As part of our Laurence Simons Search Talking Head Series, we previously interviewed Denis Förster, Director Litigation/ Investigation at Fresenius Medical Care, a worldwide leader in dialysis, on the planned corporate criminal law in Germany.
Continuing on this our German directors, Nicolai von Steinaecker and Sven Laacks, discuss the planned German Corporate Sanctions Act with Ralf van Ermingen-Marbach from Gibson Dunn, where he works in Compliance, White Collar Defence & Investigations.
He began his professional career as a lawyer with the criminal law boutique firm Wessing II Verjans in Duesseldorf and continued this with the public prosecutor's office. For many years, Ralf van Ermingen-Marbach worked - before and after a secondment to the state parliament – as a prosecutor with a focus in the field of corporate crime, most recently at the Special Unit for White Collar Crime in Düsseldorf. In 2017 Ralf van Ermingen-Marbach returned to private practice, initially working for Hengeler Mueller in Düsseldorf before moving to Gibson Dunn in Munich at the end of 2018.
The corporate criminal law or "law to strengthen the integrity of the economy" is currently being promoted by the Federal Ministry of Justice and the federal government. The federal states and interest groups were able to take a position until mid-June and shortly afterwards the federal government decided on the draft, which met with divided opinions. The Federal Council recently decided not to reject the proposed law, becoming increasingly likely that the German Corporate Sanctions Act will proceed.
LSS: Good afternoon Ralf, thank you very much for your time and for sharing your views on the subject with us.
RvE-M: Good afternoon, Sven and Nicolai. I am delighted that you approached me.
LSS: Ralf, let us explore the subject straight away. What is your opinion on the draft of the German Corporate Sanctions Act?
RvE-M: I think you must take a closer look at the individual regulations for a well-founded assessment.
LSS: Is there anything that you are concerned about?
RvE-M: Well, some people might be happy with the proposed separation of investigation and defence, as it corresponds to their own counselling approach. However, like most colleagues, I see this separation as critical. It is impractical because investigation and defence regularly go hand in hand, and it leads to high organisational effort, inefficiencies, and ultimately very high costs for clients.
LSS: You are certainly not alone in this view and the business associations will unreservedly agree with you. What do you see as a positive aspect?
RvE-M: If the company receives a formal legal position and can exercise its rights at an early stage, this offers advantages compared to the previous OWiG procedure. According to the current legal situation, companies are involved in the proceedings relatively late.
Also, there are unfortunately some regulations that contradict the aim of the German Corporate Sanctions Act to incentivize internal investigations. I consider the planned right to remain silent for employees, which is supposed to be a prerequisite for a mitigation of sanctions, to be an unfortunate regulation; this will not promote clarification of the facts in the company.
LSS: Do you have a solution in mind, Ralf?
RvE-M: You could fall back on regulations that are known from insolvency law. The interviewed employee could be subject to an obligation to provide information in an internal investigation, but in return it could be made dependent on his consent whether this information may be used against him in criminal proceedings.
LSS: You mentioned the issue of mitigation. How do you rate the proposals in the government draft?
RvE-M: In addition to the employee's right to remain silent, there are numerous requirements for sanction mitigation, the hurdles are set very high. From the perspective of a client, when weighing up the risks, one must therefore ask whether the risks of the cooperation justify the benefits of the sanction mitigation. For example, cooperation with the German authorities and the handover of all essential investigation documents could lead to a “privilege waiver” in other countries, with the result that civil plaintiffs can access such documents.
Hence a serious, as well as complicated, consideration that the company should make at the beginning of the procedure - in other words: the company should commit itself at a point in time at which it usually does not yet have sufficient overview and therefore hardly can make a balanced decision.
LSS: A daring statement, but in view of the regulations mentioned above, it is also an understandable conclusion. Compliance management systems (CMS) represent a further instrument for reducing sanctions. Let us look at your clients. How do you rate the line-up here?
RvE-M: Large corporations are mostly well positioned in terms of personnel and system. Sometimes it looks different in medium-sized businesses. But ultimately every company must put its compliance management systems to the test to avoid proceedings under the German Corporate Sanctions Act or at least to get through without serious sanctions.
LSS: Definitely. However, as the past has shown us, loopholes are always found. What do you think of the considerations or calls for precise legal requirements as to what an effective CMS should look like?
RvE-M: I can very well understand that companies are demanding clear guidelines and want to know which compliance requirements they should meet to avoid sanctions. However, I think that compliance guidelines can hardly be defined abstractly, but depend on the individual case, since many factors play a role here, such as industry, sector, or areas of activity of a company. As you can imagine, some areas are more prone to compliance violations than others. In view of my many years of work as a public prosecutor, I can therefore understand the approach of the law enforcement authorities to assess compliance systems and their effectiveness with a view to the specific facts.
LSS: A clear position that you take here. Finally: let us compare the status quo and the planned corporate sanctions law.
RvE-M: We can get by with the current system. However, I would like more legal certainty for the clients. Much is not regulated by law - for example in internal investigations - or is handled differently by the law enforcement authorities nationwide, starting with the question of whether a fine procedure is even initiated. The German Corporate Sanctions Act could therefore provide approaches for more legal clarity and legal unity. The current draft does not seem to be adequately balanced to the detriment of companies. However, since the German government has agreed about corporate criminal law in the coalition agreement and this is a central project of this legislature in the Federal Ministry of Justice, the legislative process is being pushed very quickly. Unfortunately, this is partly at the expense of a balanced solution.
LSS: Thank you very much for your insightful words, Ralf.