Compliance management systems

High praise for effective structures

The times in which the catchword compliance merely caused those responsible in companies to shrug their shoulders have been part of the past for some while now. In addition to that, the BGH has again emphasised the relevance of an effective compliance management system in one of its recent judgements (judgement of 9 May 2017 – 1 StR 265/16).

Particularly at the beginning, serious doubt was cast on the necessity of an effective compliance structure. Even today, many companies have still not implemented a compliance concept. Yet recognition of the fact that a compliance management system should be implemented, from the point of view of avoiding investigations and proceedings of the kind that damage the company’s reputation alone, ought by now to have become fairly widespread. In addition to that, in these times of the GDPR and harsh fines in the law on competition – up to ten per cent of the overall turnover achieved in the previous business year! – there is also a threat of severe financial consequences. The instrument of compliance management can moreover uncover ineffective elements in internal processes, so in actual fact it affords a double benefit.

Going beyond these considerations, the BGH has now provided another reason to implement a system of this kind, and it is one which has been under discussion in the literature for quite some time. In concrete terms this is about the way incorporating a compliance management system tends to reduce liability and mitigate fines. In the case in point, an employee of an armaments manufacturer had been convicted, among other things, of aiding and abetting tax evasion. A fine was imposed on the company at which the employee worked in accordance with Section 30 I of the German Regulatory Offences Act (OWiG). Determining the fine, the BGH (Appeals Division) observed that it is “of some importance to what extent the secondary party has fulfilled its obligation to prevent violations of the law from inside the sphere of the company and installed an efficient compliance management scheme, which must be designed to prevent infringements (…). The question of whether or not, in the aftermath of these proceedings, the secondary party optimises appropriate regulations and organises its internal company processes in such a way that it will in future certainly be much more difficult to infringe against the rules in a comparable way, may also play a role.” 

The BGH thus draws attention in a clearly recognisable way to the importance of incorporating an efficient compliance management system. Even behaviour in the aftermath of the proceedings should be taken into account, if future infringements against the rules are “certainly” (to be) “made more difficult” by optimisation of the compliance structure on the part of the company concerned. 

This judgement thus emphasises the relevance – major enough before these events – of an effective compliance management system. The situation can be summed up by saying that an appropriate system can not only help to prevent infringements; it can indeed, even in the most unwelcome case in which an infringement has actually occurred, have a mitigating effect on the amount of the fine imposed. So now, even hesitant companies should recognise that the multiple benefit of implementation must surely be enough to compensate for any extra costs occasioned by it.

[October 12th, 2017]