For a couple of years, new proposals have been published for a new legal basis for sanctions to be imposed on companies for legal violations committed by companies. On April 22, 2020, exactly seven months after a first internal draft was leaked, the Federal Ministry of Justice and Consumer Protection finally published its formal ministerial draft bill for a law on the sanctioning of company-related crimes.

The Ministry assume the following weaknesses that are to be remedied by the new provisions:

1. Insufficient possibilities to impose sanctions on large corporations due to a regular maximum liability amount of 10 million euros for monetary sanctions imposed on companies;
2. Lack of specific and reasonable rules for the attribution of monetary sanctions imposed on companies;
3. No legal incentives for investments in compliance;
4. Inconsistent and unequal prosecution of corporate crime due to the discretionary prosecution principle in the administrative offenses law;
5. Faps in the legal prosecution of crimes committed abroad;
   
6. Outdated procedural law.

The proposed new provisions

1.  Introduction of company crimes

The newly defined company crimes are to be classified somewhere between the crimes covered by the German Act on Administrative Offenses and crimes committed by individuals. For this purpose, the corresponding provisions are transferred to a new law of its own. A company crime is deemed to be given where an action has “violated obligations on the part of the company or where such action has resulted or was supposed to result in an enrichment of the company”.

A company sanction is imposed where a person of the senior management commits a company crime himself/herself or a person (other than the senior management) commits a company crime that could have been hampered or made substantially more difficult by means of appropriate preventative measures, in particular in the areas of organization, selection, training and supervision.

2. Increase of the upper limit of a monetary sanction imposed on companies

The current upper limit of a monetary sanction in the amount of EUR 10 million shall be generally maintained for monetary sanctions imposed on companies. However, for companies with a consolidated turnover of more than EUR 100 million, a turnover-related upper limit of 10% of the worldwide annual turnover of the group shall apply with respect to the monetary sanction imposed on companies, as is already the case in antitrust and data protection law. Irrespective thereof, the instrument of skimming off profits shall be maintained. Using this instrument, it has been possible to claim three-digit million amounts from companies that committed, for example, corruption in proceedings pursuant to the OWiG.

3. More possibilities and flexibility to impose sanctions

Patterned on criminal law, it shall be possible to issue a warning reserving the right to impose a sanction on the company later on instead of imposing a monetary sanction right away. The warning can be made subject to conditions and instructions -in particular the possibility of instructing the company to take certain actions to prevent company crimes in the future and to prove its compliance with these instructions by way of a certificate from a competent body, a process very similar to the US practice of imposing a compliance monitor. The warning is particularly intended to account for compliance measures.

4. Consideration of compliance programs and internal investigations conducted by the company

With respect to the consideration of compliance programs and internal investigations conducted by the company, the ministerial draft bill offers two different approaches:

4.1.  Compliance program as a factor for assessing the monetary sanction

When assessing the monetary sanction to be imposed on the company, the court shall take into account specific circumstances. Partly based on court decisions of the past few years, these include, inter alia, the following factors:

1. Precautionary measures taken prior to the company crime to prevent and detect company crimes;
2. The company’s commitment to detect the company crime and compensate for the damage; and
3. Precautionary measures taken after the company crime to prevent and detect company crimes.

4.2.  Internal investigations as a mitigating factor

The company sanction shall be reduced if the company has itself or through third parties contributed significantly to the clarification of the company crime. The reduction shall amount to up to 50% of the contemplated amount. In this respect, the following requirements apply:

1. The company must continuously and fully cooperate with the enforcement authorities;
2. If the company entrusts a third party with the conduct of an internal investigation, such third party must not be the legal counsel of the company or any accused person in this context;
3. Following completion n of the internal investigation, the company will provide the enforcement authority with the final report including the findings and any essential documents;
4. The internal investigation must have been conducted in compliance with the principles of due process;
5. Principles of due process for internal investigations.

In order for the company to benefit from the mitigating factor of having conducted an internal investigation, certain requirements must be fulfilled. Some of these aspects are now to be legally clarified:

1. Prior to being interviewed, employees must be made aware of the fact that the information they provide may be used against them in criminal proceedings;
2. Interviewees must be informed in advance that they are entitled to have a legal counsel or a member of the works council present;
3. Interviewees may refuse to testify in case they would have to incriminate themselves or close relatives.