deferred prosecution agreements: up and running in germany? presentation by joachim vogel ecla (uk)...

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Deferred Prosecution Agreements: Up and Running in Germany?

Presentation by Joachim VOGELECLA (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 agree-ments (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 (Verbandsstraf-gesetzbuch) 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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• 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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• 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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• 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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• 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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• 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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• 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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• 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 self-incrimination.

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• 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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• 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 self-incrimination 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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– 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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• 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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• 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 co-ordinate 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/GermanyE-Mail: [email protected]

Internet: http://www.jura.uni-muenchen.de/personen/v/vogel_jo

achim/index.html

deferred prosecution agreements: up and running in germany? presentation by joachim vogel ecla (uk)...

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