2 settembre 2019 BusinessCrimeLinks

German Minister of Justice reveals far-reaching plans for a new law on corporate liability for criminal offences

After years of discussion about a corporate criminal law for Germany, the Minister of Justice, Christine Lambrecht, presented a “draft law on combating corporate crime” in late August. The hitherto unreleased draft proposes – according to publicly available sources – conceptual and comprehensive changes to the existing system.

The Minister plans to regulate corporate liability for crimes in legislation that is separate from the Act on Regulatory Offences (Ordnungswidrigkeitengesetz – “OWiG”), which has been the basis for prosecution of companies until now. However, there will still be no genuine corporate criminal law. Rather, companies shall be held liable for criminal offences committed by their managers, if they are violating the company’s duties or result in an enrichment of the company. For that purpose, offences committed abroad shall also be taken into account under certain circumstances.

The proposed amendments relate, in particular, to the list of sanctions:

  • So far, the OWiG provides for administrative fines against companies of up to EUR 10 million. While the penalties shall remain at this level for smaller undertakings, companies generating an annual turnover of more than EUR 100 million shall be subject to financial sanctions of up to 10% for intentional offences and of up to 5% for negligent offences
  • Disgorgement of profits (Einziehung) shall remain possible, i.e. the state may collect what the company has illegally obtained from the crime. Such profits might then be distributed to the injured parties.
  • Even the dissolution of a company (Auflösung) shall become an option to be considered in extreme cases, for example, as regards repeat offenders or if further serious criminal conduct seems likely.
  • Companies that have been sanctioned shall be registered in an administrative register. Generally, the register is not supposed to be publicly available. However, a public notice may be permissible for information purposes in cases involving a large number of injured parties. Depending on how this is handled in practice, this could have a similar condemnatory effect as a public register.

In addition, the draft provides for fundamental procedural changes:

  • Even though the new law is explicitly not intended to be criminal in nature, the Minister of Justice intends to replace the discretionary prosecution principle (Opportunitätsprinzip), which generally applies in relation to the prosecution of administrative offences, by the principle of legality (Legalitätsprinzip), which usually only applies in criminal law. As a result, public prosecutors would have to initiate investigations against a company if there is an initial suspicion (Anfangsverdacht) of criminal conduct.
  • The draft also contains detailed rules of procedure relating to, for instance, representation rights and rights of defendants, such as the right to remain silent and the right to a fair hearing. It is also planned that companies shall be entitled to call for the admission of evidence or to lodge appeals.

The Minister of Justice also intends to regulate internal investigations, which have been at the centre of attention since a recent judgment of the German Federal Constitutional Court (Bundesverfassungsgericht). The Court upheld a ruling by the Munich Regional Court (Landgericht), which had allowed the prosecutor’s office to search the offices of US law firm Jones Day and secure documents pertaining to Volkswagen’s internal investigation into the “diesel scandal”. The draft law thus aims to provide more legal certainty for companies:

  • According to the draft, materials resulting from internal investigations shall be subject to confiscation and will be admissible in court. However, this will not apply to documents relating to the criminal defence of the company.
  • The Minister of Justice also wants to create incentives for companies to implement compliance programmes and to conduct internal investigations. For example, assisting the prosecution by an internal investigation shall, in certain circumstances, be taken into account to mitigate penalties. In particular, it shall be possible to reduce the fine by up to 50 %.

It is expected that the draft law will be subject to changes. The Government, which currently consists of members of the Christian Democrats under Chancellor Angela Merkel and the Social Democrats including the Minister of Justice, needs to agree on a common draft. While the Government parties have already agreed on some of the proposals in their coalition agreement, others are new suggestions from the Social Democrats which have been heavily criticised by the Christian Democrats (e.g., the dissolution provisions). The parliamentary debate may further delay the process. For these reasons, the legislative process will take some time. However, after years of discussion, a first step has been taken. Companies would be well advised to observe the on-going process carefully and ensure their compliance measures are up to scratch.