Germany introduces a corporate criminal liability regime – Draft bill coming soon

I. Background -

To date, Germany – in contrast to the U.S. and many European jurisdictions – has not introduced a genuine corporate criminal liability regime, meaning that corporations cannot be held criminally liable. Under the law in force, corporations can only be fined up to EUR 10 million for misconduct of managerial staff or deficiencies of the compliance function. In addition, law enforcement authorities can order the disgorgement of improper profits (which is often the main element of the sanction) as an element of the fine to be imposed. For a long time, these sanctions did not have any considerable deterrent effect, not least because the law enforcement authorities under the current regime have wide powers of discretion as to whether or not to initiate an investigation and to impose a fine, which means that in practice cases in which companies have actually been sanctioned are rare.

In the wake of the numerous recent corporate scandals involving German companies (e.g., the diesel emissions scandal), the German government decided to introduce a corporate criminal liability regime to more efficiently counter corporate misconduct and to sharpen the sanctions for corporations who fall foul of the new regime.