Corporate Sanctions Act dropped

When Germany’s governing parties signed the coalition agreement of 12 March 2018, they were in agreement that a system of sanctions against companies should be created. The aim of the “Act to Reinforce Integrity in Business” then drafted was to tackle corporate crimes and create incentives for investigating non-compliance. Currently, measures taken to avoid breaches of the law do not necessarily lead to a reduction in any fines. The government bill submitted in 2020 was intended to change this. In addition to defining a sanctions framework, it included rules which, if implemented and carried out, could have reduced sanctions.

After two ministerial drafts submitted, one government bill and numerous critical debates on the planned provisions in the drafts, after more than three years the legislative plan has now been dropped after all. Unlike the Federal Minister of Justice Christine Lambrecht’s party, the SPD, the CDU/CSU no longer supports the plan, said the lawyer and CDU politician Jan-Marco Luczak in a debate staged at the Conference of German Lawyers.

Mr Luczak said that it was in particular the planned handling of internal investigations that led to the bill being dropped. The bill envisaged a separation between the investigators and the company’s defence counsel, which means that the results of the internal investigation would no longer have been covered by the legal privilege of section 97 German Code of Criminal Procedure and could have been seized by the public prosecutor’s office for further investigative measures. It was feared, Mr Luczak said, that the bill would not have created the desired incentive to clear up misconduct but instead discouraged companies from investigating.

Since the coalition voted for the government bill back in the autumn of 2020, the Federal Minister of Justice views the CDU’s obstruction as a “breach of the coalition agreement” (FAZ, 9 June 2021). Whether Germany will still introduce a similar regulatory regime and, if so, to what extent, remains to be seen, especially given the upcoming federal elections. In any event, the government bill of 16 June 2020 has failed.