Government draft of the Association Sanctions Act What is the aim of the Association Sanctions Act (VerSanG)?
What is the aim of the Association Sanctions Act (VerSanG)?
As the sanctioning of companies for criminal offenses committed by their employees and management bodies in the course of the company's business activities has so far only been possible via the provisions of the German Act on Regulatory Offences or on the basis of relevant special laws (such as antitrust or data protection law), the grand coalition pledged to strengthen the sanctioning of companies in white-collar crime cases in the coalition agreement.
The draft law to strengthen integrity in the economy, which was passed on 16 June 2020, aims to place the sanctioning of associations whose purpose is aimed at economic business operations on an independent legal basis, to subject them to the principle of legality and to enable appropriate punishment of association offenses through an improved set of instruments. At the same time, it is intended to promote compliance measures and provide incentives for companies to help solve criminal offenses through internal investigations.
What does the VerSanG provide penalties for?
According to the draft law, an association sanction will be imposed, for example, if the association's management could have prevented or significantly impeded a criminal offence by taking appropriate precautions to prevent association crimes, such as organization, selection, guidance and supervision.
What penalties does the VerSanG provide for?
For companies with a (group) annual turnover of up to EUR 100 million, the maximum limit of EUR 10 million (for intentional offenses) or EUR 5 million (for negligence) already provided for in the OWiG remains in place. For companies with a (group) annual turnover of more than EUR 100 million, the maximum limit will in future be 10% (for intentional offenses) or 5% of the annual turnover (for negligence).
Are players in the healthcare sector covered by the draft law?
At first glance, many players in the healthcare sector will not have paid any further attention to the draft VerSanG. However, if you look at the definition of an association in Section 2 of the draft VerSanG, you will notice that it includes legal entities under public or private law, associations without legal capacity and partnerships with legal capacity. This definition means that it also covers a large number of players in the healthcare sector. In addition to MVZs or professional practice associations, hospitals and medical device manufacturers are therefore also affected by this law.
The VerSanG attaches particular importance to compliance measures:
The law does not contain a legal obligation to implement compliance measures. However, compliance measures can be taken into account when selecting the type and amount of a sanction and when examining whether the conditions for refraining from prosecution are met. However, it remains unclear which compliance measures are specifically required. The draft law states that the respective measures required depend on the individual case and that the type, size and organization of a company, the dangerous nature of the company's purpose, the number of employees, the regulations to be observed and the risk of their violation must be taken into account.
Does the law affect the banking sector?
In principle, the draft VerSanG also affects credit institutions. The draft VerSanG breaks with the principle of guilt in a constitutionally questionable manner, according to which criminal sanctions are only possible against natural persons. At the same time, the definition of "association offense" in section 2 (1) no. 3 of the draft VerSanG is extremely broad, while the sanction framework in section 9 (2) of the draft VerSanG, with its link to the association's turnover, can be particularly severe for credit institutions. In the case of any subsidiaries, the sanction framework is linked to the turnover of the entire group as an association. Since the German government's current draft of the VerSanG links the sanctioning of the "association" not only to the actions of managers, but even to the actions of other employees if managers of the association could have prevented or significantly impeded the offense in question by taking appropriate precautions, credit institutions would also be well advised to implement appropriate compliance measures or revise existing compliance measures if the government draft is actually adopted. to revise existing compliance measures in order to prevent the aforementioned association sanctions (see sections 8 no. 2, 10, 13 para. 2, 15, 36 of the draft VerSanG); this applies not least because severe association sanctions in particular generally have a significant impact on profits and ultimately also affect shareholders. Not least due to the considerable impact, the banking industry recently expressed serious concerns about the Act to Strengthen Integrity in the Economy on June 11, 2020.
Conclusion:
The term "compliance measures" is an undefined legal term that is causing uncertainty among all stakeholders. However, companies are well advised to implement functioning compliance measures in order to avoid sensitive sanctions from associations. In addition, compliance measures bring companies a wide range of benefits, from a gain in reputation to a reduction in liability risks.