Noerr Compliance Day

In cross-border projects, European companies increasingly encounter compliance risks. Traditional principles of “give and take”, for example the Chinese Guanxi culture, are classified as corruption by many local authorities in many cases and uncompromisingly pursued. In other developing countries also, the authorities increasingly insist on the maintenance of western compliance standards. How companies act legally in this tense environment was discussed by 180 national and foreign experts at today’s “Compliance Day” of the law firm Noerr.

Investigation of compliance breaches was central in the discussions. Cultural differences can considerably complicate the necessary internal investigations. The criminal law expert Dr. Christian Pelz reported from daily practice on this. “In internal investigations, it is often very difficult to motivate employees to make truthful statements”, emphasised the Noerr partner in a workshop which he led together with Dr. Torsten Fett, head of the Noerr Compliance Group. For example, in China aspects such as the maintenance of a good reputation or the desire to maintain harmonious relations are typical obstacles to investigations of the facts. In the course of internal investigations therefore, it must be carefully weighed whether and at what time local authorities or public prosecutors should be involved – all the more so because precisely there corruption is rife. Other lecturers at the workshop were Bernhard Günther, Chief Compliance Officer at ZF Friedrichshafen, and Volkhard Pfaff, Chief Compliance Officer at Airbus Defence and Space.

In addition, the Noerr experts presented possible solutions for company law disputes in connection with cross-border projects. In such cases, projects often stagnate – in the cross-border context even the risk of failure threatens. Noerr corporate partner Dr. Christoph Spiering, in a lecture on compliance in the M&A process, reported on how in such cases capacity for action can be restored.

The Noerr lawyers Hui Zhao und Yifan Zhu reported from the China practice: “The transfer of compliance systems to their Chinese businesses or their Chinese subsidiaries presents western companies usually with practical problems”, reported Hui Zhao, Head of Noerr China Desk in Frankfurt. Cultural differences, in particular those of the Guanxi culture, deeply rooted in Chinese understanding, are usually not taken into account. The latter can indicate that it is ethically required that contact be promoted by invitations and gifts. “That may not, however – as often is the case – be understood as a licence for corrupt behaviour of local employees”, warned Yifan Zhu. The wide discretion of local authorities linked to a legal situation which is not always clear present a risk which should not be underestimated as to the border between non-offensive Guanxi and criminal bribery.

The Noerr experts recommend that this demarcation be guided by the thresholds for bribery stated in the Chinese Criminal Code. They should not, however, be misunderstood as strict guidelines. “In addition, it must be taken into account that unlike in Germany there is an independent company criminal law in China”, added Yifan Zhu. Hui Zhao recommended as a preventative measure that all payments and economic activity be documented without any gaps and discounts and commissions be documented by contract. “Companies should also be guided by the ‘Basic Standards for Enterprise Internal Control’ (BSEIC)”, advised Hui Zhao. These rules on internal audit are obligatory only for listed companies, but are also recommended for medium sized companies.

In a further workshop on Legal Reputation Management, Karl-Heinz Heuser, CEO Germany of the communication agency Burson-Marsteller, and Oliver H. Oberg, Head of Global Compliance Office of the Deutsche Post DHL, discussed with the participants the chances of uniform crisis communication with the legal aspects of a crisis always in view. The workshop was chaired by the Munich Noerr partners Dr. Martin Diesbach and Prof. Dr. Thomas Klindt who also head the Noerr Crisis Management Team. Other issues at the Noerr Compliance Day were cartel law risks in industry association work and compliance in the M&A process.

In the concluding panel discussion chaired by Thorsten Fett and Thomas Klindt, the participants discussed the current state of compliance in Germany. The participants agreed that there are cases of overregulation in establishing compliance systems. Appropriate social conduct may not be penalised. “A reasonable balance should be found between necessary compliance and a system which can be operated for all employees”, was Fett’s summary of the discussion.