On November 26, 2015, Germany’s new law combatting commercial corruption came into force. The law amends the provision on commercial bribery in the German Criminal Code.
CONVENTIONAL SCOPE OF COMMERCIAL BRIBERY IN GERMAN CRIMINAL LAW
Section 299 German Criminal Code conventionally sanctioned any offering, promising or giving of consideration for an unfair preference in a business transaction. The provision roots in the German Act Against Unfair Competition (of which it was part until 1997) and, hence, is a distillate of the so-called “competition model” according to which, the law’s primary purpose concerned the protection of free competition (as oppose to the protection of the recipient’s employer or principal). For example, procurement managers who conclude contracts with (overly expensive) suppliers, while receiving bribes of the latter, were solely held criminally liable for the distorting effects their actions cause to competing (less expensive) suppliers.
EXPANDED SCOPE OF COMMERCIAL BRIBERY IN GERMAN CRIMINAL LAW
The new German law on commercial bribery, however, additionally criminalizes employees’ actions vis-á-vis their employers and principals (“principal-agent-model”): next to an undue preference of a supplier over its competitors, the law will prohibit to demand, allow oneself to be promised or accept a benefit as consideration for carrying out or omitting actions that violate one’s duties towards one’s company that relate to the competitive purchase of goods or commercial services (vice versa, it will be prohibited to offer, promise or grant a benefit to an employee or agent for him to violate his duties towards his company).
PRACTICAL IMPLICATIONS AND REMAINING QUESTIONS
Given all express testimonies and apodictic statements that were made in the course of legislation, neither the mere acceptance of an advantage nor a breach of the company’s compliance policies by themselves shall be sufficient to constitute a breach of duty. Yet, by which standards will compliance with the new German anti-Corruption legislation be judged? As competition model and principal-agent-model are applicable at the same time, rigid obedience to internal compliance policies by itself is insufficient to ensure compliance with anti-corruption legislation. This follows from the observation that free competition remains worth protecting on the account of other market participants. Thus, boundaries for the consent of employers and principals need to be drawn-up. Where employees step beyond these boundaries, they will become subject to criminal liability under the competition model. Conversely, it will be difficult to distinguish between broad duties which employees owe to their company in general and more specific duties which relate to the competitive purchase of goods or commercial services. Merely the breach of those duties subject to such constraint will be relevant for criminal liability under the principal-agent-model.
Emerging theoretical approaches which seek to distinguish neatly between both types of duties have accentuated (a) the degree of discretion which is left to individual employees when deciding on the purchase of goods or commercial services for their employer, (b) the proximity of a duty to ‘competition on the merits’, and (c) an interpretation of employees’ duties on the basis of the established doctrine on the breach of trust. While the latter would render the legislation on the principal-agent-model redundant (as the breach of trust doctrine is concluding), both the degree of discretion left to individual decision-makers and their proximity to competition on the merits will allow to develop a framework ensuring legal compliance with new anti-Corruption legislation in German Criminal law. Criteria such as (a) the organizational (in)dependence of decision-makers, (b) the prevailing circumstances when offering, promising or granting benefits (who? when? what for?), and (c) the nature of the benefit will presumably determine the precise scope of the principal-agent-model in German anti-corruption legislation.
(By Dr. Nicolai Behr)