EU and U.S. Legislation on International Data Transfers: Change and Challenges

Posted in data protection, EU, European Union Law, GDPR, Intellectual Property Litigation

The European General Data Protection Regulation (GDPR) has brought important changes to the legal grounds for data transfers between the EU and the United States. Simultaneously, a new act in the United States has come into force that also affects data transfers between the United States and the EU. This act, the Clarifying Overseas Use of Data Act (the CLOUD Act) creates legal uncertainty and could lead to violations of GDPR.

Continue reading.

Vertical Agreements: Permitted Passive Sales and Public Procurement in the EU

Posted in Antitrust, Competition Law, EU, European Union Law

Under EU competition law, it is allowed in most vertical agreements to grant distributors exclusivity for a territory or customer group. Selective distribution is the well-known exception, where no geographic restrictions may be imposed on any level in the selective network. The EU’s Vertical Block Exemption Regulation (VBER) allows suppliers to restrict active sales by a distributor as to the territories of exclusive customers reserved by the principal or allocated to other exclusive distributors (provided this does not restrict the customers of such distributors).

Passive sales may not be restricted. The Guidelines on Vertical Restraints of the European Commission (the Guidelines) define passive sales as follows

[R]esponding to unsolicited requests from individual customers including delivery of goods or services to such customers. General advertising or promotion that reaches customers in other distributors’ (exclusive) territories or customer groups but which is a reasonable way to reach customers outside those territories or customer groups, for instance to reach customers in one’s own territory, are considered passive selling.

Sales over the internet are included in the Guidelines’ definition of passive sales.

The qualification of a passive sale was recently expanded in an interesting Austrian case, which may have an impact on procurement in the other EU countries.

The Austrian National Competition Authority (NCA) received a complaint from a public hospital operator with respect to difficulties procuring surgical instruments from distributors abroad through an EU-wide public procurement process. Other distributors in the EU were allegedly unable to sell the medical devices due to exclusive distribution rights granted by the supplier to an Austrian distributor.

The NCA found that participation in a public procurement procedure amounts to a passive sale, which cannot be subject to restrictions in distribution agreements. In response to the concerns raised by the NCA, the parties have offered to eliminate the restrictions identified and clarify distribution agreements in accordance with EU competition law. On 22 May 2018, the NCA requested that the Austrian cartel court make the commitments binding. Such a decision by the cartel court would make no determination as to the existence of a competition law infringement, but the underlying definition of a passive sale may be a compelling precedent.

Given the implications of restricting passive sales, which is clearly prohibited under EU law and many national competition laws, parties should consider amending their existing distribution contracts.

Dutch Data Protection Authority on the Move: Audit of Dutch Hospitals and Dutch Health Care Insurers

Posted in Announcements, data protection, EU, European Union Law, GDPR

Announcement by Dutch DPA

The Dutch Data Protection Authority (Dutch DPA) announced on 21 August 2018 that it has audited 91 hospitals and 33 health care insurers regarding the obligation of these organizations to appoint a data protection officer. This ‘new’ requirement follows from the General Data Protection Regulation (2016/679) (GDPR), which came into force on 25 May 2018.

Background on appointment of data protection officers

The appointment of a data protection officer is, among other things, required for organizations that collect special categories of data as a core activity. One of these special categories is data revealing genetic and biometric information or data concerning health. Collecting such data is a core activity of hospitals and health care insurers, as this is inherent to their services. Consequently, these organizations are required to appoint a data protection officer under the GDPR.

Findings of Dutch DPA

The Dutch DPA discovered that two hospitals neglected to satisfy their notification requirements as to the appointment of their data protection officers. The Dutch DPA has given these two hospitals a four-week grace period to appoint a data protection officer and end their GDPR infringement. This grace period seems to indicate that the Dutch DPA did not in this case immediately impose a fine or an order subject to a penalty in spite of these GDPR infringements.

Another point of focus during this audit was whether hospitals and health care insurers had published the contact details of their data protection officer on their website. Almost 25 percent of the audited organizations had neglected this step.

To be GDPR compliant, these organizations are required to implement these measures.

More audits to come?

This audit of hospitals and health care insurers provides some insight on how the Dutch DPA will approach audits and GDPR enforcement moving forward.

The Dutch DPA made clear that it will continue performing audits on a random basis to check whether companies and organizations are in compliance with the GDPR. Such checks may include the following (to name a few):

  • whether the contact details of the data protection officer are published on the website
  • whether a notification of the appointment of the data protection officer was made to the Dutch DPA
  • whether records of processing activities are maintained (a data controller is required under the GDPR to maintain a record of processing activities that take place under its responsibility)

The Dutch DPA has also previously audited governmental organizations for the appointment of data protection officers and large private organizations for keeping records of processing activities. In our view, more unanticipated audits from the Dutch DPA should be expected shortly.

Another Major Step Towards a New Environment and Planning Act in the Netherlands

Posted in Announcements, property law, real estate

The Dutch government is working on a major overhaul of the statutory environmental framework in the Netherlands. In this context, four key environmental decrees (AMvBs) (the Decrees) were adopted and published in the Dutch Government Gazette on Aug. 31, 2018.

The publication of the Decrees is part of a major and fundamental revision of practically all Dutch environmental legislation. Dozens of acts and decrees and hundreds of rules will be bundled into one Environment and Planning Act (Omgevingswet) (the Act), including the Decrees. The Act itself was published in the Government Gazette on April 26, 2016.

This legislative program includes significant changes. Statutory obligations to attain a permit will, for example, be reduced or replaced with more general environmental rules. As a result, the industry expects a shift from permitting to supervision and enforcement. In addition, facilities with large amounts of hazardous substances will be exposed to administrative fines if they violate hazardous substances regulations (such a measure currently is not available for administrative authorities in the enforcement of hazardous substances).

Further, the municipal zoning plan (currently a key administrative instrument used to assign certain uses to plots of land) will be replaced with a new instrument, the environment plan (omgevingsplan), which should include comprehensive environmental rules (and not just the designated use of a plot). Based on the Act, local authorities may also choose to abolish the (current) requirement to attain a building permit, if they see fit. These amendments may have a major impact on development projects in the Netherlands.

The Act and the Decrees are scheduled to enter into force on Jan. 1, 2021. This allows for a period of transition during which governmental authorities and the industry can take the necessary preparatory actions.

 

Another Interest Deduction Limitation Rule in Dutch Corporate Income Tax Law

Posted in Corporate Law, Dutch Tax Law, EU, European Union Law

As part of global and European initiatives against tax avoidance, all EU member states are required to incorporate the EU Anti-Tax Avoidance Directive (ATAD) into domestic tax law no later than 1 January 2019. ATAD contains a number of rules in the areas of interest deduction, exit taxation, general anti-abuse, and controlled foreign companies. A formal legislative proposal for the incorporation of ATAD into Dutch tax law will be submitted to parliament on 18 September 2018 (Budget Day).

One of the announced measures is the so-called earnings stripping rule (the Earnings Stripping Rule), which limits the deduction of interest expenses for Dutch corporate income tax purposes in certain circumstances. Such deduction limitation could lead to a higher taxable amount. Based on the Earning Stripping Rule, Dutch companies would only be allowed to deduct “net borrowing costs” if and to the extent these net borrowing costs would not exceed the highest of:

(i)    30 percent of the company’s taxable earnings before interest, taxes, depreciation, and amortization (EBITDA), and

(ii)   EUR 1 million

Net borrowing costs are equal to the company’s annual interest expenses (including any costs related to the loan and currency exchange results), less interest income. As the Netherlands aims to have equal treatment of both equity and debt, it was decided to take a stricter approach than that prescribed by ATAD. Consequently, the Dutch government expressed, inter alia, the intention that there will be no grandfathering for existing loans and that the new legislation will not include a group escape rule.

The flip side is that some of the existing interest deductibility limitation rules may be abolished together with the introduction of the Earnings Stripping Rule. More details will follow in another blog as soon as the legislative proposal has been submitted.

 

Aansprakelijkheidsverzekering motorvoertuigen ook verplicht voor rijklare auto´s die niet meer worden gebruikt

Posted in European Union Law

Ook de verplichte verzekering van motorvoertuigen is een uitvloeisel van Europese regelgeving. Daarom is de volgende beslissing van het Europese Hof ook van belang voor bijvoorbeeld verzamelaars van nog rijklare auto’s.

Wat gebeurde er. Een Portugese dame, die om medische redenen geen gebruik meer maakte van haar auto, had deze thuis gestald maar niet uit het verkeer genomen. Op enig moment in 2006 ging haar neef daarmee joyrijden, en veroorzaakte met die niet-verzekerde auto een dodelijk ongeval.

Het Portugese equivalent van ons Waarborgfonds moest uitkeren en zocht vervolgens verhaal, onder meer op de tante als eigenaar van de niet-verzekerde auto. Daarbij kwam aan de orde of de eigenaar van een motorvoertuig verplicht is een verzekering te nemen, ook als de auto daadwerkelijk niet meer wordt gebruikt.

De eerste rechter nam aansprakelijkheid aan, zoals dat ook geldt bij een gestolen auto, als de eigenaar onvoldoende zorg heeft betracht. In hoger beroep werd geoordeeld dat de verzekeringsplicht niet geldt voor auto’s waarvan de eigenaar besluit niet meer aan het verkeer deel te nemen. In cassatie besloot de hoogste Portugese rechter een prejudiciële vraag aan het Europese hof te stellen.

Op 4 september 2018 oordeelde het Europese Hof dat onder de Europese regels een verzekering tegen de wettelijke aansprakelijkheid verplicht is, wanneer de auto in kwestie:

  • nog steeds in een lidstaat is ingeschreven, en
  • geschikt is voor de weg,

ook als de eigenaar niet van plan is er nog mee te rijden en de auto heeft gestald op een privéterrein.

Daarnaast besliste het Hof dat bij gebreke van die verzekering het “waarborgfonds” verhaal kan nemen op de eigenaar van die onverzekerde auto, ook als die niet wettelijk aansprakelijk is voor het ongeval.

Short Stay Policy in Amsterdam: Limited Room for Balancing Individual Interests

Posted in Dutch Property Law, Dutch Real Estate Law, property law, real estate

Background

Amsterdam and the conurbation are suffering a housing shortage (as is common in many larger cities). The municipality therefore seeks to limit new developments of short stay accommodations in most parts of the city. A “short stay” is defined by the Amsterdam municipality as at least four days and at most six months continuously. Under the Housing Act, switching from regular residential use to a short stay generally requires a permit for conversion and one for deviation from the zoning plan.

Facts

In 2009, the Amsterdam municipality adopted a restrictive short stay policy that included quotas on how many conversion permits (from regular housing to short stay) could be issued (the Policy). Based on the Policy, the municipality declined to issue a permit to deviate from the zoning plan to create short stay accommodations at the Prinsengracht in Amsterdam. However, the Policy’s quota had not yet been reached at the time of the permit application filing. Thus, the municipality based its decision on a balancing of interests involved and not on the Policy.

Judgement

On 27 June 2018, the Administrative Law Division of the Council of State (the Netherlands’ highest administrative court) ruled that the municipality had no grounds to deny the permit, noting that the Policy must be interpreted strictly and does not leave room for further balancing of interests. If the quotas have not yet been reached, it held, the interests of the permit applicant should outweigh the interests of the preservation and composition of housing stock.

Conclusion

Under Dutch law, an administrative body must comply with its own policy, including those relating to short stay accommodations. Thus, the body’s policy may provide the opposing side with strong arguments in court in the case of a denial of a permit or an enforcement action.

Further Clarification on Dutch Private Law Impediments

Posted in Dutch Property Law, Dutch Real Estate Law, property law, real estate

On 20 June 2018, the Administrative Law Division of the Dutch Council of State (the highest Dutch administrative court) (ALD) issued a judgement that again demonstrates the considerable burden of proof with respect to private law impediments.

Background

A municipal council cannot adopt a zoning plan if a “private law impediment” exists that would block the realization of that plan. A private law impediment may, for example, exist in a case where the municipality wants to develop residential units, but the land on which it seeks to develop is owned by a non-cooperating third party (and expropriation is not possible or desired). Such a third party can invoke the private law impediment as grounds for judicial nullification of the zoning plan.

However, private law impediments must be “obvious.” In its 20 June decision, the ALD provided additional clarity as to when a private law impediment is obvious.

Facts

In Waddinxveen in the Netherlands, the municipal council adopted a zoning plan that allowed for the building of 24 residential care units. An “owner” of nearby premises objected to this zoning plan on the basis of private law impediments; a piece of land he claimed as his own was designated in the zoning plan to be an access road and parking lot. But his claim to the land was not clear-cut. He alleged to have become the owner of that plot through prescription (the passage of time).

Judgement

Existing Dutch case law says that a private law impediment is “obvious” only if no prior research is needed to establish that the development will intrude on a third party’s rights to a premises and if this third party does not have to resign itself with this development. In this case, the ALD ruled that the prescription argument should first be presented to a civil law judge, as the third party’s claim remained open to debate, and further research was needed to ascertain whether execution of the zoning plan would affect the property of the third party. The third party’s claim to the plot was therefore not considered a private law impediment. As a result, the ALD did not nullify the zoning plan.

Burden of Proof

This verdict demonstrates that the burden of proof with respect to a private law impediment is not easily met, and that it can be important to proactively establish in civil court (non-obvious) ownership rights to a plot in order secure protection against unwanted zoning developments.

Echtgenote redt dga toch (nog) niet van borgstelling

Posted in Corporate Law

Een natuurlijk persoon heeft de goedkeuring nodig van zijn of haar echtgenoot, onder meer indien deze persoon zich borg stelt voor de nakoming van verplichtingen van een derde partij. Dit wordt in de praktijk soms over het hoofd gezien. In het arrest van 13 juli 2018, ECLI:NL:HR:2018:1220, heeft de Hoge Raad geprobeerd meer duidelijkheid te verschaffen over dit toestemmingsvereiste en de uitzonderingen hierop.

Achtergrond

Bij een borgstelling moet rekening worden gehouden met het toestemmingsvereiste van de echtgenoot. De echtgenoot kan namelijk bij het ontbreken van zijn of haar toestemming, de overeengekomen borgstelling achteraf vernietigen. De wetgever heeft een uitzondering opgenomen voor een directeur-grootaandeelhouder van een onderneming (dga) indien de borgstelling geschiedt ten behoeve van “de normale uitoefening van het bedrijf” van die dga. In een zodanig geval is geen toestemming van de echtgenoot vereist. Over de reikwijdte van deze uitzondering bestaat onduidelijkheid.

Context

Een bank wenst normaal gesproken diverse zekerheden van een kredietnemer voor de terugbetaling van het verschafte krediet. Deze zekerheden kunnen bestaan uit bijvoorbeeld een pandrecht op de inventaris van de kredietnemer of een hypotheekrecht op de bedrijfshal van de kredietnemer. Behalve zekerheden van de kredietnemer verlangt een bank ook regelmatig persoonlijke zekerheid van de dga, zoals een persoonlijke borgstelling. Afhankelijk van de omstandigheden zal de bank toestemming nodig hebben van de echtgenoot van de dga.

Het geschil

In deze zaak was een accountant (tevens dga) via zijn vennootschap een financieringsovereenkomst aangegaan met de Rabobank. Deze financiering was bedoeld voor de inkoop door de vennootschap in een accountancy-maatschap. Nadat de vennootschap in financiële problemen raakte, is deze ontbonden en uitgeschreven bij het handelsregister van de Kamer van Koophandel. De Rabobank heeft daarop de financieringsovereenkomst opgezegd en het gehele krediet opgeëist. De accountant is hierbij in persoon aangesproken tot betaling van een bedrag van € 350.000,- op grond van de borgstelling. De echtgenote van de accountant heeft de overeenkomst tot borgstelling vervolgens vernietigd vanwege het ontbreken van haar toestemming.

De uitspraak

De rechtbank en het hof oordeelden allebei dat de toestemming van de echtgenoot was vereist voor het aangaan van de borgstelling door de dga en de borgstelling dus rechtsgeldig was vernietigd. In dit kader had het hof geoordeeld dat de financiering van de inkoop in een accountancy-maatschap ook op andere wijze had kunnen plaatsvinden. Mede op basis daarvan kwalificeerde het aangaan van deze financiering niet als een ‘normale’ rechtshandeling zoals financiering voor de kantoorinrichting of een vervoersmiddel, aldus het hof in hoger beroep.

De Hoge Raad oordeelt daarentegen dat onderzocht had moeten worden of de rechtshandeling (waarvoor de zekerheid werd verstrekt) zelf tot de rechtshandelingen behoort die ten behoeve van de normale uitoefening van een bedrijf plegen te worden verricht. Met andere woorden: is het in dit geval normaal om als accountant een lening aan te gaan voor de inkoop in een maatschap?

Dit had het hof moeten onderzoeken. De Hoge Raad vindt de volgende stellingen hierbij relevant: i) de financiering was vereist om de vennootschap in staat te stellen haar normale bedrijfsuitoefening te ontplooien, ii) de financiering was een normale bedrijfshandeling, en iii) aan deze financiering was geen bijzonder risico verbonden. Het feit dat de financiering van de inkoop in de maatschap ook op andere wijze had kunnen plaatsvinden, acht de Hoge Raad niet van belang.

De Hoge Raad komt tot de conclusie dat het hof ofwel een te strenge maatstaf heeft aangelegd, ofwel zijn oordeel niet naar behoren heeft gemotiveerd. De Hoge Raad vernietigt het arrest en verwijst het geding naar het hof ’s-Hertogenbosch ter verdere behandeling en beslissing.

Commercial Agents: The Risks of Non-Control

Posted in Anti-Corruption, Antitrust, Competition Law, Corporate Law

Enterprises in a wide range of markets and industries have long used commercial agents to solicit business, collect payments, and take care of local matters.

Such agents are hired for their local or market expertise and to deal with issues that exporting or importing enterprises cannot easily handle from their headquarters. Economically and legally, they perform an auxiliary function to the principal’s main economic activity, acting as an independent economic operator but for the risk and account of the principal. This relationship enables the principal to separate its local activities from its other activities. Thus, shipping, insurance, and other service and production companies can efficiently internationalize their operations.

Potential FCPA/Antitrust Problem Posed by Agents

The use of agents may result in unfortunate surprises, demonstrated in various anti-corruption/FCPA and antitrust cases. Regarding anti-corruption/FCPA, the principal is deemed liable for the actions and (to some extent) omissions of its agents induced or allowed by the principal. Therefore, any principal must actively monitor the activities of its agent to avoid being implicated in any FCPA issues caused by the agent. In antitrust, it is well-established in case law that any infringement by an agent is automatically attributed to the principal, at least under European competition law.

Monitoring one’s agent may not always be simple. Agents, because of their expertise in certain markets or industries, often work for multiple principals and need to divide their loyalty (and resources) among various parties. As they are independently owned companies, (often) only have a part-time commitment to the principal in a certain market, and need to manage their position in that market, it is difficult for any given principal to control its agent’s activities.

Agency Relationship Risk

Because it is difficult to control an agent’s activities, working with agents may carry significant risk, and monitoring them may not be sufficient to mitigate against such risk. Termination of the agency relationship is not always simple, however, as was earlier this month demonstrated by a very expensive separation agreement between a Dutch principal and an agent that did not want to be controlled in a particular manner. The high level of compensation reflects not only the mandatory termination indemnity (due to having agents in many jurisdictions) but also the need to regulate market behavior by the agent post-termination, as businesses prefer their trusted agents not be engaged by competitors. Because the law in many jurisdictions protects agents, it is generally not an option to agree beforehand to a longer post-termination non-compete obligation than, for example, the one-year term permitted in most European law systems.

Lessons Learned

The decision to enter into a commercial agency agreement requires a solid risk analysis, including past and anticipated future market behavior by the agent unrelated to the representation of the principal. As such, the agreement may provide for the principal to maintain full control over the activities to be performed by the agent for the principal or in relation to the principal’s business (avoiding collusion through “hub-and-spoke” information exchange, where the agent also represents other active or potential competitors).

Termination of an agency agreement (for lack of control or otherwise) can be disruptive. Employing multiple agents in the same market may be a good strategy to minimize such risk.

What may also help is making sure sales managers are aware of the risks inherent in agency relationships, i.e., that they could potentially allow or condone actions by the agent that carry liability for the principal. As such, principals may wish to consider providing their sales managers with proper incentives to promote compliant behavior.

LexBlog