EU Directive implemented: Bundestag tightens German criminal law on sanctions

On 15 January 2026, the German lower house of parliament, the Bundestag, adopted the Federal Government Draft to Amend Criminal Offences and Penalties for Violations of Union Restrictive Measures (Gesetzentwurf der Bundesregierung zur Anpassung von Straftatbeständen und Sanktionen bei Verstößen gegen restriktive Maßnahmen der Europäischen Union) (see our Noerr Insight dated 5 September 2024) (“Government Draft”), after it was amended by the Committee on Economics and Energy (21/3637). The draft implements the overdue requirements of EU Directive (2024/1226) on the definition of criminal offences and penalties for the violation of Union restrictive measures in German law and fundamentally revises its criminal law on sanctions. It will significantly tighten key provisions and markedly increase the risk of penalties and fines for companies and their management. The changes will take effect immediately on the day after the law is expected to be announced, namely at the end of January or beginning of February.

To implement the rules set out in the Directive, the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz) (“Foreign Trade Act”) is to be amended, focusing on the main criminal and administrative offence provisions of sections 18 and 19 of the Foreign Trade Act and related changes to section 82 of the German Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung). Other adjustments will affect the German Customs Investigation Service Act (Zollfahndungsdienstgesetz) and the Residence Act (Aufenthaltsgesetz).

Supplementing and expanding criminal provisions in the Foreign Trade Act

The criminal provisions now contained in section 18(1) no. 1 and 2 of the Foreign Trade Act are to be supplemented and expanded. The distinction between infringements of absolute prohibitions (now section18(1) no. 1 to 3 of the Government Draft) and breaches of licensing requirements (now section 18(1) no. 4 of the Government Draft) will be retained. But there will be far greater differentiation between criminal offences against sanctions in future, with numbered lists of various known prohibitions.

The revised section 18(1) no. 2 of the Government Draft imposes penalties for breaches of obligations in connection with transactions, the use and deployment of funds and prohibitions on the disposal of frozen funds and economic resources, as is currently the case.

A new section 18(1) no. 3 criminalises certain acts of circumvention, including concealing frozen funds or economic resources and providing false or misleading information.

A particularly serious case of violation of goods-related sanctions is to be introduced, carrying penalties ranging from six months to ten years if incorrect or incomplete information is provided about the goods, transaction or parties involved, or if a non-EU company is used over which the perpetrator has a controlling or decisive influence.

Certain infringements to be upgraded from administrative to criminal offences

Many infringements that could only be prosecuted as administrative offences up to now (especially various activities currently listed in section 82(9) no. 1 to 9 and section 82(1) no. 12, 14 and 16 to 18 of the Foreign Trade Regulation) will now be subject to mandatory criminal penalties if committed intentionally. This applies above all to intentional infringements of prohibitions of certain transactions, financial services and investments.

However, breaches of universal obligations to report, especially the universal obligation to report regarding frozen assets (e.g. Article 6b of Regulation (EU) No 833/2014), which have only been punishable as administrative offences under section 19(5) no. 1 of the Foreign Trade Act, are now classified as criminal offences (newly inserted section 18(5a) of the Government Draft). However, this does not apply to breaches of the obligation to report other circumstances which facilitate the implementation of a sanction.

Significant increase in corporate fines

The new Act also brings significantly stricter penalties for legal entities and associations of persons:

The ceiling for the punitive part of corporate fines will be raised from the current €10 million to €40 million for underlying criminal offences committed by managers (section 19(7) of the Government Draft). This also applies to breaches of supervisory duties under section 130 of the German Administrative Offences Act (Ordnungswidrigkeitsgesetz).

Violations when trading in dual-use goods

Important changes apply to violations involving trading in dual-use goods, i.e. items that can be used for both civilian and military purposes. Reckless violations of certain prohibitions relating to dual-use goods, which were previously treated as administrative offences, will in future be punishable by imprisonment of up to three years or a fine under section 18(8a) of the Government Draft. Up to now, reckless acts were only punishable for certain violations of arms embargoes under section 17 of the Foreign Trade Act.

Two-day grace period rule to be deleted

In future, employees and managers responsible for compliance should place even more emphasis on implementing sanctions in their processes immediately after they are announced in the EU’s Official Journal. This is because the two-day “grace period” after new EU sanctions legislation is announced will no longer apply. The exemption in section 18(11) of the Foreign Trade Act under which no punishment was imposed on anyone committing an offence by the end of the second working day following publication in the Official Journal under section 18(1) of the Foreign Trade Act has been deleted. Under section 18(11) of the Government Draft, criminal liability will only be waived in certain cases involving humanitarian aid.

No inclusion of new types of sanctions

When creating new criminal offences, Germany is limiting itself to implementing the requirements of Directive (EU) 2024/1226. Where German criminal law has already gone beyond the minimum harmonisation requirements, the offences will remain in place. Violations of new types of sanctions that did not exist at the time Directive (EU) 2024/1226 entered into force are not covered by the new criminal provisions.

Similarly, the legislature has refrained from establishing a general offence of sanctions circumvention, since the existing standards are considered adequate.

Trusteeship

The version of the draft now adopted (21/3637) contains explicit provisions enabling public trusteeship for European subsidiaries of Russian parent companies (newly inserted section 6a of the Government Draft). The legislators are therefore creating a legal framework for monitoring companies covered by Article 5aa(2f)(a) of Regulation (EU) No 833/2014 which is suitable for all sectors and specifically relates to sanctions.

Trusteeship is ordered exclusively by the Federal Ministry for Economic Affairs and Energy on a case-by-case basis in an administrative act. The condition for public trusteeship is the existence of a real danger of breaches of public security and the foreign interests of the Federal Republic of Germany. At the request of a company, a share custodian may also be appointed by the court (newly inserted section 6b of the Government Draft) who can then exercise the administrative rights linked to a shareholder’s status. This is intended as a balance between preventing the EU’s sanctions package against Russia being circumvented or violated and safeguarding jobs and securing creditors’ interests.

Final remarks

The reform of the criminal law governing sanctions introduces tighter rules on key aspects of day-to-day practice. The current option of obtaining immunity from fines for numerous violations committed due to negligence by filing a voluntary declaration under section 22(4) of the Foreign Trade Act will be abolished once administrative offences are upgraded to criminal offences. More robust processes are now crucial. Companies and their management need to familiarise themselves with the new legal landscape, as it is more important than ever to avoid mistakes when trading with foreign countries, resulting in personal risks of criminal prosecution and fines – “playing it by ear” will no longer be an option. Companies should tighten up their compliance structures and risk management in foreign trade law and assess the continuing highly dynamic EU sanctions situation (with a view to Russia, Belarus, Iran and other countries) every day to avoid criminal liability and potential fines of up to €40 million.