The long-awaited draft bill of the German Federal Ministry of Justice for an Association Sanctions Act is available since several weeks: Compliance management systems and internal investigations are rewarded – higher penalties and regular prosecution act as a deterrent. But further changes have already been announced. Apparently, the Federal Ministry of Economics is now working on the draft.
The launch of an association offence
Outside of administrative offences law and individual criminal law, a new type of offence called “association offence“ is planned to be launched in a separate Association Sanctions Act. All associations, i.e. all legal persons and associations of persons under private and public law, will be covered. This means that the Association Sanctions Act applies not only to large corporations, but also to small and medium-sized enterprises.
An association offence shall be committed, if obligations of the association are violated. These include in particular classic property offences, tax offences, environmental offences and competition offences. If a manager of the association commits an association offence or if such an offence is committed by an employee for lack of adequate preventive measures, it will be possible to impose a sanction on the association. Offences committed abroad should also be covered – but only if the association has a branch in Germany.
The association sanction
As currently the association fine (administrative offence), the monetary association sanction should in principle amount to up to EUR 10 million. For companies that generate a turnover of more than EUR 100 million, the maximum limit for the monetary association sanction should be 10 % of the annual turnover generated worldwide – in line with the model of comparable regulations in antitrust and data protection law. In addition, the possibility of profit absorption will remain. It already allows setting a multiple of the maximum limit of EUR 10 million as fine.
New for associations is the introduction of a probation regulation – the so-called warning with reservation of association sanction – which can be combined with conditions and instructions.
If a large number of persons have been harmed by the association offence, the association should be able to be denounced by public announcement of the verdict in the sense of "naming and shaming". This should make it easier for injured parties to check for possible claims.
The possibility of the liquidation of the association as ultima ratio shall now however not be possible any more after intensive also publicly led discussions..
Aspects of the determination of an association sanction
The Association Sanctions Act will provide possibilities to mitigate sanctions and to dispense prosecution. Essential aspects for this are the compliance management system of the association as well as the execution of an internal investigation.
The implementation and improvement of the compliance management system, i.e. measures for the prevention and detection of association offences, both before and after the committing of an association offence, should have the effect of mitigating sanctions. The same applies to efforts to uncover the association offence – outside of an internal investigation – as well as measures to compensate for damages.
If the association itself or a third party instructed by the association makes a substantial contribution to the investigation of the association offence, it should be possible to reduce the association sanction up to 50%. The Association Sanctions Act stipulates certain prerequisites for mitigating the association sanction on the basis of internal investigation:
• Separation of personnel for the execution of internal investigations and defence: The same law firm – but not the same person – should be allowed to execute the internal investigation and defend the association or an accused person. Adequate security measures must be applied for this purpose. The defence lawyer should conduct his own investigations and not only access the findings of the internal investigation. This results from the comprehensive scope of an internal investigation, which is designed to identify both exculpatory and incriminating circumstances. An internal investigation ultimately becomes the extended arm of the investigating authority.
• Compliance with applicable laws and fair trial principles in the execution of internal investigations: In particular, employees should be informed before an interview that information they provide can be used in criminal proceedings against them and that they have the right to seek legal advice or the assistance of a member of the works council. They should also have the right to refuse to testify in the event of self-incrimination or incrimination against a close relative.
• Continuous and full cooperation of the association with the investigating authority: This also includes the provision of the final report of the internal investigation including its results and all essential documents.
In the future, the principle of legality will apply to the prosecution of association offences. According to this principle, the investigating authority is obliged to initiate preliminary proceedings against the association if there is an initial suspicion of an association offence.
The verdicts according to the Association Sanctions Act should be entered into a register to which only selected authorities have access.
Forecast – How companies should position themselves now
It is to be expected that the Association Sanctions Act will become law sooner rather than later, possibly with a few changes. The legislative process should therefore be followed attentively.
Due to the consideration in the context of the determination of the association sanction, companies should continuously review and improve their existing compliance management system for its effectiveness or – if they do not yet have one – introduce one to a risk-adequate extent.
Due to the application of the principle of legality in the prosecution of association offences, the number of company searches by investigating authorities will increase. They can prepare themselves for the search situations and react appropriately in the concrete case, if managers as well as other employees are trained in this regard previously