Upcoming: New law authorising dawn raids in dual-use and EU sanctions cases

11.13.2020

On 7 October 2020, the Danish Minister for Industry, Business and Financial Affairs proposed a Bill allowing the Danish Business Authority to carry out unannounced inspections (“dawn raids”) to check for compliance with dual-use rules and EU sanctions against third countries. Also, legal basis for penalties are proposed against businesses who fail to cooperate with and assist the Danish Business Authority in performing the dawn raid. If adopted, the Bill, which is scheduled for 2nd and 3rd reading in November, will at least on paper significantly boost administrative enforcement in the area and should cause export businesses and transport operators to consider whether they have proper dawn-raid governance in place. Read on for more about the Bill, which is scheduled to become law as early as 1 January 2021.

Purpose and background

The Bill, spurred by a series of high-profile media cases involving compliance with dual-use regulations and EU sanctions, seeks to strengthen the Danish Business Authority’s (“DBA”) control and supervision of compliance with rules. It proposes to enable the DBA to perform dawn raids at the relevant businesses and demand hand-over of all necessary information for inspection. Where non-compliance is suspected, the police will need to be involved.  

Which businesses are covered?

Businesses covered by the Bill are primarily Danish export businesses and transport operators, but other businesses might also be affected depending on circumstances. Financial businesses generally fall outside the scope of the Bill, still being primarily subject to the Financial Supervisory Authority’s supervision, see Section 47 of the Danish AML Act. 

No court order required  

The Bill empowers the DBA to carry out unannounced inspections without a court order. In practice, it means the DBA will be authorised to decide alone – or in consultation with other authorities, e.g. the Danish Security and Intelligence Service or the Danish State Prosecutor for Serious Economic and International Crime – to perform dawn raids. The mandate covers business premises and means of transportation but does not extend to private homes. Dawn raids thus cannot be carried out in private homes of employees. If the DBA wishes to inspect private homes, it must hand the matter over to the police who will then be able to obtain a search warrant under the rules of the Danish Administration of Justice Act.  

What information can the DBA demand?

The Bill states that the DBA, for its inspection, can demand to be handed “all necessary information, including trade documents, customer files, lists of goods and services, etc.” It is stated in the explanatory notes to the Bill that the DBA can also demand to be handed “all relevant documents, whether in paper form or stored as electronic data. The information must be surrendered in a manner and format readable for the Authority. For example, the DBA may ask for database extracts, e.g. to elucidate an exporter’s products, customer relations, etc.

The Bill thus contains only a few restrictions as to what information the DBA may demand to be handed. The DBA will be the first to determine what information that is necessary for the inspection. Ultimately, however, the question may be brought before a court of law.    

Legal privilege

The Bill is silent on the protection of legal privilege, i.e. confidential correspondence and documents subject to attorney-client privilege. We assume such information will be exempt from the disclosure requirement, and businesses who find themselves the target of a dawn raid should be mindful of this. It must be expected that the DBA will want to make sure that any information withheld on account of legal privilege is in fact subject to such privilege. 

Penalty for failing to cooperate

The Bill authorises a penalty in the form of a fine for anyone who intentionally or with gross negligence fails to help and assist the DBA in conducting its inspection. Refusal to hand over information or to cooperate with the DBA in an inspection will thus be a punishable offence. The latter appears to be a novel introduction which, however, will likely have limited significance. 

Our comments

The Bill is a significant tightening of Danish administrative enforcement in relation to dual-use and EU sanctions cases, where enforcement has thus far been based almost entirely on desk reviews. 

In the explanatory notes to the Bill it is stated that the DBA expects to be making approximately 10 inspections per year. Presumably, only a few of these will be in the form of dawn raids.

Dawn raids without a court order raise due process concerns. From the Bill itself it can be seen that the Minister for Industry, Business and Financial Affairs is aware of these concerns. The explanatory notes to the Bill clearly state that the DBA must not carry out dawn raids on suspicion of offences. In such cases the police must be involved. The explanatory notes also include a reference to section 10(1) of the Danish Due Process of Law Act, pursuant to which the DBA, on suspicion of offences, must inform about the risk of self-incrimination. 

As mentioned, the DBA’s new authorities will also apply in relation to EU sanctions cases. EU sanctions cases rank among the most serious of corporate criminal law cases, punishable by imprisonment of up to four years, see Section 110 c of the Danish Criminal Code, and authorising the police to carry out telephone tapping. Under Danish law, EU sanctions can be violated both intentionally and negligently. There is, therefore, every reason for businesses to at the very least be sure to have adequate dawn raid response procedures in place in relation to these cases. 

The new rules mean that affected businesses should consider whether they have the necessary measures in place to assist the DBA in connection with the described dawn raids. 

Kromann Reumert established its corporate criminal law practice group in 2013 and today offers deep expertise of all types of authority investigations, including police searches of company premises. We assist Danish and foreign undertakings in all aspects of criminal law, including legal representation in court. Also, we are continuously performing confidential internal investigations as part of our advisory services to clients.

Read the Bill (in Danish).