New corporate criminal law?

 What companies have to expect and how they should set themselves up.

Not only Diesel Gate and the Fifa scandal show how long the arm of the US judiciary can be when it comes to prosecuting offences across its own state border. The Federal Republic cannot (yet) keep up. Legal options for this are not available in Germany to date.

The development of criminal offences in companies

In recent decades, the impression has been created among the public that financial and economic damage is not the work of individuals, but of entire companies, if not entire industries. Numerous scandals such as the financial market crisis, cartels and the recent so-called exhaust gas scandal have contributed to this. It is therefore not surprising that the discussion concerning the introduction of corporate criminal law has gained momentum in recent years. The current Minister of Justice has placed this corporate criminal law at the top of her agenda.

The Ministry of Justice intends to present a draft law for stricter company sanctions “in the near future”. It can be considered certain that such “corporate criminal law” will be adopted in the short term.

Stricter punishments and mandatory anti-corruption compliance

The German law for sanctions against companies is weak by international comparison. In other industrialised countries, laws already exist to penalise corporations for cases of corruption or other violations of compliance. In Germany, such a regulation does not currently exist. So far, only fines can be imposed in Germany in cases of serious corruption by executives. The Federal Ministry of Justice now plans stricter sanctions even in cases of insufficient anti-corruption compliance; it also seeks to reorganise the powers of companies for internal investigations and state seizure rights. Trade associations are up in arms regarding these plans.

The multitude of corporate scandals in recent years has greatly shaken public confidence in the integrity of companies. According to the Federal Ministry of Justice, public confidence will be bolstered and any budding signs of corrupt activity will be nipped in the bud. For this purpose, an incentive and a toolkit for companies should be created to carry out internal investigations comprehensively and consistently, even in the corporate sector.

New corporate powers in the context of “Internal Investigations”

For this purpose, the Federal Ministry of Justice is planning the introduction of labour law regulations, according to which companies are to be entitled to conduct their own investigations against the employee concerned in the event of a suspicion of corruption. These include, inter alia, surveillance tools, the conducting of interviews and, where appropriate, the imposition of sanctions.

Discounts with efficient compliance

Companies that implement structures to prevent and inhibit corruption, i.e. have appropriate risk mechanisms and compliance management systems, are to be rewarded, should something go wrong.

Some residual ambiguities

It remains unclear as to what extent, for example, in the case of internal investigations, survey records, internal company summaries or the like can be confiscated by the public prosecutor. For employees, there is a risk that their statements made to the employer may be used against them in full in subsequent criminal proceedings. There may even be an obligation under labour law to disclose information. Here, there are still significant differences regarding the right to refuse to give evidence.

Penalties of up to 10 per cent of annual turnover planned

As things stand, the Federal Ministry of Justice plans to introduce tough criminal sanctions for every case of corruption. The penalty is to be up to 10 per cent of annual turnover in keeping with federal antitrust law.

Recommended action

The “corporate criminal law” will be introduced – regardless of whether it is located in the Administrative Offences Act or the slightly more conservatively termed “association criminal law”. Here, it is important to take the appropriate precautions. Despite all the criticism surrounding the planned regulation, one thing that deserves a special mention is the consideration of existing compliance management systems. If such systems are implemented, this should be rewarded, even in cases of misconduct. This is to be explicitly welcomed and entrepreneurs are now urged to implement efficient compliance management systems as quickly as possible.

We help companies to develop and introduce compliance management systems. We coordinate with works councils and quickly and professionally implement active compliance tools that offer effective protection.