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The German Federal Court of Justice (“FCJ”) recently overturned the conviction for commercial bribery in a case where (i) a management board member, who was also a shareholder of the company, received benefits in return for future transactions, and (ii) the other shareholders of the company, all being family members, agreed to the receipt of those benefits. According to the FCJ, it is the shareholders of a stock company, as the “business owners”, who should be protected by the criminal offence of commercial bribery under sec. 299 German Criminal Code (Strafgesetzbuch - “StGB”). Accordingly, in the FCJ’s view, an allegation of bribery is not appropriate if the shareholders have consented to those benefits.
As a general rule, German anti-bribery laws, such as sec. 299 StGB, provide for the criminal liability of both the giver and the recipient of a bribe. Often, other criminal offences, such as tax evasion, are associated with bribery and therefore prosecuted in parallel. The German Criminal Code applies to criminal offences committed – at least in part – in Germany, but criminal offences committed entirely abroad will also fall within the scope of the StGB if, for example, German nationals are involved.
Sec. 299 StGB prohibits the giving and taking of bribes in a commercial business context. Amongst other things, it is forbidden to offer, promise or grant a benefit to an employee and/or to an agent of a business as consideration for an unfair preference regarding the purchase of goods or services in Germany or abroad. The scope of the term "benefit" is very broad and includes any direct or indirect benefit that the receiving party is not entitled to and which puts the receiving party in a better position than before.
Sec. 299 StGB was comprehensively reformed and amended in 2015. The relevant decision of the FCJ - the decision dated 28 July 2021 in case no. 1 StR 506/20 - is based on sec. 299 StGB in its previous version before amendment. However, in its decision, the FCJ draws a comparison with the new, currently valid version of the provision, so that the decision should in principle also be considered in respect of the revised version of the sec. 299 StGB.
Among other things, the accused managing director (and sole shareholder) of a German wood trading company paid money, described as "commissions" in his accounts, to the directors of three African tropical wood suppliers, (which were all stock corporations), in the Central African Republic and the Ivory Coast (the “Suppliers”). By doing so, the accused German managing director wanted to secure trade for his company and to be favoured by the Suppliers over competitors. The shareholders of the Suppliers were predominantly members of a family. The bribes were paid partly to the directors of the Suppliers themselves and partly to family members. The accused German director had previously established contact with the Suppliers’ shareholders and their families during his stays in Africa so that he was aware of the interpersonal relationships of the Suppliers. Additionally, the Suppliers’ board members themselves were also shareholders of their respective companies and members of these families. The accused German managing director claimed the "commissions" (the alleged “bribes”) as business expenses in his tax return.
The court of first instance convicted the German managing director of several counts of commercial bribery and tax evasion.
On appeal by the managing director, the FCJ overturned the first instance judgment. According to the FCJ, the court of first instance had not sufficiently considered the relationship of the African managers. The family ties between the various involved shareholders, the long-standing relationship between the accused director and the three families, and the shareholder structure (including the family ties), would indicate that the other shareholders were aware of the alleged “bribes” and had agreed to them.
From a legal perspective, the Suppliers’ managers had, in the view of the FCJ, not received the monetary advantage as employees bound by instructions, but as business owners, since they were, in addition, shareholders of the company. In the case of a stock company, the shareholders and not the stock company itself are the business owners because the shareholders, through their (majority) resolutions, make the basic decisions for the legal entity and thus determine its fate.
The FCJ regarded the owner of the business, i.e. the shareholders, as the ones being worthy of protection under sec. 299 StGB. In addition to promoting free and fair competition, the bribery offence under sec. 299 StGB protects the business owner from the risk that a bribed party, (such as its employee or agent), acting in his own interests, is not making objective decisions based on competitive criteria but is being led by the bribe and thus favouring the bribe-giver in an anti-competitive manner. However, if business owners themselves decide to accept bribe money and to follow unfair motives, this is seen as part of their private autonomy and within the limits of contractual freedom. Additionally, the FCJ pointed out that the business owners could not be both the perpetrator of the crime and the injured party at the same time. Accordingly, the prerequisites of bribery will not be fulfilled if the “bribed” board member is, at the same time, a shareholder of the company.
In this decision, the FCJ confirmed the line it had previously taken on breach of trust (sec. 266 StGB) to the detriment of a stock corporation or limited liability company: However, the FCJ’s view that the owner of the business may consent to such acts is in contrast to the prevailing view in legal literature on the old version of sec. 299 StGB, which was relevant in this case.
Ultimately, however, the FCJ’s decision remains a specific example in which the particular circumstances of the individual case, (such as the family-owned companies and the defendant's relationship to these families), were particularly important. Thus, in future, in every case of alleged commercial bribery, it will be necessary to carefully examine whether there is room to assume consent of the business owner, bearing in mind that any new cases will likely have to be measured against the requirements of sec. 299 StGB in its current version, which does not only prohibit bribery in a competitive situation (as was the situation under the previous version of the provision) but also sanctions any breach of duties vis-à-vis the employer in exchange for a benefit in relation to the supply of goods or services.
20 December 2021
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