In a recently published decision of April 22, 2015 (file no 5/12 Qs 1/15), the district court in Frankfurt am Main ruled that bribing the managing director of a limited liability company is not a criminal offense under Section 299 German Criminal Code, if the managing director is also the sole shareholder of the company.

WHAT HAD HAPPENED?

Two sales representatives had offered a managing director and sole shareholder of a company EUR 10.000 and EUR 20.000 as an incentive to buy a printing machine for his company. The local court Frankfurt am Main refused to open the main proceedings against the two sales representatives, stating that they cannot be held liable for bribing G, as Section 299 German Criminal Code is not applicable on G. The district court now confirmed the decision by the local court and overruled the public prosecutor’s appeal.

LEGAL BACKGROUND

Section 299 para 1 German Criminal Code on commercial bribery prohibits that employees or agents of a business demand, allow themselves to be promised or accept an improper benefit for themselves or another in a business transaction as consideration for according an unfair preference to another in the competitive purchase of goods or commercial services. Vice versa, Section 299 para 2 applies to anyone offering, promising or granting such an improper benefit to employees or agents of a business.It is the common opinion amongst the German courts that the managing director of a company is an “agent” in the sense of section 299 German Criminal Code. Offering the managing director an improper benefit could be regarded as commercial bribery.The district court in Frankfurt now had to decide whether or not the managing director of a company qualifies as an agent even if he is, at the same time, the sole shareholder of the company. The issue arises because according to the prevailing opinion in Germany, one cannot bribe the (sole) owner of a company. The law requires a “principal-agent-relationship” between the recipient of the bribe and the company. One could argue, however, that there is no “principal-agent-relationship” between the managing director / sole shareholder and his company.

DECISION BY THE DISTRICT COURT

This was the first time, a district court in Germany had to decide this issue. And the district court concluded that as the managing director / sole shareholder he does not qualify as agent and thus, cannot be bribed. But the district court did not completely let G of the hook. The managing director may have committed embezzlement by accepting the incentive from the sales representatives. Also, the district court did not (have to) touch this aspect, but in turn the sales representatives may have participated (aiding or abetting) in any embezzlement by the managing director. Therefore, the decision by the Frankfurt court should not be interpreted as a carte blanche to bribe managing directors / sole shareholders.

OUTLOOK

As reported in our previous post, section 299 German Criminal Code and its scope are the topic of a broad discussion in Germany and it is likely that the section will be amended and expanded in the near future.