The District Court in Munich, Germany (file no 5 HKO 1387/10) recently handed down a decision which defines the compliance-related duties of the board of directors of a German stock corporation. The key points of the decision are the following: 1. As a consequence of his duty of legality each board member is obliged to organize and monitor the company in a way that no violations of law such as bribe payments to foreign public officials or foreign private persons occur. A board member violates his duties if he implements a deficient compliance system and if he does not sufficiently monitor the compliance system. 2. In case of a respective risk exposure, a board member only complies with organizational duty if he implements a compliance organization aiming at damage prevention and risk control. Decisive factors for the extent of the compliance organization are type, size and organization of the company, applicable laws, geographical presence and previous compliance incidents. 3. The adherence to the duty of legality and therefore the implementation of an effective compliance system are joint obligations of all board members. The board is obliged to obtain on a continuous basis comprehensive information about known compliance incidents. The board must assess whether the implemented compliance system is adequate to prevent violations against compulsory laws. 4. Cross-border bribe payments constitute violations of the law and may not be justified by arguing that otherwise economic success in corrupt markets would not be possible. Strict rules apply to the implementation of a compliance system to prevent bribe payments. Read the original decision (in German), here
Nicolai Behr is a compliance and dispute resolution attorney in Baker & McKenzie’s Munich office. He is a member of the steering committee of GlobalComplianceNews, a compliance news website with global reach moderated by Baker & McKenzie. He is a member of the committee "International" of the German Institute for Compliance. Dr. Behr is a regular speaker on compliance and white collar topics.