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Germany: Brief overview on recent anti-corruption legislation

Over the last years, German corruption scandals increasingly attracted national and international media attention. This clearly culminated in the almost daily press releases reporting on the corruption charges of the former Federal President of Germany, Christian Wulff. He was incriminated in April 2013 and acquitted by the Regional Court of Hannover not before February 2014. Albeit finally proven innocent, this matter forced him two years earlier to withdraw from his position as President due to the enormous press coverage, coincided with public pressure.

Other spotlight corruption cases of the last decade were the investigations against large multi-national companies Siemens, MAN, Ferrostaal and Daimler. In the Siemens case, the investigations resulted in fines unprecedented in Germany of more than 395 Mio EUR plus additional payments to US authorities of some 800 Mio USD. Furthermore, Siemens replaced many top and medium level management members and increased its compliance personnel to more than 700 heads at times. Comparable high fines were issued against MAN, Ferrostaal and Daimler. These cases show that multi-national enterprises are increasingly subject to criminal investigations, not only in the United States, but also under the considerably tightened German anti-corruption laws. Given that German law applies to any conduct committed on the German territory (cf. German Criminal Code, sec. 3), for companies conducting business in Germany, it is vital to be acquainted with the relevant domestic legal provisions.

In Germany the offences of corruption are regulated in the Criminal Code (sec. 299 f. for bribery in the commercial sector and sec. 331 ff for bribery of public officials). Paying/promising payments and other benefits as well as receiving/demanding payments and other benefits is illegal. Facilitation payments to officials are also prohibited.

In 1998/1999, more than 20 years after the initiation of the US Foreign Corrupt Practices Act, Germany implemented the OECD Convention on Combatting Bribery of Foreign Officials in International Business Transactions. Thus, active bribery of foreign officials became illegal (cf. the Law on Combating Bribery of Foreign Officials in International Business Dealings, IntBestG). In former times, only German officials were covered by the German corruption provisions and payments to foreign officials were even tax deductible. Similarly, in 1998 and 2002 Germany extended the scope of application even further to cover certain EU public officials and foreign public officials of EU Member States (EuBestG). Moreover, in 2002 Germany also extended bribery in the commercial sector to activities carried out in foreign markets. In addition, the United Nations Convention against Corruption was signed by Germany in 2003. Germany now complies with most of the requirements of this Convention. However, members of parliament (whether at federal, state or local level) are not (yet) regarded as public officials. Bribery of members of parliament is thus only punishable in the context of buying or selling votes (cf. sec. 108e of the German Criminal Code). In their coalition agreement, the present German government has declared their intention to extend the criminal liability to bribery of members of parliaments so as to fully implement the UN Convention. Draft legislation has already been submitted.

With regard to bribery in the public sector, the offence applies to civil servants, judges, soldiers, as well as individuals who otherwise carry out functions of a public official or have been specifically appointed to carry out public services. Moreover, the German law distinguishes between acts of public officials being in line with their duties (sec. 331 and 333 of the German Criminal Code), this regularly covering facilitation payments, and acts in breach of their duties (Criminal Code, sec. 332 and 334). Only the latter cases and only the active conduct of providing/offering such benefits (sec. 334) are also extended to foreign public officials.

With regards to the bribery in commercial transactions, it is worth noting that any employee or agent can be on the bribe-taking side, but not the owner of the business. The benefit must be requested, offered, promised or accepted as a quid-pro-quo for a future preference in an unfair manner in the competitive purchase of goods. However, the future preference does not have to be specified any further; a general future preferential treatment is sufficient. Moreover, caution should be taken with regards to past preferential treatments as these might be interpreted as incentives for future preference and thus also fall within the scope of the offence.

Finally, it is important to note that under German legislation, corporate criminal liability is not regulated yet. The reason is that German criminal law is based on the guilt of the individual. However, legal entities and also senior management may be administratively and severely (see cases referred to above), fined under sec. 30, 130 of the Act on Regulatory Offences (OWiG). The requirement is that the criminal wrongdoing was facilitated by organisational or compliance deficiencies of the company, meaning that supervision by the responsible manager was not carried out (omission) or not carried out properly (negligence), and as a consequence of this omission or negligence, a criminal or administrative offence was facilitated. While the German legislator has so far been resistant to introduce the criminal liability of legal entities, the topic is increasingly discussed. In the near future, European and international trends will make the introduction of real corporate criminal liability unavoidable.

In conclusion, anti-corruption regulations have become increasingly relevant in business transactions touching Germany. The prosecution authorities show a growing interest in taking on such cases not least considering the significant fines. In view of the increasing influence of European and international developments on German law, it is a not unlikely scenario that German anti-corruption legislation will be further extended in the future.