Deferred Prosecution Agreements: Up and Running in Germany?

Report
Deferred Prosecution Agreements:
Up and Running in Germany?
Presentation by Joachim VOGEL
ECLA (UK) and Institute of Advanced Legal
Studies Afternoon Seminar on Deferred
Prosecution Agreements, London, 26 June 2013
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Introduction (1)
• There ist no corporate criminal liability sensu
stricto under German law as it stands now.
• There are no deferred prosecution agreements (DPA) sensu stricto under German law
as it stands now.
• So why a presentation on German law?
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Introduction (2)
• working definition of DPA
– negotiated agreement between a prosecutor and a
corporate body that has a history of criminal
misconduct but is now cooperating and willing to
accept reasonable legal consequences
– corporate body admits the alleged criminal
misconduct, pays fines, compensates victims,
disgorges profits, cooperates, implements
compliances programms etc.
– prosecutor conditionally defers prosecution (but may
resume it if the conditions are not met)
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Introduction (3)
• Hypothesis 1 = Part I of my presentation: Functional
equivalents of DPAs are possible within the current German
legal framework pursuant to the German Act on
Administrative Offences (Ordnungswidrigkeitengesetz, OWiG).
Indeed, such equivalents are already „up and running“ in
Germany as it has been clearly demonstrated by the Munich I
prosecutor in the landmark Siemens case.
• Hypothesis 2 = Part II of my presentation: Possibly before end
of 2013, the German House of Länder (Bundesrat) will
introduce a draft Corporate Criminal Code (Verbandsstrafgesetzbuch) into legislative procedure. Although the outcome
of that initiative is unclear, we should reasonably expect to
see „real“ DPAs in the nearer future in Germany.
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Introduction (4)
• Hypothesis 3 = Part III of my presentation: However, it is quite
clear that constitutional restraints set out by the German
Federal Constitutional Court (Bundesverfassungsgericht,
BVerfG) in its landmark judgment of 19 March 2013 – 2 BvR
2628/10 on plea agreements in criminal proceedings against
individuals are also applicable to possible future DPAs.
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Part I: DPAs under current
German legislation (1)
• corporate liability in Germany: in theory
administrative, in practice quasi-criminal
• corporate liability pursuant to current § 30 OWiG
– corporate bodies and unincorporated associations (= para.
4 (1) Schedule 17)
– any criminal offence which violates duties of the corporate
body or unincorporated association as such (no list
solution, Part 2 Schedule 17)
– either committed by representatives or other persons with
decision and/or supervision power in the corporate body
or unincorporated association
– or committed by other employees provided that lack of
supervision contributed to the offence (§ 130 OWiG)
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Part I: DPAs under current
German legislation (2)
• corporate sanctions pursuant to § 30 OWiG
– fines (Geldbuße) up to 10 Million Euro (= para. 5 (3) (a)
Schedule 17)
– confiscation of profits made from the offence, no limit,
amount may be estimated (= para. 5 (3) (d) Schedule 17)
– no formal orders to compensate victims, donate money,
co-operate in investigations, implement a compliance
programme (see para. 5 (3) (b), (c), (e) and (f) Schedule
17). However, such requirements and their fullfilment may
well be decisive for the prosecutors‘ decision either to
issue an out-of-court sanctioning order (Bußgeldbescheid)
or proceed with the prosecution and go to court (see infra)
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Part I: DPAs under current
German legislation (3)
• Procedural environment of § 30 OWiG
– once corporate criminal offences are alleged, the public
prosecutor may – and as a rule does – take over the
investigation and prosecution also with a view to corporate
liability pursuant to § 30 OWiG, see § 42 OWiG
– as a rule there are joint proceedings against individuals and the
corporate body or unincorporated association under StPO and
OWiG, in particular during the early stages of investigations.
However, proceedings can be separated, and the proceedings
against the corporate body or unincorporated association may
be led independently (selbständiges Verfahren, § 444 (3) StPO)
– the corporate body or unincorporated association is not
formally „suspect“ or „accused“ but only „party“ to the criminal
proceedings (Beteiligter, § 444 Abs. 1 StPO). However, the law
for suspect and accused individuals applies analogously
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Part I: DPAs under current
German legislation (4)
• procedural choices taken by the prosecutor (and him or
her alone without judicial control)
– whether to investigate and prosecute at all, § 47 OWiG. In
major cases of corporate crime, public prosecutors will at
least investigate;
– whether to immediately issue a sanctioning order, see § 88
(2) OWiG, or bring the case to court, § 64 OWiG, so that
the court will issue the sanctioning order, § 45 OWiG.
– However, once the sanctioning order has become final,
further prosecution is excluded, § 84 OWiG, even if the
corporate body or unincorporated association would be in
breach of requirements (see para. 9 Schedule 17)
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Part I: DPAs under current
German legislation (5)
• The ground-breaking case: Siemens – but many more have followed
(MAN, Ferrostal, Thyssen-Krupp et al.)
• 2006: The Munich I prosecutor starts a criminal investigation
against 12 Siemens employees for misappropriation of funds. The
investigation later reveals that Siemens systematically bribed
foreign officials to obtain business.
• 15 November 2006: 23 prosecutors and 250 police persons search
the Siemens headquaters in Munich, seize objects and documents
and execute 5 arrest warrants.
• November/December 2006: Siemens decides
– to fully co-operate with Munich I prosecutor, U. S. Department of
Justice (DOJ) and U. S. Security Exchange Commission (SEC),
– to retain Debevoise & Plimpton LLP and Deloitte & Touche GmbH with
an international investigation, and
– to completely re-organize compliance and auditing.
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Part I: DPAs under current
German legislation (6)
• 2007-2008 Co-ordinated investigations by Munich I prosecutor, SEC, DOJ.
Parallel internal investigation the most extensive and most expensive (553
Mio. Euro) ever heard of
• April-July 2007 – almost complete replacement of Siemens‘ most senior
management (CEO, CAO, CCO, General Counsel, Supervisory Board)
• 03 October 2007 – Negotiated sanctioning order, Munich I district court:
201 Mio. Euro (1 Mio. Euro fine, 200 Mio. Euro profit)
• 2007 – restitution of unlawful tax deductions (195 Mio. Euro).
• Since October 2007 – amnesty programme for all but the most senior
employees and leniency programme for the most senior employees
• 15 December 2008 – Negotiated sanctioning order, Munich I prosecutor:
395 Mio. Euro (0,25 Mio. Euro fine, rest profit). Agreement with DOJ and
settlement in U. S. v. Siemens (450 Mio. US-Dollar - fine). Agreement
with SEC and settlement in SEC v. Siemens (350 Mio. US-Dollar – profit).
Further payments, independent monitor (Theo Waigel, former German
Federal Minister of Finance) for 4 years.
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Part II: DPAs in possible future German
reform legislation (1)
• 2012 – political initiative by SPD (German Labour Party) and Grüne
(German Green Party) to introduce corporate criminal liability sensu
stricto into German law, sponsored by Länder Nordrhein-Westfalen
and Hamburg
• 12./13.06.2013 – Nordrhein-Westfalen presents cornerstones (not
yet a full draft) of a possible „Verbandsstrafgesetzbuch“ (Criminal
Code of Corporate Bodies) at the Permanent Conference of
German Federal and State Ministers of Justice
• possibly before end of 2013 – formal legislation initiative via
Bundesrat (House of Länder)
• outcome unclear, probably depending on the results of the German
General Elections 2013.
• however, many experts believe that sooner or later corporate
criminal liability proper will be introduced into German law,
including „real“ DPAs
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Part II: DPAs in possible future German
reform legislation (2)
• Cornerstones of the Nordrhein-Westfalen initiative: substantive law
– In principle, the draft shall be a supplement to the German Criminal
Code (Strafgesetzbuch – StGB) which shall be, in principle, be
applicable.
– In principle, the current regulation of corporate liability in §§ 30, 31
OWiG (see supra) shall be maintained in substance.
– „Penalties“ (Verbandsstrafen) shall be:
• fines
• reprimands which may be followed by fines (Verwarnung mit Strafvorbehalt)
• public notice of the conviction
– „Measures“ (Verbandesmaßregeln) shall be:
• debarment from subsidies and/or public procurement
• (as ultima ratio) winding-up orders
– It shall also be possible
• to issue probation orders and
• to prescind from punishment if certain requirements have been met.
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Part II: DPAs in possible future German
reform legislation (3)
• Cornerstones of the Nordrhein-Westfalen
initiative: procedural law
– In principle, the general law of criminal procedure (as
laid down in the Code of Criminal Procedure,
Strafprozessordnung, StPO) shall be applicable.
– If there are reasonable grounds to suspect that a
corporate criminal offence has been committed, the
prosecutor shall be bound to investigate (but not
necessarily to prosecute).
– Corporate bodies shall enjoy the privilege against selfincrimination.
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Part II: DPAs in possible future German
reform legislation (4)
• possible role of DPAs in future German law
– negotiated stay and/or termination of proceedings
pursuant to § 153a StPO (if applicable)
• not in felony cases, other real grave cases
• requires the court‘s consent, however not a public trial
– negotiated order of summary punishment
(Strafbefehl) pursuant to §§ 407 seq. StPO
• issued by the court, however not in a public trial
– settlement (Verständigung) before the court in public
trial pursuant to § 257c StPO, in particular
• negotiated probation orders.
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Part III: Constitutional restraints
to DPAs in German law (1)
• Germany adheres to the „continental“ or „inquisitorial“
model of criminal procedure. Therefore, „agreements“
between the „parties“ (prosecutor – defendant) are
not easily integrated into the German criminal
procedure. Still, the legislator introduced formal plea
agreements for individual defendants in 2009.
• In ist landmark judgment of 19 March 2013 – 2 BvR
2628/10, the German Federal Constitutional Court
accepted the constitutionality of plea agreements.
However, the court set out considerable constitutional
restraints to judicial misuse of the new instrument.
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Part III: Constitutional restraints
to DPAs in German law (2)
• In particular, the Court held:
– It is of central concern to criminal proceedings to establish
the real facts of a case. Therefore, plea agreements must
not be used to shortcut the investigation (principle of ex
officio investigation), and criminal sentences cannot be
based on plea agreements as such but only on a
sufficiently thorough investigation.
– The right to a fair trial, the privilege against selfincrimination and the presumption of innocence must not
be infringed upon through plea bargaining. In particular,
the state must not threaten exceedingly harsh sentences if
the defendant does not plead guilty, and neither must the
state promise exceedingly mild sentences in case of a
guilty plea.
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Part III: Constitutional restraints
to DPAs in German law (3)
– Rather, the sentence agreed upon must, in principle
and – of course – taking the guilty plea into account,
correspond to the gravity of the offence.
– Transparency and documentation are key aspects of a
constitutional regulatory approach to ensure effective
control by the public and the appellate courts. The
plea bargaining process must be fully disclosed in the
public trial, and must be duly recorded in the minutes
of the court session.
– “Informal” agreements are illegal and
unconstitutional.
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Part III: Constitutional restraints
to DPAs in German law (4)
• It seems quite clear that these principles would
also apply to „real“ DPAs between prosecutors
and corporate bodies in Germany which would
mean:
– DPAs could only be entered into after a sufficiently
thorough investigation; the corporate body‘s
statement of fact / confession of / admission to the
offence would not be sufficient.
– The sentence agreed upon must be broadly
comparable with the sentence a court would impose
taking into account a guilty plea (= para. 5 (4)
Schedule 17).
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Part III: Constitutional restraints
to DPAs in German law (5)
• It would be illegal and unconstitutional either to
threaten excessive punishment if the agreement failed
or promise exceedingly mild punishment in exchange
for an agreement.
• The negotiation process would have to be fully
disclosed in open court and duly recorded in the
minutes of the court session (see para. 8 (6), (7)
Schedule 17).
• The final decision would rather be a court decision, not
the agreement as such approved by the court. Indeed,
a constitutional DPA would resemble more closely a
negotiated probation order by the court.
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Closing remark
• A major and unsolved problem is how to coordinate the public investigation and a
voluntary or required internal investigation,
and how to cope with that problem in a DPA.
If we look at para. 5 (3) (f) and (g) Schedule
17, we see an imminent risk that the privilege
against self-incrimination will be undermined,
all the more so since corporate bodies have a
clear tendency to make scapegoats of
employees.
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Thank you for your attention!
Joachim VOGEL, University of Munich/Germany
E-Mail: [email protected]
Internet: http://www.jura.unimuenchen.de/personen/v/vogel_joachim/index.html
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