Impact of FCPA (US Anti-Corruption Act) and UK Bribery Act on German Management

Not least since the cases of “Siemens”, “Daim­ler”, “BAE”, “MAN”, the Foreign Corrupt Prac­ti­ces Act (FCPA), which applies in the USA and dates back to the 1970s, has become the focus of German public atten­tion. The FCPA is divi­ded into two sections. While on the one hand acts of bribery are subject to sanc­tions under certain condi­ti­ons, a second, in prac­tice more frequent area regu­la­tes the viola­tion of manda­tory accoun­ting rules and the requi­re­ment of adequate inter­nal controls. Even acts commit­ted by employees of a company that is not itself listed on a U.S. stock exch­ange may fall within the scope of the FCPA if certain — from a German perspec­tive — minor connec­ting factors to the U.S. are present. Examp­les of these connec­ting facts are: Use of U.S. accounts for the tran­sac­tion in ques­tion, a meeting on U.S. terri­tory during which bribes were alle­gedly nego­tia­ted, parti­ci­pa­tion in a tele­phone call from abroad (!).

The UK Bribery Act, on the other hand, has been in force since mid-2011. It borrows signi­fi­cantly from the FCPA. Howe­ver, its anti-corrup­tion regu­la­ti­ons go beyond exis­ting U.S. regu­la­ti­ons. Here, too, the connec­ting factors for inter­ven­tion are very small. It applies world­wide to all compa­nies that have busi­ness rela­ti­ons with UK compa­nies or are active on the market in the UK, i.e. have a “suffi­ci­ently close connec­tion” to the UK. German compa­nies must have a demons­tra­ble busi­ness acti­vity in the UK. The UK Bribery Act thus applies to secon­dary bran­ches, repre­sen­ta­tive offices and produc­tion faci­li­ties in the UK.

The legal conse­quen­ces of the FCPA are remar­kable and can threa­ten the exis­tence of a company and a mana­ger. The company invol­ved may be fined up to $2 million per case. In addi­tion, fines or impri­son­ment (the latter up to 5 years) are impo­sed on the mana­gers invol­ved, at whose behest the payment was orde­red or execu­ted. In addi­tion, there are civil penal­ties. The best-known exam­ple from a German perspec­tive is Siemens AG: here, a fine of US $450 million was impo­sed, and the profit skim­ming amoun­ted to a further US $350 million. And the procee­dings against some mana­gers have not yet been concluded.

British courts can impose fines of unli­mi­ted amounts(!) on compa­nies and indi­vi­du­als. Private indi­vi­du­als also face up to ten years in prison and compa­nies face exclu­sion from all public contracts

Gene­ral advice is no substi­tute for indi­vi­dual, preven­tive advice and exami­na­tion of the speci­fic risk situation.

But: Trans­pa­rent and imple­men­ta­ble guide­lines for the preven­tion of corrup­tion should be in place in the company in any case. Top manage­ment should commit to taking action against corrup­tion and estab­lish a corre­spon­ding corpo­rate culture that rejects corruption.

Busi­ness part­ners must be selec­ted carefully and in accordance with compli­ance requi­re­ments. Employees are to be trai­ned on a regu­lar basis.

In addi­tion, there is the need to take out appro­priate D&O insu­rance*) for the mana­gers, which also includes adequate crimi­nal law protection.

*) D & O insu­rance (Direc­tors and Offi­cers insu­rance) protects members of gover­ning bodies such as GmbH mana­ging direc­tors, AG, foun­da­tion and asso­cia­tion board members, super­vi­sory board members and advi­sory board members as well as execu­tive employees and autho­ri­zed signa­to­ries from the finan­cial conse­quen­ces of perso­nal liabi­lity vis-à-vis their own company (inter­nal liabi­lity) and vis-à-vis claims by third parties (exter­nal liability).