On October 21, 2020, the German government introduced the draft of the Association Sanctions Act to the Bundestag (https://dserver.bundestag.de/btd/19/235/1923568.pdf). This initiated the final phase of the legislative process and the law could even be passed at the end of 2020 or probably at the beginning of 2021. These are the three key innovations:
- Principle of legality: In administrative offenses law, the current principle is that companies may be investigated if there is an initial suspicion, but this is not mandatory. The new law is intended to increase the pressure to prosecute by imposing a duty to investigate. In return, options for closing proceedings have been expanded. In the future, these options will be subject to negotiations with investigating authorities as part of an effective defense concept.
- Higher penalties: For major corporations with an annual revenue of more than 100 million euros, a fine may in future be up to 10% of global annual group revenue. In addition, there is still the possibility of disgorgement. Companies of all sizes can be severely affected by the future sanctions.
- Increased importance for preventive compliance systems: The fact whether a company has a compliance system and whether it is effective will in future be scrutinized with regard to the decision on the amount of a fine as well as to the decisions whether a mere warning will be sufficient or whether a proceeding can be closed due to minor significance, or when deciding on potential requirements to close proceedings. Although the requirements for smaller or mid-sized companies will not be the same as for large companies, a risk-based effective compliance system will also be expected of such companies in the future.
We advise on appropriate compliance systems, tailored to the risks and requirements of the respective company, taking into account your company’s specifics needs and requirements.