Germany: New Anti-Corruption Law

Fighting Private Sector Bribery and Cross-Border CorruptionGermany-map-colour

Statistics from the Federal Criminal Police Office show that the number of corruption-related offences committed in 2013 increased to 3,995. The new regulation on taking and giving bribes in commercial practice under Section 299 of the Criminal Code is intended to implement international standards in light of growing cross-border corruption. After intensely controversial hearings and some late changes, the new anti-corruption law was passed by Parliament and came into force on November 26 2015.

Breach of Obligation Towards Principal Now Actionable

The reform of Section 299 includes the criminalisation of employees or agents that breach internal obligations towards their companies. In particular, it aims to protect employers and principals. The background to this reform is, among other things, that the EU Council Framework Decision provides for penalties where no competitive distortion exists but an obligation towards the principal has been breached in exchange for a benefit and without the company’s prior consent. In other words, the disloyalty of the recipient of the benefit towards its principal in relation to a breach of duty within internal legal relationships is now considered a crime.

Challenges

Here in lies the crux of the matter: the broadness of the law in principle allows for the prosecution of acts that concern only trivial internal company issues. For example, a reputable catering company requires that employees dress formally. If a client of the company offers to pay employees to wear a disguise at its event, this offer – as such, not obviously punishable – may be subsumed under the new provision. This example shows the need for action – in particular, the need to define the content of the provision clearly.

If the provision is not implemented properly, risks will also arise in relation to the fact that companies may have to define the breach of an obligation. If this is the case, not only will the legislature and the courts have to decide whether an act is punishable, but private organisations will also be subject to this obligation.

Moreover, businesses and individuals outside the company whose internal rules have been broken will have little knowledge of their business partners’ internal guidelines.

However, merely accepting a benefit as such is not yet considered a breach of an obligation; an action or omission beyond this must take place. For acceptance of a benefit to be considered a breach of an obligation, the benefit must have been offered in return for a breach of duty by the recipient that is in the interests of the giver of the benefit.

Consequences for Businesses and Employers

The new power gained by this provision will lead to massive challenges for compliance units and create an increased need for consultation for all enterprises on the German market. As the provision will also apply to crimes committed outside Germany, international businesses will feel these effects even more, as countries will interpret the meaning of breached obligations differently.

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For further information on this topic please contact Patrick Müller-Sartori at CMS Hasche Sigle by telephone (+49 221 77 16 159) or email (patrick.mueller-sartori@cms-hs.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

Source: International Law Office (ILO) – Contributed by CMS Hasche Sigle

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