To combat white collar crime, the country wants to create a register registering people, corporates or business partnership as being unreliable
Recent media reports about the increasing number of awards of public contracts to companies involved in white collar crime have promted a public debate about corruption in Germany. As a result, a proposal has been made to create a nationwide corruption register in which any natural person, corporate entity or business partnership is to be registered as being unreliable. For one thing, this aims to facilitate the inquiry of tenderer, applicants and potential contractors by contracting authorities before accepting a tender, and, for another, to effectively combat and prevent further white collar crime.
White collar crime − particularly corruption − constitutes a significant problem for the state, the economy and society. According to Federal Criminal Police Office statistics, in 2013, losses reached €3.82b in the field of white collar crime and €175m for corruption. Overall, the investigation authorities started 1.403 investigation proceedings involving alleged corruption.
The justice and economy ministers of the German federal states have recognised the need for action and discussions are currently being held with the Federal Government.
Inconsistent legal situation
On 1 January 2009, the European Commission established the Central Exclusion Database. This records all legal entities that can no longer receive financial resources from the EU because they have committed misdemeanours or criminal acts that adversely affected EU financial interests. This information contained in the database is available only to public agencies that administer EU financial resources. The database is determined to protect financial aids of the EU but it does not influence the placing of orders at a national level.
Germany has no national and centralised database, although some legislative steps towards this have been taken in the past.
At federal state level, some non-public corruption registries have been introduced, but in six of 16 federal states (Brandenburg, Mecklenburg-Vorpommern, Saarland, Sachsen, Sachsen-Anhalt and Thuringen), no corruption registries exist. In North-Rhine-Westphalia, which has one of the strictest anti-corruption laws, and Berlin, positive experience has been gained. Anti-corruption legislation has been shown to be more effective than criminal or trade law penalties in combating economic crime in the area of granting public orders.
Agencies that pursue criminal acts and infringements must communicate any registrable statutory violation directly to the competent information agency. The contracting authorities must report any exclusion from order placements. The affected companies will be informed that they have been registered, but must file an application to obtain detailed information about the content of the registration.
Registration can threaten a company’s economic existence if it depends on public orders, as the recording of unreliability leads to the risk of exclusion.
Nationwide corruption register
As the number of national and EU tenders increases, the justice and economy ministers have consistently taken the view that existing state-level regulations are insufficient to ensure adequate security against unreliable companies. Therefore, they have requested the federal government to establish a national register to encourage and guarantee fair competition, as well as to protect the state, taxpayers and honest companies from losses.
The common Hamburg and Schleswig-Holstein register is considered to be the model to follow when establishing a nationwide register. A central information authority will register grave misconduct, which includes not only corruption but also white collar crime in a broader sense, particularly for example money laundering, fiscal evasion, fraud, embezzlement or criminal insolvency offences. A final adjudication and even penalty notices are sufficient as verification for committing misconduct. According to the official justification of the law, a registration can also be performed during criminal proceedings if the defendant has made an confession or an arrest warrant has been issued. In addition, the register will offer the possibility of deleting registered data quickly (between one and three years) in case of recovered and proven reliability.
The registration itself does not amount to an exclusion from public procurements and the decision on exclusion ,,will be made by the information authority after a hearing. The authority has to put all circumstances in consideration before imposing a blocking period of six months to three years. An essential consideration is the motivation for companies to introduce convincing compliance measures – those can influence the decision process of the authority as well. However, even if no blocking period has been imposed principals have to inspect the register if an order exceeds a boundary limit. It is therefore imaginable that every registration has wide-ranging consequences for each economic participant.
A change in the law is also planned within the healthcare system that will penalise bribe and bribability in medical professions. As white collar crime and the damage resulting from it are increasing, the harmonisation of the applicable state-level law is desirable. It is expected to be some time before a national register replaces the existing state-level regulations as some unresolved issues still remain. Nonetheless, experience has confirmed the need for such a measure to ensure adequate protection and fair competition although the state-level registers have not reached the desired success so far. The common position can be taken as evidence that a national corruption register will be given the green light, and that legislative change is sought by all parties. Positive influences will be seen, particularly in the case of federal states with no register.
Patrick Müller-Sartori is senior counsel and Vanessa Köster is junior lawyer in white collar crime and compliance at CMS Hasche Sigle in Cologne