Ethics and anti-corruption rules for defence contractors in Germany

Ethics and anti-corruption

When and how may former government employees take up appointments in the private sector and vice versa?

Current and former members of the federal government must notify the government of intended activities in the private sector if they may give rise to a conflict with the public interest. The notification duty expires 18 months after leaving government. If there is interference with public interest, the government may prohibit the activity for 12 months, which may be extended to 18 months. The government decides about the prohibition based on a recommendation by an advisory board. At state level, several states (Brandenburg, Hamburg, Hessen, Nordrhein-Westfalen, Schleswig-Holstein) have enacted similar legislation to date, others intend to follow (Thüringen).

German civil service law - at the federal and state level - requires retired civil servants to notify the government if they intend to enter into any activity related to their service responsibilities in the five years before retirement. The government may prohibit the activity if official interests are adversely affected. The notification duty expires after five years. No such obligations apply to the proposed principal or new employer.

How is domestic and foreign corruption addressed and what requirements are placed on contractors?

Corruption is punishable under the German criminal code. Corruption includes bribery of German and EU public officials and German soldiers (sections 333 and 334), of members of parliament (section 108e) and commercial bribery (section 299). In severe cases, it also covers bribery of non-EU foreign officials (section 335a). Companies may be subject to fines if their employees commit corruption offences on their behalf.

Companies whose employees have been found guilty of corruption on their behalf are debarred from public contracting for a period of up to five years. In the case of other improper behaviour intended to unduly influence the outcome of a procurement procedure, a contractor may be debarred for up to three years. Eligibility for public contracts may be restored if the contractor has taken appropriate remedial measures to ensure future compliance.

Some regional states operate registers of contractors that have been found guilty of corrupt practices. In these states, state government entities must consult the register to check whether a prospective contractor is listed. A federal register is expected to start operation in 2019 or 2020 based on a 2017 statute.

There are no statutory provisions on value-limits of gifts or invitations to meals, travel or lodging for government officials or business partners. Unless government or company internal guidelines provide otherwise, social etiquette is usually the appropriate benchmark. However, most government entities have issued strict internal guidelines on accepting gifts or other benefits. In particular, law enforcement authorities such as the police or customs do not allow their personnel to accept any benefit at all in the discharge of their duties. Other government authorities are also quite restrictive on accepting gifts.

What are the registration requirements for lobbyists or commercial agents?

Lobbyists and commercial agents are not generally required to register with any government entity (in addition to general business registration requirements). However, a contracting authority may require commercial agents to register for specific procurements.

Are there limitations on the use of agents or representatives that earn a commission on the transaction?

Generally, there are no legal limitations on the use of agents or representatives.

The German military has adopted general terms requiring the approval of intermediaries. Approval will only be granted if it is commercially appropriate to use a broker. This is not the case if the contractor can be expected to deal with the procuring department directly. The use of general commercial agents who have due authority to contract on the contractor’s behalf and are instructed to negotiate for the contractor in particular areas of business not specifically related to military or public contracting is usually deemed appropriate. Commissions are only accepted if the military has approved the agent, the contractor discloses the commission, and the amount is fair and reasonable. Commissions are also acceptable if the contract is awarded in an open or restricted (ie, non-negotiated) procedure.