Germany: new developments in corporate criminal liability
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Wolfgang König
GÖRG Partnerschaft von Rechtsanwälten, Cologne
The discussion on how corporate misconduct should be sanctioned has gained momentum in Germany. This is not just the result of the latest high-profile violations of emissions’ regulations, but also a consequence of new coverage about investigations into the potential criminal conduct of banks and further reports of potential corporate misconduct. There are numerous legislative proposals, some of which were drawn up by one of the German federal states, while others originated from the scientific community. As a response, the German government has taken up the cause of introducing a law, a first draft of which was recently published in the relevant expert circles. Even though this draft is certainly going to be revised, at least to some extent, one must state that as a ramification of this new Act (called Verbandssanktionengesetz (Corporate Sanctions Act)) coming into force, the legal framework will change substantially. Some significant changes are already emerging.
In the future, corporate misconduct must be prosecuted in accordance with the principle of legality that applies under the regime applicable in the future. This is distinct from the current situation, in which such misconduct can be punished (only) as an administrative offence but not as a criminal offence, thus, there is a wide range of discretion.
The framework of potential sanctions will be significantly increased, particularly for larger companies. According to the latest proposal, an offence can result in a monetary sanction of up to ten per cent of the company's average worldwide turnover per year. Further potential sanctions serve as a warning, combined with a reservation of sanctions that may be implemented later, similar to the concept of a deferred prosecution agreement under common law jurisdictions. Moreover, as an ultima ratio, the third potential sanction the draft law provides is the possibility for the dissolution of the company/association.
Internal investigations, as well as compliance measures up to and including the implementation of a compliance management system, shall, inversely, help to reduce the amount of any such potential sanctions. In this respect, however, a whole series of questions remain unanswered, inter alia as to how an anti-seizure protection of documents and work-products (eg, documents produced by lawyers involved in such internal investigations) is to be structured.
Final decisions about sanctions resulting from this new law are to be entered in a register at the Federal Office of Justice, specifying the details of the concrete offence. As per the current draft, such a register shall not be publicly accessible, but will provide information to public authorities, as well as courts, upon request. Thus, at the moment, there is no additional publicity (so-called ‘naming and shaming’), but an offence may lead to disadvantages in public proceedings or in court.
A legal succession in any such sanctions will come into force as well: in case of a merger or a comparable transaction being implemented in accordance with the German Transformation Act or following the acquisition of a business through an asset deal, the surviving legal entity is explicitly declared as being liable and responsible according to such draft law.
The legislative procedure is expected to continue soon with a Corporate Sanctions Act coming into force in 2020 or early 2021.
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