Penalties for corporations: jail for corporations, too, if you please

The SPD once called for corporate criminal law to punish criminal business practices. Now it provides the minister of justice. But he is hesitant.

HSBC aided and abetted tax evasion and money laundering, but cannot be punished for it. Picture: ap

Just one example: the Swiss scandal bank HSBC has systematically aided and abetted tax evasion and money laundering. But it cannot be punished for it, at most fined. Now the Association of German Criminal Investigators is demanding that such institutions must be able to be dissolved. In doing so, it is tying in with the debate on corporate criminal law, which is making little headway in Germany.

Unlike most of its European neighbors, Germany’s criminal law has so far focused strictly on individual people. Only they can incur guilt, courts can only impose fines or imprisonment on specific managers. In the case of corporations and other legal entities, it is only possible to siphon off illegal profits or impose fines under the Administrative Offenses Act – a maximum of 10 million euros.

Whether this should remain the case is controversial. In the last Bundestag election campaign, the SPD called for corporate criminal law "so that a bank’s shareholders would also suffer the consequences of criminal business practices," according to SPD leader Sigmar Gabriel. The red-green-governed state of North Rhine-Westphalia and its SPD Justice Minister Thomas Kutschaty have even presented a draft bill. According to it, fines for companies could amount to up to 10 percent of annual sales. Exclusion from subsidies and public contracts would also be possible. The maximum penalty would be the dissolution of the company.

It is not a question of new offenses, but of new sanctions for known ones, such as fraud, tax evasion, bribery and environmental crimes. The majority of the other federal states support NRW’s proposal. The black-red coalition agreement at federal level provides for at least examining the idea of corporate criminal law.

Much resistance to corporate criminal law

But there is also much opposition: The Association of German Chambers of Industry and Commerce criticized a "tendency to criminalize companies". The Association of Family Businesses considers the plan unconstitutional. And the CDU/CSU also rejects it: "Corporate criminal law could lead to employees being liable for the misconduct of managers by losing their jobs," says Volker Ullrich, a member of parliament.

That’s why German Justice Minister Heiko Maas (SPD) is now taking a cautious course. He only wants to introduce corporate criminal law if it is not enough to tighten up the law on administrative offenses, he said at a symposium in December.

Specifically, Maas hinted at four measures. "We must ensure that monetary sanctions are based on the economic circumstances of a company," he said, adding that the current limit of 10 million euros is only "peanuts" for large corporations. Secondly, he said, the public prosecutor’s office has so far had far too much freedom in deciding whether to impose fines on a company. Maas wants to set concrete guidelines here.

Third, individual district court judges have been deciding on administrative offenses up to now. Maas does not think that is appropriate. And fourth, the justice minister wants to reward companies that have internal compliance programs. So far, only one in five German companies has internal programs to prevent rule violations.

Officially, Maas is still looking into the matter with an "open mind. Even NRW Minister Kutschaty has not given up yet and is fighting for his corporate criminal law. And Gabriel? You don’t hear anything more from him on this subject. He is now Minister of Economics.