Introduction

The federal government plans to create new corporate penalties and abandon the discretionary principle which has thus far applied in corporate prosecutions. Further, the upper limit of penalties will be significantly increased.

At the same time, the government aims to establish legal requirements for internal investigations that provide an incentive for investigation support.

Legality principle

For legal practice, the proposed abandonment of the discretionary principle is probably the most incisive amendment. Where an offence relating to a company's operational activities or enrichment is suspected, the initiation of proceedings against the company will become mandatory and will no longer be at the authorities' discretion.

According to the coalition agreement, clear procedural rules will increase legal security for the companies involved. These procedural provisions must also include company-specific regulations on terminating proceedings. Presumably, the options for terminating proceedings will be clearly defined by law (as per individual criminal law).

Higher monetary penalties

The federal government plans to commensurate monetary penalties with the economic strength of the companies involved. For example, the maximum penalty for companies with a turnover of more than €100 million would be 10% of their annual turnover. The coalition agreement also states that penalties against companies should be made public by appropriate means.

The federal government intends to create concrete and comprehensible sentencing rules for imposing penalties. The Federal Court of Justice's juristiction is also expected to be considered. In a 9 May 2017 judgment the Federal Court of Justice held that the extent to which a company has installed an effective compliance management system aimed at avoiding legal violations is significant when assessing a fine (1 StR 265/16).

Internal investigations

The coalition agreement stipulates that legal incentives should be set for investigation support through internal investigations and for disclosing any findings gained therein. The federal government aims to introduce legal requirements for internal investigations and, in particular, to regulate the search and seizure of documents.

To date, jurisdiction case law on the seizure of documents held by lawyers or drawn up by them in the context of internal investigations remains inconclusive. In a 25 July 2017 decision, the Federal Constitutional Court temporarily ordered that documents confiscated from an internal investigation at a law firm may not be evaluated for the time being (2 BvR 1287/17). A final decision has not been adopted yet.

Draft bill

While the federal government is expected to present a draft bill on corresponding new provisions as early as Autumn 2018, its intent is clear: through higher corporate penalties on the one hand and rewarding compliance measures and investigation support on the other hand, companies will be held more accountable.

For further information on this topic please contact Laura Görtz at CMS by telephone (+49 69 71701 341) or email (laura.gortz@cms-hs.com). The CMS website can be accessed at www.cms-hs.com.

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