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Wolfgang Spoerr is a partner and Mathias
Priewer is an associate at Hengeler Mueller.
Dr Spoerr can be contacted on +49
(0)30 203 74 159 or by email: wolfgang.
spoerr@hengeler.com. Mr Priewer can be
contacted on +49 (0)30 203 74 248 or by
email: mathias.priewer@hengeler.com.
PROFESSIONAL INSIGHT September 2018
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T
he discussion surrounding corporate
criminal liability is not new in
Germany. Instead, this issue can be
seen as ever present background
noise of varying amplitudes, rising and
falling over the past few decades. Many
misunderstandings have had an influence
on this discussion, because terminological
questions have not been adequately separated
from the substantive aspects. Thirty years
ago, the Council of Europe’s Committee of
Ministers recommended the introduction
of criminal liability for offences which are
committed during the exercise of company
activities. Many European countries
subsequently took action. Now almost all new
supranational contracts and legislation dealing
with commercial criminal law, particularly in
the European context, provide for corporate
criminal liability and only a handful of states
still go without. Germany has so far not
addressed this issue within its criminal law
provisions, but rather under the Statute on
Administrative Sanctions (Ordnungswidrigke
itengesetz). Within the German context, if an
offence is committed within a company and
certain accountability conditions are fulfilled,
then that legal entity is sanctioned with a fine.
Corporate criminal liability – nothing new in
substance
This has often been misunderstood, as if
Germany was one of the odd ones out,
unaware of the concept of corporate criminal
liability. This has certainly not been the case.
The law of administrative offences currently
allows for the imposition of fines of up to
€10m per offence, with a disgorgement of
profits in addition. Although traditionally, the
law of administrative offences was designed
to sanction legal infringements with a low
level of unlawfulness, today it has developed
into a sharp sword, with company fines that
are pushing the limits, mainly driven on the
European level within competition, capital
markets and data protection law. This has
clearly led to a blurring of lines within the
sanctioning framework. The European Court
of Human Rights (ECtHR) and the European
Court of Justice (ECJ) have recently clarified
the applicability of specific substantive and
New corporate criminal
liability in Germany
– paradigm shift or
evolution?
BY WOLFGANG SPOERR AND MATHIAS PRIEWER

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procedural fundamental rights applicable to
criminal law that administrative sanctions can
indeed have a criminal law character.
The current classification of companies’
responsibility into this two-track structure,
administrative offences on the one hand,
criminal level consequences on the other, has
been a major stumbling block. Particularly
at a time where it is fashionable to single
out ‘multinational companies’ or ‘greedy
managers’ as the culprits for negative
economic developments or crises, the call for
‘real’ corporate criminal liability and, linked
thereto or sometimes even masked by it,
the call for a tightening of sanctions, can be
heard loud and clear. In light of the financial
crisis, the ‘cum-ex share transactions’ and the
investigations surrounding diesel emissions,
the governing parties gave in. Governing
coalition agreement Merkel III (2013) had
already stated an intention to evaluate the
possible introduction of corporate criminal
liability for multinational companies. Now,
the March 2018 coalition agreement for
the current legislative period goes one step
further.
Changes expected in the current term
First, it provides for the introduction of
corporate criminal liability: looking behind
the facade of pure terminology, the real
evolutionary substance of the proposal
becomes quite evident. There is to be a move
away from the opportunity principle typical
for the law of administrative offences, which
puts the initiation of proceedings to prosecute
legal infringements in the due discretion of
the competent authority. Instead, the legality
principle, the basis of criminal procedural law,
will apply in the future. This entails a general
obligation to prosecute. Once an investigation
has been initiated, prosecutors may only
refrain under certain circumstances. German
criminal law theory will continue to focus
on individuals. Only individuals are capable
of acting and can in turn be considered
criminally liable for these actions, which is a
prerequisite for criminal sanctioning within
the conventional model of individualistic
liability.
Furthermore, the coalition agreement
contains specific details on the new regulation
of sanctions against companies. For example,
the fine to be set is to be aligned with the
economic strength of the company. For
companies with a turnover of more than
€100m, the maximum level for a fine is
to be fixed at 10 percent of their turnover.
The coalition agreement even addresses
sentencing criteria and in this context picks
up on legal requirements dealing with
internal investigations within companies. The
agreement explains, among other things, the
underlying idea of providing incentives for
companies to cooperate by way of ‘internal
investigations’ and the subsequent disclosure
of the findings gained.
Naturally, the coalition agreement does
not yet constitute objective law. It does not
bind its signatories and is merely a political
statement of intent. However, its clear and
indicative stipulations do portray a strong
political will. There is no longer a need to dust
off a crystal ball in order to predict that a law
containing comprehensive new rules regarding
company responsibility, company sanctions
and the procedural aspects connected thereto
will become a reality in the coming years. This
may take place through the introduction into
material and procedural criminal law or the
implementation of an overall strategy in the
form of a separate law, to run ancillary to the
criminal law.
Weak justification
It is undisputed, and therefore not the
subject of any further consideration, that it
is legitimate to have a legislative desire to
adequately allocate responsibility for legal
infringements which are closely connected to
a company’s actions. There are no rational
grounds to assume that only individuals
should carry the risk of criminal liability
surrounding a company’s actions. The
building blocks of the upcoming reforms
will need to be discussed one-by-one, to see
if they withstand the tests of necessity and
proportionality. Criminal law, the ‘strongest
weapon’ a legislator has at hand, is the last
resort of social control. Precisely due to this
ultima ratio function of the criminal law,
the legislator has to stipulate the aims of
the sanctions and must assess whether it is
ultimately necessary in order to accomplish
the objective behind it.
Regarding the sanctioning framework,
proponents of the reforms often stress
the alleged deterrent effect that corporate
criminal liability would have. However,
this point is highly disputed. The theory
of the general deterrent effect of high
criminal sanctions is itself controversial.
Criminological analyses indicate that the
potential offender’s perceived risk of being
caught has much more of an influence on his
decision to commit the crime than the level of
the fine to be expected. Moreover, applicable
law already provides for highly deterrent
sanctions – a recent case saw a fine of €1bn
imposed. Furthermore, the framework applies
per case, meaning that multiple offences lead
to the addition of individual fines. Lastly,
it must also be taken into account that,
according to the already applicable law, the
state can seize the assets acquired as a result
of the offence.
Another argument brought forward by
the proponents of the intended reforms,
and which is sufficiently convincing at first
sight, is legal certainty. They point out that
a move away from the opportunity principle
will ensure consistent application of the law
throughout the country. Practitioners know
that there are substantial differences in
regional prosecution and sanctioning, which

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leaves it up to chance whether and, if so, with
what intensity, a company will be investigated
in cases of misconduct. This poses a risk for
the competitive equilibrium of companies.
In this regard, legislative intervention is
reasonable. However, it seems more than
questionable whether the planned reforms are
the right path to take here. There are already
guidelines in place for fine proceedings, which
unambiguously urge public prosecutors to
assess the possible imposition of fines against
companies while dealing with the misconduct
of employees. The fact that compliance with
this aspect is limited is partly due to differing
mentalities, but mostly a result of a lack of
resources and their incorrect application.
The criminalisation of companies and the
extension of public prosecution will not
affect these practical issues. On the contrary,
there is a real fear that the existing deficits
will only worsen, not in the least because the
intended alignment of the fine to be imposed
with the economic strength of the company
will ultimately result in much more intense
investigative efforts.
Real benefits to be expected
The many advantages that the reforms
– depending on their ultimate design – can
have for companies are mainly of a procedural
nature. If legal certainty is to also mean a
strengthening of the procedural position of a
company within the investigative proceedings,
this would have to be seen as progress.
In the current legal situation companies
are regularly not formally involved in the
proceedings until a very late stage, and often
not until the investigation is completed, and
long after the involvement of individually
accused employees of the company. Unlike
the employees, companies therefore for a
while do not benefit from any information
and participation rights, such as the right
to examine case files or the right to apply to
take evidence. Effective case defence then
becomes very difficult, as does the structuring
of any internal investigation. If companies
were to be granted their own position
within the proceedings, independent of any
formal involvement, there would be two
accompanying effects: an upgrade of their
procedural subject status and, at the same
time, a power shift within the proceedings.
The legislator is faced with complex
questions here. Should the principle of
freedom from self-incrimination, which states
that nobody is obliged to contribute to their
own conviction during criminal proceedings,
also apply to companies? If the principle is
considered an element of the rule of law and
therefore a procedural right of defence, just
as the ECtHR sees it, then it should apply.
Alternatively, if it is considered merely a
part of material law, at its core a concept
protective of human dignity, the thought
could be neglected if the indirect effect on
the individual is ignored. If the right against
self-incrimination were to apply, who would
be able to rely on it? Is it everyone on a
managerial level or just representatives and
certain bodies? Would it not be the correct
approach to give all employees the ability to
invoke this right, because, after all, they are
part of the company and a sanction against
the company could disadvantage its employees
as well?
The greatest opportunities arise from
the announcement that there shall be
legal provisions and incentives for internal
investigations and the subsequent disclosure
of the findings gained. The legislator faces a
balancing act here between overregulation,
in which case, even the use of the term
‘internal’ investigation would be incorrect
from the start, and the creation of legal
certainty. While so far it is still the case that
companies can more or less decide freely
whether they want to use the findings from
internal investigations solely for compliance
purposes or whether to also pass them on
to investigative authorities, sanction-related
incentives may lead to a de facto obligation
to cooperate. The legislator must achieve
a solution that encourages companies to
effectively run their self-cleaning processes
while simultaneously maintaining some
freedom of choice.
It would be a desirable outcome if these
reforms would help to mitigate friction with
other jurisdictions. Problems in this regard
typically arise during internal investigations
with a transnational aspect. One conceivable
and company-friendly approach would be
the implementation of so-called ‘blocking
statutes’, or rules that limit the application of
foreign law, which could, in turn, weaken the
obligatory force of requests for the disclosure
of documents coming from foreign courts.
With a view to seizures of documents
from internal investigations, it also remains
to be seen whether there will be major
reforms in this regard. The German Federal
Constitutional Court, employing a strictly
formal approach, recently asserted a
simplifying, and, in the long-term, potentially
even self-disproving priority status for
effective prosecution. In this regard, the
legislator will have to newly define its state
interests, which will also need to account for
the fact that the protection of the lawyers’
work in the context of dealing with companies
can equally serve the establishment of the
truth in criminal proceedings, as it should, in
fact, according to the legal concept of the new
law on corporate criminal liability.