Bill for a German corporate crime law

Philipp Reusch

With its bill of 15 August 2019 for an Act to Combat Corporate Crime, the Federal Ministry of Justice and Consumer Protection is on the way to creating something which has never existed in Germany: a corporate crime law in the form of a statute imposing penalties for crimes committed by corporate entities.

The background for the bill is that, under current law, penalties for criminal acts committed by corporate entities (corporations and partnerships) are limited to fines of up to ten million Euros. While a fine of ten million Euros may have a deterrent effect for small and mid-sized companies, it is hardly a severe penalty for well-capitalized multinational conglomerates.

In addition, current laws relating to administrative offenses give the competent authorities sole discretion for whether or not to prosecute even the most severe corporate crimes, resulting in inconsistent and inadequate practices for imposing penalties on corporate entities.

In light of this situation, the bill which has now been presented includes six core areas, the key content of which will be briefly described below:

1. Reorganization of laws governing corporate crime

Codifying corporate criminal penalties in a new statute emphasizes the significance of these penalties. The bill takes up existing elements relating to corporate fines (§ 30 of the Administrative Offenses Act) and develops them further.

2. Expanded range of penalties

In addition to monetary penalties and issuance of warnings reserving the right to impose monetary penalties, the bill also provides for dissolution of the entity or for combining different types of penalties.

3. Consideration of internal investigations

Precautions taken by the entity in order to prevent and discover criminal acts are taken into account in determining the penalty. The legislative intent states that this is intended to create an incentive for entities to establish effective compliance management systems.

4. Succession and contingent liability

In order to prevent entities from evading sanctions by bringing about a full or partial succession, the bill allows penalties to be imposed on the successor or successors as well.

5. Compulsory prosecution

The new law would subject the prosecution of corporate crimes to the principle of compulsory prosecution: the authorities are required to investigate if there is an initial suspicion of a criminal offense. While there are exceptions, this rule ensures that the law will be applied in a consistent and even-handed way.

6.    Corporate crime register

A criminal register for corporate crimes will be introduced by the Federal Office of Justice, based on the Federal Central Criminal Register and the Central Trade Register. Final and binding rulings imposing penalties for corporate crimes will be entered into this register, as will fine assessment decisions in accordance with § 30 of the Administrative Offenses Act. The typical period before which entries will be removed is ten years.

Practical note

Although this is just a bill, companies should lose no time in getting to know its content, if only because establishing internal checks such as effective compliance management systems is typically a time-consuming undertaking, and since the adoption of a corporate criminal statute in Germany now appears to be more a question of "how" than "whether" in light of the presentation of this bill, as well as international trends.

[November 2019]