Compliance: Introduction of a Nationwide Corruption Register?

The Ministers of Justice of the different German federal states agreed during their conference held in late June 2014 that corrupt companies will in future be entered in a nationwide register. Such a register has previously existed only in certain of the German federal states, and if so, then in varied forms. It is intended that companies in which offences such as bribery, fraud or antitrust violations or price fixing have been committed, are added to a "black list" according to uniform rules.

The exact list of offences and the threshold for inclusion in the register - i.e. whether a criminal charge is sufficient or whether there must have been a conviction - have not yet been decided on. However, all agreements in violation of free competition and all cases of bribery will be included. This is a further step in the direction already followed in relation to the implementation of a corporate criminal code, namely that economic crimes committed by individual employees should have consequences not only for those individuals, but also for the company as a whole – resulting, in the worst case, in the insolvency of the company.

The object of the corruption register is to exclude "black sheep" from participating in government tenders. To this end, all public agencies (at federal, state and local levels) will be required to inspect the corruption register before awarding a contract. A company that is listed in the register will have to be thoroughly investigated and may be excluded from participating in public tenders. However, the mere fact that a company is included in the register will not automatically suffice to exclude it from participating in government contracts; it will simply have to be particularly intensely scrutinised. It is expected that private companies will be allowed to consult the register as well, but only if they themselves are recipients of government grants, subsidies or aids.

It has not yet been decided how long a company will remain listed in the corruption register, once entered in same. In those German federal states that have already established such a register, the terms range from six months to ten years.

To have its name removed from the register, a company will have to assist the prosecutor with the investigation and rid itself of any offenders. In addition, the establishment of efficient compliance rules or whistleblower hotlines will help companies to have their names removed from the corruption register, thus regaining eligibility to participate in government tenders.

Comment

Companies can no longer afford not to implement appropriate compliance management systems. While such systems used to primarily protect individuals from prosecution and claims for damages, the focus is now, in particular, also on protecting companies from onerous monetary penalties and exclusion from participation in government contracts. This concerns, above all else, those branches in which the government is a key customer, such as public transportation, civil engineering, defence, and medical technology.