German Anti-Bribery and Anti-Corruption Law – An Introduction

Introduction

Since the bribery scandals of international magnitude involving German multinational companies like Siemens as well as the local scandals among public officials and politicians, Germany’s enforcement of anti-bribery and corruption law has increased steadily and resulted in significant number of prosecutions and sanctions imposed in domestic as well as in foreign anti-bribery and corruption cases. As of today, Germany is the third largest enforcer of outbound bribery.[1] In 2011, the number of bribery offenses in private sector recorded in Germany increased by no less than 29 percent.[2] Recently, the German Parliament passed a bill raising fines for the companies in connection with bribes from € 1 million to € 10 million.[3]Thus, the compliance with German anti-bribery and corruption law has increasingly become one of the important building blocks of the corporate compliance for the local as well as for the international companies.

 Legal Framework

Most of the German anti-bribery and corruption provisions are laid down in Sections 331-338 (bribery in public office), 299-302 (bribery in commercial business transactions) and 108b-198e (electoral bribery) of the German Criminal Code (Strafgesetzbuch, “StGB”). The anti-bribing and corruption practices involving EU and other foreign public officials and judges are penalized by the European Union Anti-Corruption Act (EU-Bestechungsgesetz, “EUBestG”) and the Act of Combating International Bribery (Gesetz zur Bekämpfung internationaler Bestechung, “IntBestG”) respectively.

Whom do the anti-bribery and corruption offenses concern?

German anti-bribery and corruption provisions cover offenses in both, public and private sector. The addressees of the relevant provisions are:
Domestic and foreign public officials
 
“Public officials” include civil servants, judges and individuals who otherwise carry out official public functions, or have otherwise been appointed to serve with a public authority or agency, or have been commissioned to perform public administration services. Hence, German anti-bribery and corruption law is not only limited to the individuals in central or state government functions, but covers also other public sector entities, such as state enterprises, universities, university hospitals, public transportation companies etc. In addition, the law also extends to the foreign public officials, judges and soldiers.
 
Employees or agents of business
 
Unlike the US anti-bribery and corruption regulations, German law directly only applies to individuals active for the companies, i.e. employees or agents of commercial practices. “Commercial practices” constitute all profit oriented activities with certain duration, including, inter alia, commercial companies, independent professional services, public-private-partnerships as well as profit oriented public companies. Despite their exemption from the criminal liability, the companies may still face fines for the offenses committed by its employees (see below).
 
Delegates and voters
 
“Delegates” include members of the parliaments on the federal, state, municipality or municipal association level as well as the members of the European Parliament. German anti-bribery and corruption law also prohibits bribery of the voters at the elections or ballots to these parliaments as well as in other public ballots.
 
Anyone
 
Anyone who bribes the individuals above can be liable according to the German anti-bribery and corruption regulations.
 
Are active and passive bribery equally covered?
 
Generally, German anti-bribery and corruption law covers both active (offering a bribe) and passive (accepting a bribe) bribery. An exception to this rule is an offense involving non-EU public officials where only active bribery is prohibited.
 
What exactly is prohibited?
 
Benefits
 
commercial practices prohibit bribery in terms of granting and accepting benefits. A “benefit” is any advantage to which the target is not legally entitled. It can be defined as any material or immaterial advantage that improves the position of its target in terms of his or her financial, legal or personal situation. This can include, inter alia, gifts, profitable consultancy contracts, discounts, catering, support in professional advancement, or even sexual favors. There are no statutory de minimis thresholds, i.e. advantages of any value can qualify as a “benefit”. Further, so-called facilitation payments are also considered bribery by German law. Bribery in the form of such payments will be also enforced, even if such payments are a common practice in a specific industry.
 
However, minor customary advantages that are objectively unlikely to influence the decision making process, such as promotional giveaways like pencils or pens or an invitation to a cup of coffee or to a non-opulent meal, are not deemed to be a “benefit” and are exempt from the criminal offense.
 
Bribery in public office
 
German anti-bribery and corruption law prohibits giving to (offer, promise or grant), and taking (demand, allowance or acceptance) benefits by a public official for himself or another in connection with the discharge of an official duty (Section 331 StGB) or the past or future performance of an official act that violates his official duties (Section 332 StGB).
 
Bribery in commercial business transactions
 
Likewise, German law prohibits giving to, and taking benefits by an employee or agent of a business for himself or another in a business transaction as a consideration for obtaining an unfair preference in the competitive purchase of goods or commercial services (Section 299 StGB). The preference is unfair if it is not based on any reasonable considerations, but only exists because of the benefit itself, e.g. exclusive supply of goods against an additional payment. The same also applies to a competitive conduct abroad (Section 299 (3) StGB). The restrictions for business transactions generally concern benefits for future actions, i.e. retroactive awards for past performance are usually allowed. However, a reward that is at the same time given as an incentive for future preferences is illegal as well as a retroactive award if this has been agreed prior to the respective performance.
 
Electoral bribery
 
Buying and selling votes for an election or ballot by delegates is under scrutiny of German anti-bribery and corruption law (Section 108e StGB). Likewise, granting or accepting gifts or benefits for voting or not voting in a particular manner is equally prohibited (Section 108b StGB) (see above).
 
What are the potential penalties?
 
Individuals
 
The penalties for individuals range from fines to imprisonment whereas the sanctions apply to each count of bribery. The maximum aggregate sentence is, however, 10 years. The penalties according to the offense type are:
 

Companies

Although companies cannot be subject to criminal liability, they may be punished with fines up to € 1 million under the German Administrative Offense Act (Gesetz über Ordnungswidrigkeiten, “OWiG”) for a corruptive act committed by their representatives or employees. In addition, such acts can lead to a confiscation or disgorgement of the economic advantage of the company gained through the respective bribe (e.g. gross profit or assets of equivalent value). Due to the amendments passed by the German Parliament, the corporate fines are expected to increase from € 1 million to no less than € 10 million in the near future (see Introduction).

Is there any affirmative defense available?

Yes, an affirmative defense exists in connection with the bribery in public office: As long as the public official’s duties are not violated, granting or receiving benefits is not punishable if the principal of the public official has authorized the benefit before or immediately after its receipt.

Where does the German anti-bribery and corruption law apply?

The law generally applies to offenses committed (i) in Germany, (ii) outside of Germany against a German, and (iii) outside of Germany by a German. The EUBestG extends the passive bribery offense to the public officials and judges of the EU and its member states. 

[1] TRACE, Global Enforcement Report 2011.

[2] Federal Criminal Police Office, Corruption Report “Bundeslagebild 2011”.

[3] The bill (Achtes Gesetz zur Änderung des Gesetzes gegen Wettbewerbsbeschränkungen) is currently subject to the conciliation proceedings by the mediation committee at the German Upper House (Bundesrat). However, the conciliation does not concern new regulations for the company fines, but other parts of the bill.