Statement of ACC on Germany’s draft Corporate Sanctions Act
The Association of Corporate Counsel (ACC) takes this opportunity to comment on the planned German law on company sanctions. ACC is a global bar association that promotes the professional and business interests of in-house counsel, with over 46,000 members employed by over 10,000 organizations in more than 85 countries. ACC has more than 3,000 members throughout Europe.
In 2019, the German Federal Ministry of Justice introduced a first draft of the Corporate Sanctions Act (Verbandssanktionengesetz, or the “VerSanG-E”). While ACC generally supports enforcement regimes that incentivize corporate compliance programs, we are concerned about the impact of the law on legal privilege. The draft law promises a significant reduction in fines if the company conducts an internal investigation into misconduct while at the same time eliminates legal privilege for pre-indictment investigations. By limiting legal privilege to post-indictment internal investigations, the draft law undermines its incentives for corporate compliance programs and internal investigations.
Corporate internal investigations are a standard practice in today’s corporations. As in-house counsel, ACC members value the preventative and remedial benefits of internal investigations. The success of an internal investigation is completely dependent upon the cooperation of a company’s employees and officers, and for that reason, the protection of legal privilege is very important. Protecting employee communications with investigating counsel from disclosure to the government allows counsel to better uncover the true facts and circumstances around alleged wrongdoing because privilege: (1) encourages employees and officers to be more candid; (2) enhances the likelihood that employees and officers will proactively seek advice from lawyers; and (3) improves the lawyer’s ability to assess the effectiveness of corporate compliance initiatives.
Most internal investigations are carried out before a company is formally accused of a crime. Investigations are more probative when they occur as close in time as possible to the alleged wrongdoing, and early investigations help corporations assess their potential liability, make changes to their business processes, and inform stakeholders about potential impact on financial performance. While a company may ultimately disclose the information learned in an investigation to the government, it does so in a way that preserves its right of defense and hopefully decreases its liability so that it can continue serving its corporate purpose.
With its incentives for corporate compliance, the VerSanG-E recognizes the valuable role that corporations play in monitoring their own practices and constantly improving their legal compliance. We urge reconsideration of the draft law’s removal of privilege for pre-indictment investigations, as that will only serve to deter corporate efforts to promote internal compliance.
About ACC: The Association of Corporate Counsel (ACC) is a global legal association that promotes the common professional and business interests of in-house counsel who work for corporations, associations and other organisations through information, education, networking, and advocacy. With more than 46,000 members in 85 countries employed by over 10,000 organisations, ACC connects its members to the people and resources necessary for both personal and professional growth. By in-house counsel, for in-house counsel.® For more information, visit www.acc.com and follow ACC on Twitter: @ACCinhouse.