In Germany, corporates do not bear any criminal liability. Under the current law, in the event of unlawful acts by senior managers, a company may only have administrative fines imposed on it. The German Federal Ministry of Justice has presented a draft bill intended to combat corporate crime. The objectives of the draft bill are to provide an independent legal framework for sanctioning companies and other "associations", to strengthen internal investigations and for the provision of tougher sanctions, thereby providing an incentive for investment in compliance.
The "corporate sanction" is intended to be a punitive measure, attracting considerably higher penalties than the administrative fines which have been possible to date. In the case of a corporate with a group annual turnover of more than 100 Million Euro, a sanction of up to 10% of the group annual turnover may be imposed, and in the case of negligence up to 5%.
As a Director Litigation / Investigation, Denis Förster is responsible for cross-border litigation as well as domestic and international investigations in front of governmental authorities at Fresenius Medical Care, a worldwide leader in dialysis.
Corporate criminal law or the "Law to Strengthen the Integrity of the Economy" is currently being pushed forward by the Federal Ministry of Justice and the German government. Lawyers' associations and lobbyists offered alternatives until mid-June, and a short time later the Federal Government’s cabinet adopted the draft, which met with very divided opinions.
Denis discusses planned corporate criminal law, with our German directors, Nicolai von Steinaecker and Sven Laacks.
LSS: Good afternoon Denis, how are you in these challenging times?
DF: Thanks for asking, well so far. Even if I miss travelling very much. It is one of my passions privately, but of course I also travel a lot professionally.
LSS: The amount of travel was not foreseeable when you joined Fresenius Medical Care in Autumn 2012?
DF: That's right. For the first few years, I mainly focused on corporate law issues and advising our boards and committees before I evolved into my new role. At the time, in connection with a worldwide FCPA investigation successfully completed, we had an increasing need to monitor and coordinate the cooperation with external lawyers in the U.S.
An example from another major U.S. case – outright funny for Europeans – in a successfully disputed US court case for product liability, we had several lawyers and technicians present in an adjoining building to demonstrate all the dialysis machines we have ever marketed, while the jury followed the trial instead of Christmas shopping!
LSS: You have now successfully completed this chapter and the next challenge is about to come, the Corporate Sanctions Act! There has been a lot of noise about this and the Corporate Sanctions Act has been met with great rejection. What do you think of the proposed law?
DF: Indeed, the planned law presents us with great challenges and unfortunately, despite numerous and constructive criticism - we tried to make the best possible contributions at the industry association level - the Cabinet draft was launched unchanged.
LSS: What are the main criticisms?
DF: First, there is the strict separation of the internal lead investigator without legal privilege on the one hand and the defence counsel of the company on the other. As a consequence, legal privilege of the defence counsel gets practically undermined, and the company would have to use two different law firms. This is simply not practical and much worse, a very strong cost factor. Furthermore, we see the regulations for hearing employees in the intended form as extremely problematic. Since the employee concerned also enjoys a fair procedure in internal surveys, he is entitled to refuse to testify on topics that could be self-inflicting in a later legal process. Of course, this can mean that there will potentially be large "memory gaps" which weaken the company’s cooperation credit. It would be more expedient to work with a so-called contradiction solution: the employee contributes to comprehensive information and can, if relevant, object to the use of his statements in later procedures. With this de facto "leniency policy" we still have hope that it will be taken into account. But despite all justified criticism, the law also has its advantages.
LSS: What do you think these are?
DF: With the law becoming effective, we would have parity at international level. Comparable regulations have long existed in other European countries, such as Great Britain, Spain or Italy, and the rigid position of the US authorities is well- known to German companies. If foreign companies in Germany face criminal responsibility, it may reduce the likelihood of prosecuting German companies abroad. In times when politicians are flirting with protectionist measures again, this should not be underestimated. The second, very pragmatic advantage would be: in the future, companies will be investigated themselves in the process, with all rights and obligations. If, as is currently the case, investigations are carried out against employees, then we as a company have virtually no access to the files but are forced to contribute to the investigation. In the future, companies will know what details are involved and can try to limit the damage as far as legally possible.
LSS: Interesting - how do you assess the need to prepare for companies in the field of litigation and internal investigations in the light of what has been said?
DF: Since the conduct of internal investigations, even if they are initiated after the start of the investigation, must now be considered as a mitigation of punishment, there will certainly be an increased need for personnel here. The Compliance Management Systems (CMS) will also continue to gain in importance: an effective CMS can even avoid a sanction to the company in future or reduce the penalty. A missing or inadequate CMS has the effect of increasing sanctions.
LSS: And will legislators explicitly standardize in future what an effective CMS should look like?
DF: No, unfortunately politics failed to do that. You only define the goal, not the way to get there. Especially since it will be challenging for legislators to create a definition for an effective CMS for the multitude of different industries and evolution of standards over times. However, I advocate a certification for compliance management systems already granted to be respected, for instance a US monitor ship successfully completed. These can be provided with a certain period of validity so that the progressive development is also taken into account.
However, it should be noted that - even though we are currently well positioned at Fresenius Medical Care, many companies still have room for improvement at this point and, above all, would have to increase their staff.
LSS: Looking at the timeline, when do you think the implementation of the legislative initiative is likely?
DF: I project the legislative proposal will be implemented faster than initially thought. On the one hand it is a core project of our Minister of Justice, on the other hand the current events around Wirecard will further strengthen the call for corporate criminal law. I think it is likely that it will be ratified this year. This may even be paired with a shorter transition period than initially discussed.
LSS: Denis, thank you very much for your time and the interesting insights.