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Deferred Prosecution Agreements: Up and Running in Germany?

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. Introduction (1).

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Deferred Prosecution Agreements: Up and Running in Germany?

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  1. DeferredProsecution Agreements: UpandRunning in Germany? Presentationby Joachim VOGEL ECLA (UK) and Institute ofAdvanced Legal Studies Afternoon Seminar on DeferredProsecution Agreements, London, 26 June 2013

  2. Introduction (1) • There ist nocorporatecriminalliabilitysensustrictounder German lawasitstandsnow. • Therearenodeferredprosecutionagree-ments (DPA) sensustrictounder German lawasitstandsnow. • So why a presentation on German law?

  3. Introduction (2) • workingdefinitionof DPA • negotiatedagreementbetween a prosecutorand a corporatebodythathas a historyofcriminalmisconduct but isnowcooperatingandwillingtoacceptreasonable legal consequences • corporatebodyadmitstheallegedcriminalmisconduct, paysfines, compensatesvictims, disgorgesprofits, cooperates, implementscompliancesprogramms etc. • prosecutorconditionallydefersprosecution (but mayresumeitiftheconditionsare not met)

  4. Introduction (3) • Hypothesis 1 = Part I ofmypresentation: Functionalequivalentsof DPAs arepossiblewithinthecurrent German legal frameworkpursuanttothe German Act on Administrative Offences (Ordnungswidrigkeitengesetz, OWiG). Indeed, such equivalentsarealready „upandrunning“ in Germany asithasbeenclearlydemonstratedbytheMunich I prosecutor in thelandmark Siemens case. • Hypothesis 2 = Part II ofmypresentation: Possiblybefore end of 2013, the German House of Länder (Bundesrat) will introduce a draft Corporate Criminal Code (Verbandsstraf-gesetzbuch) into legislative procedure. Althoughtheoutcomeofthat initiative isunclear, weshouldreasonablyexpecttosee „real“ DPAs in thenearerfuture in Germany.

  5. 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.

  6. Part I: DPAs undercurrent German legislation (1) • corporateliability in Germany: in theory administrative, in practice quasi-criminal • corporateliabilitypursuanttocurrent § 30 OWiG • corporatebodiesandunincorporatedassociations (= para. 4 (1) Schedule 17) • anycriminaloffencewhichviolatesdutiesofthecorporatebodyorunincorporatedassociationas such (nolistsolution, Part 2 Schedule 17) • eithercommittedbyrepresentativesorotherpersonswithdecisionand/orsupervision power in thecorporatebodyorunincorporatedassociation • orcommittedbyotheremployeesprovidedthat lack ofsupervisioncontributedtotheoffence (§ 130 OWiG)

  7. Part I: DPAs undercurrent German legislation (2) • corporatesanctionspursuantto § 30 OWiG • fines (Geldbuße) upto 10 Million Euro (= para. 5 (3) (a) Schedule 17) • confiscationofprofitsmadefromtheoffence, nolimit, amountmaybeestimated (= para. 5 (3) (d) Schedule 17) • no formal orderstocompensatevictims, donatemoney, co-operate in investigations, implement a complianceprogramme (seepara. 5 (3) (b), (c), (e) and (f) Schedule 17). However, such requirementsandtheirfullfilmentmaywellbedecisivefortheprosecutors‘ decisioneithertoissue an out-of-court sanctioningorder (Bußgeldbescheid) orproceedwiththeprosecutionandgotocourt (seeinfra)

  8. Part I: DPAs undercurrent German legislation (3) • Proceduralenvironmentof § 30 OWiG • oncecorporatecriminaloffencesarealleged, thepublicprosecutormay – andas a ruledoes – takeovertheinvestigationandprosecution also with a viewtocorporateliabilitypursuantto § 30 OWiG, see § 42 OWiG • as a ruletherearejointproceedingsagainstindividualsandthecorporatebodyorunincorporatedassociationunder StPO and OWiG, in particularduringtheearlystagesofinvestigations. However, proceedingscanbeseparated, andtheproceedingsagainstthecorporatebodyorunincorporatedassociationmaybeledindependently (selbständiges Verfahren, § 444 (3) StPO) • thecorporatebodyorunincorporatedassociationis not formally „suspect“ or „accused“ but only „party“ tothecriminalproceedings (Beteiligter, § 444 Abs. 1 StPO). However, thelawforsuspectandaccusedindividualsappliesanalogously

  9. Part I: DPAs undercurrent German legislation (4) • proceduralchoicestakenbytheprosecutor (andhimor her alonewithoutjudicialcontrol) • whethertoinvestigateandprosecuteat all, § 47 OWiG. In majorcasesofcorporatecrime, publicprosecutors will at least investigate; • whethertoimmediatelyissue a sanctioningorder, see § 88 (2) OWiG, or bring thecasetocourt, § 64 OWiG, so thatthecourt will issuethesanctioningorder, § 45 OWiG. • However, oncethesanctioningorderhasbecome final, furtherprosecutionisexcluded, § 84 OWiG, evenifthecorporatebodyorunincorporatedassociationwouldbe in breachofrequirements(seepara. 9 Schedule 17)

  10. Part I: DPAs undercurrent German legislation (5) • The ground-breakingcase: Siemens – but manymorehavefollowed (MAN, Ferrostal, Thyssen-Krupp et al.) • 2006: The Munich I prosecutorstarts a criminalinvestigationagainst 12 Siemens employeesformisappropriationoffunds. The investigationlaterrevealsthat Siemens systematicallybribedforeignofficialstoobtainbusiness. • 15 November 2006: 23 prosecutorsand 250 policepersonssearchthe Siemens headquaters in Munich, seizeobjectsanddocumentsandexecute 5 arrestwarrants. • November/December 2006: Siemens decides • tofullyco-operatewithMunich I prosecutor, U. S. Department of Justice (DOJ) and U. S. Security Exchange Commission (SEC), • toretainDebevoise & Plimpton LLP andDeloitte & Touche GmbH with an international investigation, and • tocompletelyre-organizecomplianceandauditing.

  11. Part I: DPAs undercurrent German legislation (6) • 2007-2008 Co-ordinatedinvestigationsbyMunich I prosecutor, SEC, DOJ. Parallel internalinvestigationthemost extensive andmost expensive (553 Mio. Euro) everheardof • April-July 2007 – almostcompletereplacementof Siemens‘ mostseniormanagement (CEO, CAO, CCO, General Counsel, Supervisory Board) • 03 October 2007 – Negotiatedsanctioningorder, Munich I districtcourt: 201 Mio. Euro (1 Mio. Euro fine, 200 Mio. Euro profit) • 2007 – restitutionofunlawfultaxdeductions (195 Mio. Euro). • SinceOctober 2007 – amnestyprogrammefor all but themostsenioremployeesandleniencyprogrammeforthemostsenioremployees • 15 December 2008 – Negotiatedsanctioningorder, Munich I prosecutor: 395 Mio. Euro (0,25 Mio. Euro fine, restprofit). Agreement with DOJ andsettlement in U. S. v. Siemens (450 Mio. US-Dollar - fine). Agreement with SEC andsettlement in SEC v. Siemens (350 Mio. US-Dollar – profit). Further payments, independentmonitor (Theo Waigel, former German Federal Minister ofFinance) for 4 years.

  12. Part II: DPAs in possiblefuture German reformlegislation (1) • 2012 – political initiative by SPD (German Labour Party) and Grüne (German Green Party) tointroducecorporatecriminalliabilitysensustrictointo German law, sponsoredby Länder Nordrhein-Westfalen and Hamburg • 12./13.06.2013 – Nordrhein-Westfalen presentscornerstones (not yet a fulldraft) of a possible „Verbandsstrafgesetzbuch“ (Criminal Code of Corporate Bodies) atthe Permanent Conference of German Federal and State Ministers of Justice • possiblybefore end of 2013 – formal legislation initiative via Bundesrat (House of Länder) • outcomeunclear, probablydepending on theresultsofthe German General Elections 2013. • however, manyexpertsbelievethatsoonerorlatercorporatecriminalliability proper will beintroducedinto German law, including „real“ DPAs

  13. Part II: DPAs in possible future German reform legislation (2) • Cornerstonesofthe Nordrhein-Westfalen initiative: substantivelaw • In principle, thedraftshallbe a supplementtothe German Criminal Code (Strafgesetzbuch – StGB) whichshallbe, in principle, beapplicable. • In principle, thecurrentregulationofcorporateliability in §§ 30, 31 OWiG (seesupra) shallbemaintainedin substance. • „Penalties“ (Verbandsstrafen) shallbe: • fines • reprimandswhichmaybefollowedbyfines (Verwarnung mit Strafvorbehalt) • publicnoticeoftheconviction • „Measures“ (Verbandesmaßregeln) shallbe: • debarmentfromsubsidiesand/orpublicprocurement • (asultimaratio) winding-uporders • Itshall also bepossible • toissueprobationordersand • toprescindfrompunishmentifcertainrequirementshavebeenmet.

  14. Part II: DPAs in possiblefuture German reformlegislation (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 self-incrimination.

  15. Part II: DPAs in possiblefuture German reformlegislation (4) • possibleroleof DPAs in future German law • negotiatedstayand/orterminationofproceedingspursuantto § 153a StPO (ifapplicable) • not in felonycases, other real grave cases • requiresthecourt‘sconsent, however not a publictrial • negotiatedorderofsummarypunishment (Strafbefehl) pursuantto §§ 407 seq. StPO • issuedbythecourt, however not in a publictrial • settlement (Verständigung) beforethecourt in publictrialpursuantto § 257c StPO, in particular • negotiatedprobationorders.

  16. Part III: Constitutional restraintsto DPAs in German law (1) • Germany adherestothe „continental“ or „inquisitorial“ modelofcriminalprocedure. Therefore, „agreements“ betweenthe „parties“ (prosecutor – defendant) are not easilyintegratedintothe German criminalprocedure. Still, thelegislatorintroduced formal pleaagreementsfor individual defendants in 2009. • In ist landmarkjudgmentof 19 March 2013 – 2 BvR 2628/10, the German Federal Constitutional Court acceptedtheconstitutionalityofpleaagreements. However, thecourtset out considerableconstitutionalrestraintstojudicialmisuseofthenewinstrument.

  17. 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 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.

  18. 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.

  19. Part III: Constitutional restraints to DPAs in German law (4) • Itseemsquiteclearthattheseprincipleswould also applyto „real“ DPAs betweenprosecutorsandcorporatebodiesin Germany whichwouldmean: • DPAs couldonlybeenteredinto after a sufficientlythoroughinvestigation; thecorporatebody‘sstatementoffact / confessionof / admissiontotheoffencewould not besufficient. • The sentenceagreed upon must bebroadlycomparablewiththesentence a courtwouldimposetakingintoaccount a guiltyplea (= para. 5 (4) Schedule 17).

  20. Part III: Constitutional restraints to DPAs in German law (5) • Itwouldbe illegal andunconstitutionaleithertothreatenexcessivepunishmentiftheagreementfailedorpromiseexceedingly mild punishment in exchangefor an agreement. • The negotiationprocesswouldhavetobefullydisclosed in open courtanddulyrecorded in theminutesofthecourtsession(seepara. 8 (6), (7) Schedule 17). • The final decisionwouldratherbe a courtdecision, not theagreementas such approvedbythecourt. Indeed, a constitutional DPA wouldresemblemoreclosely a negotiatedprobationorderbythecourt.

  21. Closingremark • A majorandunsolvedproblemishowtoco-ordinate thepublicinvestigationand a voluntaryorrequiredinternalinvestigation, andhowtocopewiththatproblem in a DPA. Ifwelookatpara. 5 (3) (f) and (g) Schedule 17, wesee an imminent riskthattheprivilegeagainstself-incrimination will beundermined, all themore so sincecorporatebodieshave a cleartendencytomakescapegoatsofemployees.

  22. Thankyouforyourattention! Joachim VOGEL, University ofMunich/Germany E-Mail: joachim.vogel@jura.uni-muenchen.de Internet: http://www.jura.uni-muenchen.de/personen/v/vogel_joachim/index.html

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