Belgium

• Investigations trends/developments
• Law reforms impacting corporate criminal liability
• Sectors targeted by law reforms or enforcement action
• Cross‑border coordinated investigation or enforcement activity
• Predictions for 2023

Investigations trends/developments

International sanctions (including EU efforts to increase criminal enforcement)

The EU’s response to the war in Ukraine (as with the responses of the UK, the U.S. and other countries) has demonstrated that sanctions will remain at the forefront of international policymaking, with an important impact on Belgian businesses with an international footprint. The array of sanctions adopted in 2022 has been unprecedented, and we have seen many businesses struggling with the compliance burden of navigating this complex landscape. Looking ahead, and with these sanctions here to stay, we expect an uptick in sanctions enforcement, including criminal prosecutions.

EU criminal law – rising amount of cases by EPPO: focus on different types of (cross-border) fraud

The EPPO started its activities in June 2021, and has opened more than 1000 investigations across the EU since then. In Belgium alone, it has initiated over 25 investigations into criminal conduct that have allegedly caused more than EUR 320 million in damage. As a result of the activities of the EPPO, we expect an increase in cross‑border fraud investigations in Belgium, notably in customs matters. In cases that are prosecuted by the EPPO, criminal court litigation will be the preferred option, and out-of-court settlements and dismissals will be the exception.

Social criminal law topics – including issues with (sub)contractors

There has been an increased use of both subcontracting and posted foreign workers in the Belgian labour market. Problems relating to social fraud and social dumping have caused the Belgian authorities to increase their scrutiny of this phenomenon. Belgian social law chain liability schemes have further incentivised large-scale investigations by Belgian prosecutors, as principals may be held civilly liable for the underpayment of wages by their (sub)contractors and for the payment of social security contributions on these unpaid wages. Companies may also be directly targeted for criminal prosecution if their knowledge of illegal employment by a (sub)contractor on Belgian territory can be demonstrated. Recent high-profile cases in several sectors have been widely discussed in the media, resulting in significant reputational damage, following initial undercover media reports alleging various social malpractices by subcontractors. This has led to inspectorate raids triggering investigations, at times into directors and C-suite executives, concerning allegations of social criminal law offences such as leading a criminal organisation or aiding or abetting human trafficking.

Whistleblower directive – transposition in Belgian law

The new EU Directive on the protection of persons who report breaches of Union law (the EU Whistleblowing Directive) was adopted in 2019, with a requirement that EU Member States transpose the EU Whistleblowing Directive into national law by 17 December 2021. Like many other EU Member States, Belgium has missed this deadline, but the transposition of the EU Whistleblowing Directive into Belgian national law was finally realised with the Belgian whistleblowing law that will enter into force on 15 February 2023.

The Belgian whistleblowing law has a broader material scope than the EU Whistleblowing Directive. It makes anonymous reporting possible via an external channel and via an internal reporting channel at companies with more than 250 employees. The law provides for an extensive out-of-court protection procedure for the settlement of conflicts between the victim of retaliation, and the entities or persons who retaliate.

As whistleblowing was not regulated in Belgium before (with some exceptions for the financial and public sectors), we expect an increase in the number of reports and, as result, in the number of investigations following the entry into force of the Belgian whistleblowing law.

Increase of compliance risks/burden/awareness on multiple fronts – companies are proactively tackling this

Expectations that private actors will have to conduct due diligence on their customers and supply chains, implement appropriate screening measures and issue public reports on internal processes and their implementation, continue to increase. Businesses need to screen their partners for different categories of risks, including in relation to international sanctions, money laundering, bribery and corruption, and risks of adverse sustainability and human rights impacts in their supply chains. In recent years, we have seen that businesses across all sectors are proactively handling these new compliance challenges by strengthening their compliance frameworks, which raises market standards and puts businesses who do not do so at an increased liability risk.

Law reforms impacting corporate criminal liability

Ecocide

A new code of criminal law is expected to introduce radical changes to the Belgian criminal law system. Under the current proposal, penalties for already existing offences will be revised and streamlined, and new criminal offences, including a self-standing offence of ‘ecocide’, will be introduced. These legislative developments are in line with an ever‑increasing focus on investigating and prosecuting environmental pollution.

Transposition of Whistleblower directive

The Belgian whistleblowing law provides for criminal sanctions for non-observance of the rules on the internal reporting channel, and registration of the reports. The law also provides for criminal sanctions for legal entities, its employees, and every natural person or legal person who:

• hinders or attempts to hinder reporting
• retaliates against protected persons
• brings vexatious proceedings against protected persons
• breaches the duty of maintaining the confidentiality of the identity of reporting persons.

In line with the EU Whistleblowing Directive, it also imposes sanctions when reporting persons have knowingly reported or publicly disclosed false information.

Corporate sustainability reporting and due diligence directives

The year 2023 will be marked by the development of a wide array of new sustainability obligations for companies operating in the EU. While the scope of the future Corporate Sustainability Due Diligence Directive, introducing mandatory human rights and environmental due diligence obligations, is still under discussion, the Corporate Sustainability Reporting Directive was adopted on 28 November 2022, thereby extending companies’ previous obligations under the Non-Financial Reporting Directive. While it remains to be seen how this new directive will be implemented in Belgian law, there is little doubt that the Belgian legislator will maintain the criminal liability to which non-compliance with the obligations resulting from the Non-Financial Reporting Directive gave rise.

On corporate due diligence, Belgian lawmakers have maintained the proposed criminal liability regime in the amendment to the Belgian draft law on corporate vigilance and responsibility introduced in August 2022.

Further parliamentary debate on the draft law is likely not to take place before the Corporate Sustainability Due Diligence Directive is adopted at EU level.

Sectors targeted by law reforms or enforcement action

The fight against social fraud and illegal employment remains an enforcement priority in Belgium. The transport and construction sectors (among other sectors) are being specifically targeted by the Social Intelligence and Investigation Service (the SIOD) as high‑risk sectors for social fraud and social dumping.

As a result, and as in previous years, so-called flash audits have been carried out in 2022 (and possibly again in 2023) in these sectors. Such flash audits typically focus on the payment of (minimum) wages and social security contributions, documentary requirements and working time limitations. We see these audits resulting in criminal prosecutions not only for a breach of social laws, but also for common law criminal offences such as forgery, criminal organisation and human trafficking.

Businesses that are subject to these kinds of investigations face serious reputational risks.

Cross‑border coordinated investigation or enforcement activity

EU criminal law statistics: increased efficiency of cross‑border investigations

After a year of existence, 928 cases have been opened, of which around 30 have been referred to national courts, mainly concerning VAT fraud.

A majority of these investigations target alleged cross-border criminal conduct. As these first investigations progress and new investigations are opened, we expect to see an uptick in criminal enforcement actions and litigation in relation to cross-border fraud, including in customs matters.

Increase in cross-border workplace investigations

There has been an increase in workplace investigations with a cross-border dimension in 2022. As a result of the international activities of companies, employees in several jurisdictions may be involved. Therefore, the laws of multiple jurisdictions govern the investigative process. Different local counsel must be consulted as to how the investigation must be conducted to comply with local laws. The need for cross‑border engagement is further strengthened when the investigation also entails carrying out an exercise to assess the culpability of (a group of) employees who are subject to different local rules in terms of possible disciplinary measures and procedures.

Predictions for 2023

Social criminal law topics

In-house legal and investigation teams must demonstrate an increased awareness of social fraud and social dumping, which have significant potential to bite through the chain liability systems prevalent in Belgian social law. Once these systems are triggered, for example, when a construction project is set up, they may have far-reaching consequences for companies making use of (sub)contractors, even if the infractions are limited to a lower-tier supplier, resulting in the company being exposed to civil and even criminal liability. Combined with the anticipated new rules on whistleblowing, which we expect to lead to an uptick in reports, this means that it is vital to have a clear and in-depth system of vetting with a unified process. Moreover, the chain of subcontractors needs to be mapped and monitored in order to prevent undeclared work, and ensure the payment of wages and social and fiscal debts.

Greenwashing claims and enforcement action

Although no such claims have been directed at corporates in Belgium, we do expect Belgium to follow neighbouring countries, with greenwashing claims and/or enforcement actions against companies and their directors by regulators, prosecutors and shareholders.

EU criminal law (including sanctions)

For a few years now, there has been a clear policy at EU level to boost the criminal enforcement of legal violations that violate EU interests. Besides the investigations initiated by the EPPO, the European Commission is taking steps to harmonise and strengthen the criminal enforcement of EU sanctions laws, and is openly calling on Member States to step up enforcement.

This article is part of the Allen & Overy Cross-border White collar Crime and Investigations Review. Please visit the review homepage for our overviews and insights in other jurisdictions.