Germany anti bribery and anti corruption review

A review of anti bribery and anti corruption laws in Germany highlighting a series of high profile cases.
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29 January 2013

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Germany, European Union

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Crime, Fraud & Investigations > Bribery & corruption

Corporate & Governance > Bribery & corruption
Employment & Benefits > Whistleblowing
Dispute Resolution - Financial Markets > Crime

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Sascha Kuhn

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Contents

I Introduction
In recent years, several major corruption scandals in Germany have caught both national and international media attention, for example,
the scandal involving German multinational conglomerate company Siemens and, most recently, a corruption scandal involving the
former chief risk officer of state-owned BayernLB who was sentenced to more than eight years in prison for accepting bribes during the
sale of the banks stake in the Formula One business.
Understandably, the severe legal consequences and the detrimental effect on the reputation of companies involved, have sparked an
increased demand for effective compliance mechanisms in the German private sector. It is striking, however, that there has been a
substantial increase in the number of cases of corruption in the private sector, which have in 2010 for the first time surpassed the
number of cases in the area of public administration1.
With a general election looming, however, the focus of public interest in Germany has most recently shifted back towards the political
arena. Peer Steinbrck, the challenger to acting Federal Chancellor Angela Merkel, for example, found himself under fire after his
supplementary income outside the Bundestag (lower house) from lectures and his allegedly close relationship with parts of the financial
industry were put under scrutiny. Steinbrck fended off criticism by disclosing more details about his additional earnings and suggested
that he would back tougher earnings reporting rules for members of parliament.
While such news and recent scandals may paint a somewhat bleak picture of current anti corruption efforts, Germany is in fact a
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country with a high overall level of business integrity and fairly effective systems for preventing corruption .

II Domestic Bribery: legal framework

Most provisions relating to corruption offences and the relevant penalties are laid down in the German Criminal Code (Strafgesetzbuch,
StGB). In Germany, unlike in some other jurisdictions, as a matter of principle only individuals can be held criminally liable. However, if
the individual acts on behalf of a corporate body the corporation may be subject to fines or the confiscation of assets gained as a result
of the criminal conduct under the provisions of the Act on Regulatory Offences (Ordnungswidrigkeitsgesetz, OWiG).
The German Criminal Code distinguishes between three types of bribery offences: (a) offences involving public officials, (b) bribery in
commercial practice, and (c) bribery of delegates.

Offences involving public officials

Definition of "public officials"
The meaning of the term public official is of significant importance. It is defined in Sec. 11 (1) (3) StGB and refers to civil servants,
judges, individuals that otherwise carry out public official functions; or have otherwise been appointed to serve with a public authority or
other agency or have been commissioned to perform public administrative services regardless of the form of organisation chosen to fulfil
such duties. Due to the broadness of the definition, public officials can not only be found in typical governmental functions (eg
ministers, state secretaries) but also in any other state entity such as universities, university hospitals, state enterprises (eg municipal
energy suppliers), public broadcasting corporations and many more.
Most recently, the definition has been the subject of the landmark Ratiopharm decision of the German Federal Court of Justice
(Bundesgerichtshof)3. In summary, the Court had to decide whether a practising physician, who in this case accepted money for
preferring Ratiopharms generics over those of its competitors, is a public official or whether he is, in the alternative, an agent of a
business (namely the statutory health insurer). The court held that the physician is neither. In the eyes of the court, the relevant criterion
is whether the individual in question can be seen as the extended arm of public authority or whether his function is characterised by a
sense of individual trust and freedom of scope. The court held that it was the latter, thus rejecting criminal liability for both the physician
and the pharmaceutical company under the Anti Bribery legislation regarding public officials (see below).
Members of parliament (regardless of whether on a federal, state or local level) are not considered to be public officials. They are,
however, subject to a separate offence in the German Criminal Code (see below).
Taking bribes (Sec. 331 StGB)
Pursuant to Sec. 331 StGB, it constitutes a criminal offence if a public official (or any person entrusted with special public service
functions) demands, allows himself to be promised or accepts a benefit for himself or for a third person for the discharge of an official
duty. A benefit is any advantage to which the public official is not legally entitled. This includes, for example, gifts, lucrative
consultancy contracts but also non-pecuniary advantages such as sexual favours.
Taking bribes intended to incentivise violation of ones official duties (Sec. 332 StGB)
Compared to Sec. 331, Sec. 332 StGB constitutes an aggravated offence in that it additionally requires the (past or future) performance
of an official act which violates an official duty (i.e. any laws, service regulations, or official instructions prohibiting or mandating a certain
behaviour).
Giving bribes (Sec. 333 et seq. StGB)
While Sec. 331 and 332 StGB penalise the passive side of bribery, Sec. 333 and 334 StGB make promising and giving bribes to public
officials a criminal offence. Analogous to Sec. 332, Sec. 334 additionally requires the (past or future) performance of an official act which
violates an official duty.

Taking and giving bribes in commercial practice (Sec. 299 et seq. StGB)
The central Anti Bribery provision for the private sector is Sec. 299 StGB which covers both the active and the passive side of bribery.
Sec. 299 (1) StGB makes it a criminal offence for an employee or agent of a business to demand, allow himself to be promised or
accept a benefit for himself or another in a business transaction as consideration for according an unfair preference to another in the
competitive purchase of goods or commercial services. Vice versa, Sec. 299 (2) StGB covers offering, promising or granting a benefit
for the aforementioned purposes.
While a retroactive reward for past performance is permissible, a reward that is at the same time given as an incentive for future
preferences is illegal under this provision4.

Moreover, the fact that "facilitation payments" are a common practice in a specific industry is irrelevant and does not constitute a valid
defence. Minor customary advantages (eg low value gifts, promotional giveaways, an invitation for a non lavish lunch), however, that are
objectively unlikely to influence the decision making process, are not deemed to be a "benefit" within the meaning of Sec. 299 StGB.5
Unlike the bribery offences involving public officials, the offence of taking and giving bribes in commercial practice may only be
prosecuted upon request by an affected party or certain associations (see below), unless the prosecuting authority considers at its own
instigation that prosecution is required because of special public interest. Such interest can, for example, be assumed, when the victim
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does not file a request in fear of detriment to his business or other economic disadvantages. Pursuant to Sec. 301 (2) StGB, the
request for prosecution can not only be filed by the victim but also, inter alia, by competitors or competent associations such as the
German Agency to Combat Unfair Competition (Wettbewerbszentrale).

Bribing delegates (Sec. 108e StGB)

Sec. 108e StGB makes it illegal to undertake to buy or sell a vote for an election or ballot in the European Parliament or in a parliament
of the Federal Republic of Germany, its federal states (Lnder), municipalities or municipal associations. The fact that anything short of
the actual sale of votes remains legal, thus making in essence the decision-making process leading up to votes "fair game" for lobbyists
and the like, has been widely criticised by the public in general and even numerous members of parliament. Most recently, the critics
have been joined by 26 of the 30 DAX-listed companies (among them Siemens, MAN and Daimler) who demand the ratification of the
United Nations Convention Against Corruption (see below) which would force Germany to enact tougher anti corruption legislation in
regard to the bribing of delegates. These companies argue that it proves difficult to commit foreign suppliers to strict anti corruption
standards when at the same time the German government allegedly refuses to do the same. Some delegates, on the other hand, see
their constitutionally guaranteed free mandate at risk, raising concerns that as little as a free lunch may yield criminal consequences.

German courts, however, recognise the need for legislative action. The German Federal Court of Justice has criticised the fact that
certain manipulative conduct in regard to elections and ballots that it deemed worthy of punishment cannot be prosecuted. While the
court sees the social harmfulness of corruption widely acknowledged in all areas of public and private life, along with the expansion of
the scope of potential culpability, it has raised the question of why developments in the anti corruption sphere have left the offence of
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bribing delegates entirely unaffected.

Penalties
The penalties for the aforementioned offences range from fines to imprisonment and vary substantially depending on the nature and
seriousness of the offence.
Individuals
The offence of bribing a public official is punishable with a fine or a prison term of up to three years. In its aggravated form (Sec. 334
StGB), the minimum prison sentence for bribing a public official is three months, while the maximum sentence is five years. Bribing
judges or arbitrators is, under certain circumstances, punishable with higher prison sentences (see Sec. 333 (2), Sec. 334 (2) StGB).
In especially serious cases, the prison sentence for bribing a public official is between one year and ten years (Sec. 335 (1) StGB). An
especially serious case within the meaning of this provision typically occurs, inter alia, when the offence relates to a major benefit
(starting at around 10,000 Euros).
Bribing in commercial practice is punishable with fines or imprisonment of up to three years. In especially serious cases, the sentencing
range is from three months to five years in prison (Sec. 300 StGB).
The punishment for bribing delegates is imprisonment not exceeding five years or a fine. In addition to a sentence of imprisonment of at
least six months the court may order the loss of the ability to hold public office, to vote and to be elected in public elections (Sec. 108e
(2) StGB).
Companies

As stated above, the fact that only individuals are criminally liable under German law, does not mean that companies involved in
corruption will go unpunished. If the individual acted on behalf of a corporate body, the corporation can be punished with severe financial
sanctions of up to 1m in fines (Sec. 30 (2) OWiG). Additionally, the offence can be punished with the forfeiture of a sum up to the
amount of the pecuniary advantage gained (Sec. 29a OWiG). In addition, the owner of an undertaking can be fined for intentionally or
negligently omitting necessary supervisory measures designed to help prevent criminal offences within his undertaking (Sec. 130
OWiG). As recent cases have shown, fines against companies can be substantial. The German MAN group, for example, had to pay
150m in fines, while Siemens had to pay 395m.

III Enforcement: domestic bribery

Recent German court rulings have shown that it can be difficult to distinguish between illegal conduct, on the one hand, and permissible
conduct generally deemed socially desirable (eg funding of universities or political parties, sponsoring), on the other hand. However,
there seems to be general agreement that the broad scope of criminal offences for bribing requires a narrow interpretation of the relevant
provisions.9
While the definition of the term "public official" has been the subject of many court rulings (see above), other aspects of the relevant
criminal offences have also been discussed. In the case of a chairman of a German energy supplier who sent vouchers for tickets for the
Soccer World Cup 2006 to government officials, the German Federal Court of Justice had to decide, whether this constituted a criminal
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offence pursuant to Sec. 333 StGB.

In the eyes of the court, the relevant question was whether the benefactor acted with the intent to

influence the public officials future performance of their duties and/or to reward such performances in the past. The court developed
criteria which can, to some extent, give guidance for answering this question:
1. Is a different (non criminal) motive for giving the benefit also plausible?
2. Which position does the public official hold?
3. What is, if any, the relation between the benefactor and the beneficiary?
4. In what fashion was the benefit given (secretively or transparently)?
5. What was the nature or value of the benefit?
Based on these criteria, the Federal Court of Justice upheld the acquittal of the chairman by the Regional Court in Karlsruhe, making
clear, however, that the Regional Court could have just as easily arrived at a different judgement.

IV Foreign bribery: legal framework

The relevant provisions dealing with foreign bribery can be found in:
1. the German Law Against International Bribery (Gesetz zur Bekmpfung internationaler Bestechung, IntBestG)
2. the Act Implementing the Protocol of 27 September 1996 to the Convention on the Protection of the European Communities'
Financial Interests (Gesetz zu dem Protokoll vom 27. September 1996 zum bereinkommen ber den Schutz der finanziellen
Interessen der Europischen Gemeinschaften, EUBestG), and
3. the German Criminal Code.
IntBestG
The IntBestG equates foreign public officials with public officials within the meaning of Sec. 334 et seq. StGB, thus making bribing
foreign public officials illegal. The German Federal Court clarified in its Siemens decision11 that the term "foreign public official" must not
be construed in the light of the respective national legal system in which the public official acts. Rather, it should be interpreted in
accordance with the autonomous definition laid down in Article 1 (4) (a) of the Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions by the Organisation for Economic Co-operation and Development (OECD Anti Bribery
Convention). According to this provision, "foreign public official" means any person holding a legislative, administrative or judicial office
of a foreign country, whether appointed or elected; any person exercising a public function for a foreign country, including for a public
agency or public enterprise; and any official or agent of a public international organisation.

In addition, the IntBestG imposes penalties on bribing foreign delegates in the course of international trade.
EUBestG
Similar to the IntBestG, the EUBestG equates public officials of the EU und those of EU Member States with their counterparts in
Germany within the meaning of Sec. 332, 334 et seq. StGB.
Sec. 299 (3) StGB
With regard to the private sector, the above mentioned provision penalising taking and giving bribes in commercial practice also applies
to conduct in foreign trade (Sec. 299 (3) StGB).

V Associated offences: financial record keeping and money laundering

Past cases of corruption have shown that bribery is in many instances accompanied by other criminal offences including fraud (Sec.
263 et seq. StGB), embezzlement and abuse of trust (Sec. 266 StGB), restricting competition through agreements in the context of
public bids (Sec. 298 StGB) and tax evasion (Sec. 370 of the German Fiscal Code). Moreover, bribery is explicitly mentioned in the
provision regarding money laundering (Sec. 261 (1) No. 2 (a) StGB).

VI Enforcement: foreign bribery and associated offences

In its evaluation report for phase three of the implementation of the OECD Anti Bribery Convention (see below) into German law, the
Working Group on Bribery in International Business Transactions commends Germany for having investigated and prosecuted a high
number of foreign bribery cases in the past, thus demonstrating substantial enforcement of its anti corruption legislation.12 Moreover,
the requirement for tax auditors to report suspected acts of foreign bribery to the prosecuting authorities has proven to be quite effective.

VII International organisations and agreements

Germany has signed and ratified several (but not all) major anti corruption agreements.
OECD Anti Bribery Convention
Germany has ratified the OECD Anti Bribery Convention and implemented it by adopting the above mentioned IntBestG. The convention
deals with the "active" side of corruption in international business transactions and encourages legislative efforts aimed to combat
foreign corruption. While generally welcoming Germanys efforts in this regard, the Working Group on Bribery in International Business
Transactions also identified some shortcomings in the implementation: The Working Group views sanctions imposed against individuals
and legal persons as generally being too low. Moreover, the Working Group is concerned that Germanys policies and approach on
facilitation payments is insufficient, as Sec. 333 StGB, which covers bribes paid to induce the public official to perform a lawful act (see
above), is not included in the IntBestG.
United Nations Convention against Corruption (UNCAC)
The UNCAC is the first legally binding international anti corruption instrument and aims to prevent and criminalise corruption, as well as
to promote international cooperation in this regard. Moreover, asset-recovery is a fundamental principle of the Convention. The UNCAC
has been signed by 140 countries and ratified by 162 countries. While the Federal Ministry of Economic Cooperation and Development
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prides itself on supporting developing countries in the implementation of the UNCAC , Germany itself has not (yet) ratified the
Convention. It would require Germany to enact tougher Anti Bribery legislation in relation to delegates (see above).
United Nations Convention against Transnational Organized Crime (CTOC)
Unlike the UNCAC, the CTOC, also known as the Palermo Convention, has been ratified by Germany, in 2003. Parties to the

Convention commit themselves to taking a series of measures against transnational organized crime, including the creation of domestic
criminal offences (participation in an organized criminal group, money laundering, corruption and obstruction of justice); the adoption of
new and sweeping frameworks for extradition, mutual legal assistance and law enforcement cooperation; and the promotion of training
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and technical assistance for the building or upgrading the necessary capacity of national authorities.
Council of Europe Criminal Law Convention on Corruption

The Council of Europe Criminal Law Convention on Corruption, which has been ratified by 43 countries, aims to promote international
cooperation in the prosecution of bribery offences. The Group of States against Corruption (GRECO), established in 1999 by the Council
of Europe to monitor States compliance with the organisations anti corruption standards, has criticised Germany for having so far failed
to ratify the Convention. GRECO has also urged Germany in particular to substantially broaden the scope of what constitutes criminal
conduct in the active and passive bribery of delegates under Sec. 108e StGB.15

VIII Legislative developments

During the current term of the Bundestag, all three opposition parties have separately introduced bills aimed to broaden the scope of the
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offence "bribing of delegates" . It remains to be seen, whether these efforts will bear fruit in the near future. The bills are currently
pending in the Legal Committee of the Bundestag.

IX Other laws afecting the response to corruption

Besides the penalties for the bribery offences described above, the companies involved can face another and potentially severe legal
consequence: debarment from public procurement contracts. Provisions regarding such debarment can be found in the anti corruption
laws of some German federal states (Lnder), as this area falls within their legislative power. In the state of North Rhine-Westphalia, for
example, the Corruption Prevention Act of 2004 (Korruptionsbekmpfungsgesetz) introduced a mandatory corruption register for the
public sector, blacklisting companies involved in corruption.

X Compliance
There is a general trend among German companies to place greater value on the implementation of effective compliance mechanisms.
While some companies assign the respective responsibilities to their legal department, others prefer to establish an independent
compliance office. In addition to anti corruption measures, these departments usually deal with the entire spectrum of compliance. anti
corruption measures that are now common and have proved effective include whistleblowing hotlines and ombudsman systems.
One of the challenges of the future will be to set up adequate compliance structures in small and medium sized businesses. The legal
requirements applying to these companies are just as strict as the ones applying to international companies but obviously their financial
and human resources are much more limited.
As the recent data protection scandal involving German national railway company Deutsche Bahn has demonstrated, the subject of
compliance cannot be considered purely from the perspective of anti corruption efforts, without regard to data protection laws as well.
In 2009, Deutsche Bahn admitted to have undertaken extensive data screenings among some 173,000 of its employees in an effort to
detect illicit transactions and corruption. The company compared names, addresses and bank details of suppliers with those of their
employees, without having concrete suspicion of unlawful conduct.
As a reaction to this and similar scandals involving other major German companies the German Federal Data Protection Law
(Bundesdatenschutzgesetz) was amended. The reform, however, proved insufficient and had the effect of making internal investigations
by companies aimed at identifying illegal conduct much more difficult. Discussions on whether (and if so, how) employee data
protection provisions will have to be amended have been going on for quite some time now. Against the background of the new plans for
a revised European data protection system it remains to be seen, however, when the German legislator will take the necessary steps.

XI Outlook and conclusions

The existing conflict between anti corruption legislation and data protection law looks likely to dominate the anti corruption debate in
Germany in the short and medium term.
Meanwhile, the number of bribery cases being prosecuted is not likely to decline.

1 Bundeskriminalamt (Federal Criminal Police Office), Report Korruption, Bundeslagebild 2010

2 Transparancy International, National Integrity System Report Germany, 2012
3 Bundesgerichtshof, decision of 29 March, 2012 (GSSt 2/11)
4 Schnke/Schrder Strafgesetzbuch, 2010, Sec. 299, marginal no. 18
5 Lackner/Khl, StGB-Kommentar, 2004, Sec. 299, marginal no. 5.
6 Fischer, StGB-Kommentar, Sec. 301, marginal no. 3
7 SPIEGEL ONLINE, Pltzlich Moralapostel, 9 August, 2012
8 Bundesgerichtshof, decision of 9 May, 2006 (5 StR 453/05)
9 Michalke, StV 2001, 492 et seq
10 Bundesgerichtshof, decision of 14 October, 2008 (1 StR 260/08)
11 Bundesgerichtshof, decision of 29 August, 2008 (2 StR 587/07)
12 Working Group on Bribery in International Business Transactions, Evaluation Report for Phase Three of the Implementation of the
OECD Anti Bribery Convention in Germany, 2011
13 Federal Ministry of Economic Cooperation and Development,
http://www.bmz.de/de/presse/aktuelleMeldungen/2011/dezember/20111208_pm_233_korruption/index.html, 2011
14 United Nations, http://www.unodc.org/unodc/en/treaties/CTOC/
15 GRECO, Third Evaluation Round Compliance Report on Germany, 9 December 2011
16 Deutscher Bundestag, Drucksache 17/1412 (Die Linke), Drucksache 17/5933 (Bndnis 90 / Die Grnen), Drucksache 17/8613 (SPD)

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