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Trends and climate

Trends

Have there been any recent changes in the enforcement of anti-corruption regulations?

The Act on Combatting Corruption, which came into force on November 26 2015, is one of the most expansive reforms to German criminal anti-corruption legislation undertaken by the German Bundestag. The new act extends the criminal offence of taking bribes in commercial practice (Section 299 of the Criminal Code) and expands the criminal offences of bribing public officials (Sections 331 and following of the Criminal Code) and their extraterritorial applicability. In addition, the Act on Combatting Bribery in the Healthcare Sector, which came into effect on June 4 2016, implements new criminal offences regarding active and passive bribery of healthcare professionals (including physicians, dentists, veterinarians, pharmacists and psychotherapists). These amendments will affect companies and challenge their compliance and legal departments.

Legislative activity

Are there plans for any changes to the law in this area?

There are no further specific legal reforms planned concerning bribery and corruption. However, this may change in the next few months, once a new government has been formed, as on May 10 2017Germany ratified the 1999 Council of Europe Criminal Law Convention on Corruption.

Legal framework

Authorities

Which authorities are responsible for investigating bribery and corruption in your jurisdiction?

Unlike the United Kingdom and its Serious Fraud Office, Germany has no specialised anti-corruption agency. Accordingly, the general law enforcement authorities (ie, the public prosecutor’s office and the police departments) are also responsible for the enforcement of the laws concerning corruption and bribery. However, most federal states have centralised the prosecutor´s offices that specialise in anti-corruption investigations. There are also often special task forces within the police.

Domestic law

What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?

The key legislative and regulatory provisions in Germany are:

  • regarding bribery in the commercial sphere: Sections 299 and 300 of the Criminal Code;
  • regarding bribery in the healthcare sector: Sections 299a, 299b and 300 of the Criminal Code;
  • regarding bribery in the public sector: Sections 331 to 334, 335, 335a and 336 of the Criminal Code; and
  • regarding bribery in the political sphere: Section 108e of the Criminal Code.

International conventions

What international anti-corruption conventions apply in your jurisdiction?

Germany is a signatory to:

  • the Convention on the Protection of the European Union´s Financial Interests (signed on September 27 1996 and ratified on September 10 1998);
  • the European Convention on the Fight against Corruption Involving EU Officials or Officials of EU Member States (signed on June 25 1997);
  • the resolution of the Council of Europe on the 20 Guiding Principles for the Fight against Corruption (adopted on November 6 1997);
  • the Convention on Combatting Bribery of Foreign Public Officials in International Business of the Organisation for Economic Cooperation and Development (signed on December 17 1997 and ratified on September 10 1998);
  • the Council of Europe´s Civil Law Convention on Corruption (signed on November 4 1999), Criminal Law Convention on Corruption (signed on January 27 1999) and the Additional Protocol to the Criminal Law Convention on Corruption (signed May 15 2003); and
  • the UN Convention against Corruption (signed on December 9 2003 and ratified on November 12 2014).

Germany´s public prosecutors offices frequently cooperate with foreign investigation authorities. The basis of such cooperation is primarily a bilateral treaty between Germany and the relevant foreign country. In the absence of such a treaty, the cooperation is regulated by the provisions of the Act on International Cooperation in Criminal Matters.

Specific offences and restrictions

Offences

What are the key corruption and bribery offences in your jurisdiction?

Bribery in the commercial sphere

According to Section 299 of the Criminal Code, an employee or agent of a business shall be criminally liable if he or she demands, allows him/herself to be promised or accepts a benefit for him/herself or for a third person on a business transaction as consideration for according an unfair preference to another party in the national or international competitive purchase of goods or commercial services. The same applies to the person who offers, promises or grants such benefit to an employee or agent of a business (Section 299(2)(1)). The preference is considered unfair if it is not based on any reasonable decision-making, but exists only because of the benefit itself.

Section 300 regulates especially serious cases. A case is considered especially serious if the offence relates to a major benefit or the offender acts on a commercial basis or as a member of a group whose purpose is the continued commission of such offences.

The Act of Combatting Corruption has added a subsection to Section 299 that protects the employer´s interests in the loyal and unbiased performance of duties by its employees and agents. A crime exists not just if the benefit leads to an unfair competitive advantage: it exists if the benefit is meant as a consideration to the employee or agent for violating his or her duties towards the business by an act or omission in the purchase of goods or commercial services (Sections 299(1)(2) and (2)(2)). Therefore, it is sufficient for the breach of duty to be connected to the purchase of goods or commercial services; a distortion of the competitive process is not necessary. The issue of duty to the company can arise as a result of either law or contract. Thus, an employee who accepts a benefit from a supplier in consideration for ignoring the company’s internal rule to invite an offer from a competitor for comparison is liable under Section 299, even if the supplier’s offer was in fact the best offer available on the market.

In addition to the adoption of this ‘employer model’ (Geschäftsherrenmodell), the 2015 Act of Combatting Bribery has expanded criminal liability for money laundering (Section 261 of the Criminal Code). Consequently, active as well as passive bribery in the commercial sphere is also a predicate offence for money laundering when committed on a commercial basis or as a member of a criminal association. German investigating authorities and courts frequently assume that this requirement is met in cases involving companies.

Bribery in the healthcare sector

On March 29 2012 the Grand Criminal Panel of the German Federal Court ruled that physicians who work in private practice are neither public officials nor agents of the statutory health insurance (BGH, Beschl v 29.03.2012 – GSSt 2/11). Therefore, the granting and receiving of benefits to influence their conduct as doctors can be considered neither bribery in the public sector in terms of Sections 331 to 334 of the Criminal Code, nor bribery in the commercial sphere in the meaning of Section 299.

In response, the German Parliament adopted the Act of Combatting Corruption in the Healthcare Sector. As a result, every healthcare professional who, in connection with the exercise of his or her profession, requests, receives or accepts the promise of a benefit for him/herself or a third person in consideration for preferring somebody surreptitiously with respect to the procurement, prescription or dispensing of drugs and medical products, or the referral of patients, is criminally liable (Section 299a). The same applies to the person who offers, promises or grants the benefit (Section 299b).

In addition, Section 300 of the Criminal Code, which provides criminal liability for especially serious cases of bribery in the commercial sphere, also provides criminal liability for especially serious cases of bribery in the healthcare sector.

Bribery in the public sector

The term ‘public official’ is defined in Section 11(1)(2) of the Criminal Code. It encompasses civil servants and judges, as well as anybody else who carries out public official functions or has otherwise been appointed to serve with a public authority or other agency, or has been commissioned to perform public administrative services. The organisational form chosen to fulfil such duties does not matter. Therefore, employees of state-owned or state-controlled companies may be included if those companies operate as an extension of the state.

The Act on Combatting Bribery broadened the scope of Germany´s law on bribery in the public sector significantly. In addition to domestic public officials, the current law concerns EU officials, as well as certain foreign and international public officials (Section 335a of the Criminal Code). The term ‘EU public official’ includes not only members of the EU institutions such as the European Commission and the European Central Bank and all public officers, but also persons only assigned by the European Union. Of even greater practical importance is the new provision attached to Section 335a of the Criminal Code. This provision adjusts criminal liability to domestic officials in all other countries (EU and non-EU states) and is interpreted very broadly. In addition, Section 5(15) stipulates almost universal jurisdiction. This means that it is sufficient for the perpetrator to be a German citizen at the time of the offence for Sections 331 to 337 to apply.

To be held criminal liable for bribery in the public sector in its basic form, it would be sufficient for a public official or a person entrusted with special public service functions demand or allow him/herself to be promised, or accept, without approval by his or her superior, a benefit for him/herself or for a third person for the performance of an official duty (Section 331 of the Criminal Code). The same liability applies to the person who offers, promises or grants the benefit (Section 333).

The qualified offences of granting and accepting bribes under Sections 332 and 334 require a more specific – expressed or implied – agreement of wrongdoing than for basic bribery. Thus, the benefit granted or accepted must be meant as a consideration for the fact that an official act has been or will be performed whereby official duties have been or will be violated. In those cases, the public official (Section 332), as well as the ‘donor’ (Section 334) can be held criminally liable. ‘Especially serious cases’ are defined in Section 335.

Furthermore, misdemeanours under Sections 332(1) and 334 of the Criminal Code (both in conjunction with Section 335a) are predicate offences for money laundering.

Bribery in the political sphere

Bribery in the political sphere is regulated by Section 108e of the Criminal Code. The German legislator updated this section in 2014 to implement the provisions of the Criminal Law Convention on Corruption by the Council of Europe and the UN Convention against Corruption. Nowadays, members of certain national, EU or international parliaments, as well as members of a foreign legislative body, who demand or allow themselves to be promised, or accept, an unfair benefit for themselves or a third person in consideration for the execution of an act or omission by order while exercising their mandate are criminally liable (Section 108e (1)). The same liability applies to the ‘donor’ (Section 108e (2)).

Compared to the previous legal situation, the current law covers not only the buying and selling of votes, which was difficult to prove by investigation authorities, but also influencing actions, such as in faction meetings or working committees, as well as non-material benefits. Accordingly, Section 108e is expected to have a deep impact on all lobbying activities.

Hospitality restrictions

Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?

Since there are no specific laws in Germany regarding gifts or the provision of hospitality, determining where hospitality ends and where corruption starts is particularly challenging. The German laws on bribery and corruption cover, in principle, any kind of advantage to which the recipient is not legally entitled. Therefore, the term ‘benefit’ that is generally used can be defined as any material or immaterial advantage that improves the position of its target in terms of his or her financial, legal or personal situation. This can include gifts, meals or entertainment of low value or small travel expenses. An exception is made only in cases where the advantage is “acceptable” because it is “socially adequate”. To distinguish socially adequate from corrupt behaviour, the federal authorities have turned away from fixed amounts of money to examine the individual circumstances of each case. Decisive parameters may be the nature and worth of the promised benefits, the status of the person invited, the relationship between the parties, the apparent objective of the provided benefits, and whether the transactions are handled transparently or secretly and their frequency. The view on gifts and hospitality is usually stricter in the public sector than in the commercial sphere.

Facilitation payments

What are the rules relating to facilitation payments?

In principle, granting or receiving facilitation payments leads to criminal liability. There is one exception in case of bribery of public officials if there is no violation or intended violation of official duties through the performance or future performance of the public official (Sections 331, 333 and 335a).

Liability

Scope of liability

Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?

There is no corporate criminal law in Germany. Therefore, companies cannot be held liable directly under anti-corruption rules of the Criminal Code. However, companies can be held liable if the offence was carried out by a leading employee or if the offence was made possible by the lack of supervisory measures (Sections 30 and 130 of the Administrative Offences Act). In such cases, it is possible to impose a fine on the company.

Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?

Agents, as well as facilitating parties, can be held liable for bribery offences. Criminal liability depends on the kind of involvement in the offence. Where the agent or facilitating party acts intentionally and follows his or her own interest in committing the offence, it is most likely that he or she will be criminally liable as a co-perpetrator (Section 25(2) of the Criminal Code). Where the agent or facilitating party does not act intentionally and gains no interest in the action, he or she will probably be liable for aiding and abetting (Section 27 of the Criminal Code). Whether an agent or facilitating party is liable as co-perpetrator or for aiding and abetting is decided on a case-by-case basis.

Foreign companies

Can foreign companies be prosecuted for corruption in your jurisdiction?

Even though there seems to be a strong political desire to strengthen the liability of companies for criminal offences, under current German law neither German nor foreign companies can be subject to criminal liability.

However, Section 30 of the Administrative Offences Act provides fines against legal entities whose representatives or other executive employees have committed bribery offences.

In principle, such fines may also be imposed on foreign companies. This requires that the bribery offences of the foreign company’s representatives or other executive employees take place under German jurisdiction (Sections 3 and following of the Criminal Code and Section 5 of the Administrative Offences Act), and that the constitution of the foreign company be comparable to the one of a German company. Thus, a fine against a foreign company will be imposed only where the foreign company has headquarters, or at least some assets, in Germany.

Whistleblowing and self-reporting

Whistleblowing

Are whistleblowers protected in your jurisdiction?

Since the European Court of Human Rights convicted Germany in 2011 for unduly restricting a whistleblower´s freedom of expression, several legislative proposals have been presented. Nevertheless, the German legal system still does not provide proper and comprehensive protection. While the current labour law requires employees to take their suspicion of wrongdoing to their superiors before going to the authorities, not even large companies are forced to establish a whistleblower hotline or to appoint an ombudsman. Furthermore, a whistleblower may be faced with retributive measures or termination of his or her employment contract if his or her suspicion turns out to be unfounded.

Self-reporting

Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?

In general, judges make use of their discretion to reduce criminal sentences, depending on the company´s cooperation. The prosecutor may also reduce the requested sentencing.

Dispute resolution and risk management

Pre-court settlements

Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?

The most important aspect of the German Code of Criminal Procedure with regard to bribery and corruption is probably the principle of legality, expressed in Section 152(2). Under this provision, the investigating authorities have a duty to act against any person reasonably suspected of criminal activities. Contrary to many other countries, German prosecutors have no discretion to initiate investigations.

However, the Code of Criminal Procedure provides different types of pre-trial settlement in addition to plea bargaining at trial.

Pre-court settlement 

Not every case with sufficient evidence against the defendant needs to go to court.

Under Section 153(1) of the Code of Criminal Procedure, in cases of misdemeanour the public prosecution office may dispense with prosecution, with the approval of the court of the main proceedings, if the perpetrator´s guilt is of a minor nature and there is no public interest in the prosecution. If charges have already been preferred, the court, with the consent of the public prosecution office and the indicted accused, may do the same.

Pursuant to Section 153a(1), the public prosecution office may, with the consent of the defendant and of the court of the main proceedings, dispense with preferment of public charges and concurrently impose conditions and instructions upon the defendant if these are of such a nature as to eliminate the public interest in criminal prosecution and if the degree of guilt does not present an obstacle. If the public charges have already been preferred and the public prosecutor and the indicted person agree to settle, the court may do the same.

Plea bargains

The possibility of plea bargaining is provided in Section 257c of the Criminal Code. In suitable cases, the court may reach an agreement with the participants on the further course and outcome of the proceedings. The subject matter of this agreement may comprise only the legal consequences that could be the content of the judgment and associated rulings, other procedural measures relating to the course of the underlying adjudication proceedings and the conduct of the participants during the trial. A confession shall be an integral part of any negotiated agreement. The verdict of guilt, as well as measures of reform and prevention, may not be the subject of a negotiated agreement.

Defences

Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?

Unlike the law prohibiting bribery in the public sector, the provisions regarding bribery in the commercial sphere concern only benefits for future actions. As a result, retroactive awards for past performances are usually allowed. Such benefits are however illegal if they are also meant as an incentive for future actions; the same applies to retroactive awards that have been agreed prior to the performance in question.

What other defences are available and who can qualify?

Sections 331(3) and 333(3) of the Criminal Code offer a defence in case of bribing public officials, excluding judges. Such a justification requires that the perpetrator act with the prior or retrospective approval of the competent authority. Furthermore, all general defences of the Criminal Code – such as self-defence – are applicable, but unlikely to be successful, in bribery cases.

Risk management

What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?

Safe harbours can be created by internal controls, ethics and compliance programmes that should face the individual needs of a company and include controls on risk areas such as gifts, hospitality, entertainment and expenses, customer travel, political contributions, charitable donations and sponsorships, facilitation payments, as well as solicitation and extortion. To secure the effectiveness of such measures the company should put in place a written policy to prohibit bribery that should be communicated throughout the company so that compliance becomes a duty of all employees. But it is not only the employees who should be aware of the compliance standards. The compliance of third parties, such as business partners, should be ensured as well. This applies especially to the risk of corrupt practices of the third party. Third parties should furthermore commit to the compliance standards of the company itself. Moreover, the senior management should support the company’s measures to prevent bribery and create a ‘tone at the top’ that promotes a compliance culture within the company. In addition, they should appoint a compliance officer who has enough authority to overview the implementation of the compliance system. The compliance standards should be regularly reviewed and communicated to all employees of the company – for example, through internal audits or trainings. In case of an act against the compliance standards, the company needs to implement disciplinary measures.

Record keeping and reporting

Record keeping and accounting

What legislation governs the requirements for record keeping and accounting in your jurisdiction?

The requirements for record keeping and accounting within a company are governed by the German Commercial Code, as well as the German Stock Corporation Act and the German Limited Liability Companies Act.

What are the requirements for record keeping?

Sections 238 to 241a of the Commercial Code provide the general requirements for record keeping within the company. According to Section 238, every merchant must keep record of its commercial transactions and assets. The record must be kept in a way that enables a third party to get an impression of the situation of the company. There are special provisions in case of a limited company (Sections 41 to 42a of the Limited Liability Companies Act) or a stock company (Section 150 of the Stock Corporation Act). A company does not have to keep record if, for two consecutive years, its yearly sales revenue does not exceed €600,000 and its yearly profit does not exceed €60,000 (Section 241a of the Commercial Code). Under Section 331 of the Commercial Code, a false record is punishable with a maximum of three years of imprisonment or a monetary fine. The record must be submitted electronically to the Bundesanzeiger, which is a public display of the records (Section 325 of the Commercial Code).

Reporting

What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?

Besides the fact that a disclosure of potential violations of anti-corruption regulations might lead to leniency, companies are not obligated by law to report them in any way. This goes back to the principle in German law that nobody is under an obligation to incriminate him or herself.

Penalties

Individuals

What penalties are available to the courts for violations of corruption laws by individuals?

According to Section 299 of the Criminal Code, the perpetrator shall be liable to imprisonment not exceeding three years or a monetary fine. In especially serious cases, Section 300 stipulates that the offender shall be liable to imprisonment from three months to five years.

Under Sections 299a and 299b of the Criminal Code, the perpetrator is liable to imprisonment of up to three years. Section 300 also covers especially serious cases of bribery in the healthcare sector. The law provides for a custodial sentence of three months up to five years.

In its basic form, bribery in the public sector is punishable with a custodial sentence of up to five years or a monetary fine (Sections 331 and 333 of the Criminal Code). In cases of qualified offences of granting and accepting bribes, the punishment for the public official (Section 332), as well as the ‘donor’ (Section 334), is imprisonment for three months to five years. In ‘especially serious cases’, as defined in Section 335, penalties range from one year up to 10 years’ imprisonment.

Bribery in the political sphere provides for a maximum of five years of imprisonment or a fine (Section 108e).

Companies or organisations

What penalties are available to the courts for violations of corruption laws by companies or organisations?

Under current German law only individuals are subject to criminal liability.

However, Section 30 of the German Administrative Offences Act allows legal entities to be punished for bribery offences of their representatives or any other executive employees with fines up to €10 million. If the profit generated by the offence is higher, the fine may be as high as that profit. Thus, fines have, in some cases, exceeded €100 million. The same goes if the management of the company has intentionally or negligently not fulfilled supervisory measures that are necessary to prevent bribery by employees or agents of that company.

Alternatively to a fine, Sections 73 and 73b of the Criminal Code allow the confiscation of the economic advantage the company gained through the respective bribe.

Additionally, Section 123 obliges public entities to ban companies from procurement procedures if one of their executive employees has been sentenced for bribery.