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). The plan was to adopt this before the end of 2020 or 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.
The planned draft legislation was not finalized during the last legislative period. Nevertheless, it is still expected that this or a comparable bill will be implemented in the next federal government. The time until the adoption of a so-called corporate criminal law can now be used for the review and development of compliance systems in companies – including small and medium-sized enterprises. It should be noted in particular that even under the current legal situation, companies can be threatened with sanctions if no internal control measures are put in place. Control measures in the sense of compliance must also be taken into account in the event of personal criminal liability, for example of managing directors.
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.
