Company Sanctions Act
Arguments and Positions
The government coalition agreement between the political parties CDU/CSU and SPD includes the introduction of a company sanctions act (Unternehmenssanktionsrecht). In „white collar crime“, it wants to ensure a more severe penalisation also of companies that benefit from the misconduct of their personnel, as a matter of principle. Sanctions of up to 10 percent of the whole group’s turnover are planned. Moreover, an obligation to investigate for public authorities and a nationwide uniform prosecution of infringements by companies are striven for. Also, clear-cut rules for proceedings and, where appropriate, their termination are intended to bring more legal certainty for companies and greater flexibility for the judiciary.
Good starting points for solutions in the „Cologne Draft“
In the past years, politicians and associations presented various reform proposals for a company sanctions act. The “Cologne Draft” for such an act is mainly about incentives to improve corporate compliance.
Informal draft by the BMJV
An informal draft by the German federal ministry of justice (BMJV) for an “act to fight corporate crime” (Gesetz zur Bekämpfung der Unternehmenskriminalität / VerSanG-E) became known in August 2019. An official bill is expected shortly.
VCI proposal: improve compliance
The chemical industry, too, speaks for modernising the company sanctions legislaton. Together with the professional organisation of compliance managers, the chemical industry has elaborated a 13-point paper which is oriented to the “Cologne Draft”. A reform of the legal rules on minor irregularities (Ordnungs-widrigkeiten) or the introduction of a new company sanctions act should mainly serve for a better corporate culture and compliance. This opportunity should also be used to clearly regulate the sanctions procedure and the rights of those affected.
- Strengthen compliance systems
Above all, a future company sanctions act should strengthen all compliance systems in companies. Therefore, no sanctions should be imposed if an individual offender disregards a basically functioning compliance system and commits an infringement from within the company. Company sanctions should be based on a demonstrable deficiency in the organisation.
- Observe the separation principle under company law
Parent companies should not be liable for the misconduct of their subsidiaries. As a matter of principle, only the individual legal entity – and not the group as a whole – should be held liable.
- Preserve the defence rights of companies
An effective protection of confidentiality for management and in-house lawyers is needed to preserve the defence rights of accused companies. Therefore, rights to refuse to testify and to cooperate are needed. Furthermore, prohibitions to confiscate should be introduced; in particular, this applies for documents from company-internal investigations.
- Introduce a self-denunciation that relieves from sanctions
A self-denunciation that relieves from sanctions is an incentive to investigate and find out about internal shortcomings. The companies should be given this possibility.
- Take into account a willingness to cooperate
Furthermore, a willingness to cooperate of the companies concerned should have a mitigating effect.
- Suspend monetary sanctions
It should be possible to suspend monetary sanctions on probation, subject to conditions.
- Do not “pillory” companies
Measures that are only harmful to a company are not helpful – e.g. exclusion from award procedures or its public “pillorying”