German Federal Court of Justice (BGH) imposes more stringent conditions regarding the liability of the managing director of a GmbH (Limited Liability Company)

Under certain circumstances, the managing director of a GmbH can be held internally liable to the GmbH in the case of an infringement of the German Unfair Competition Act (UWG) (internal liability), but he may also be liable to third parties (external liability). In its judgement of 18.06.2014 (I ZR 242/12) the BGH laid down the conditions for such an external liability in connection with unfair trade practices.

In the present case, a gas supply company sought an injunction against a competitor, a GmbH, and the competitor’s managing director based on infringements of certain provisions of the German Unfair Competition Act.

Once again the BGH pointed out that the “principles of liability of interference” (Störerhaftung) do not apply the realm of the UWG. Rather, the decisive question is whether the managing director himself can be considered the perpetrator of or at least an accomplice to the infringing action of the company.

Hence, the managing director can be held personally liable to third parties if he was actively involved in the infringement or if he was legally obliged to prevent the infringement from occurring. In contrast to previous judgements, the BGH decided that mere knowledge of the infringement is not enough to impose such an obligation. Rather, the failure to act may only treated in the same manner than an active infringement if the managing director was in the position of a “guarantor”. To prevent an incalculable risk for the managing directors the Court made clear that the managing director cannot be considered a guarantor only because of his position as part of an executive body or because of his knowledge of the infringement of the UWG.