OECD Publishes Phase 4 Anti-Bribery Implementation Report on Germany

/ Global Compliance Solutions Group LLC/

In June, the OECD published their Phase 4 report (the "Report") on Germany's implementation of the 1997 OECD Anti-Bribery Convention.  The OECD published their Phase 3 report on Germany in March 2011.

The Report describes Germany's achievements, challenges, and enforcement practices related to its foreign bribery laws.  Since 1999, there have been 67 bribery cases in Germany that have resulted in 328 individuals and 18 entities being sanctioned.  A majority of these having occurred in the last 5 years.  This rate places Germany among the highest enforcers of the Anti-Bribery Convention in the world.  

The Working Group commended Germany for holding individuals responsible, but noted a concern that there appeared to be insufficient enforcement against companies.  The Report noted that Germany has demonstrated an ability to detect bribery allegations through multiple sources including Mutual Legal Assistance, self-reporting by companies, coordination with tax authorities, and joint investigative teams in multi-jurisdiction investigations.    

Bribery Risks in Light of Trade Profile

Germany is the largest European economy and the 4th largest economy in the world.  It accounted for 7.85% of the world's exports in 2016.(1)  The German economy is very strongly oriented towards exports. Exports accounted for almost half of Germany's GDP in 2016.(2)  47% of German foreign direct investment is in the United States, UK, Luxembourg, and the Netherlands.(3)  Many of the bribery allegations involving German companies and nationals related to projects in Central, Eastern, and South-Eastern Europe.  

Germany's trading with China has increased substantially recently.  German imports from and exports to China rose to 180 billion USD in 2016 and Germany became the largest recipient of Chinese foreign direct investment in 2017.(4)

Germany has a high exposure to the risk of bribery of foreign officials due to its dependency on exports and its trading in high-risk industrial sectors in high-risk jurisdictions.(5) 

Bribery Cases        

Since 2011 there have been 121 foreign bribery cases being investigated, with 35 still under investigation and 42 cases terminated due to insufficient grounds.  47 cases have resulted in sanctions on individuals and/or companies.  In the last five years the rate of enforcement has increased significantly over the previous ten years.  

Report Conclusions and Recommendations

  • German tax authorities have played a large role in detecting foreign bribery cases.
  • There is strong cooperation between tax authorities, prosecutors, and the Police.
  • OECD commends Germany's efforts to investigate, prosecute, and sanction individuals.
  • Germany plays a leading role in enforcing the Anti-Bribery Convention.
  • A couple of the many recommendations included that they provide clear guidance to companies about self-reporting procedures and that they amend legislation to provide clear protections for whistle-blowers.

Case Examples from the Report

Aviation company: "A subsidiary of a German aviation company paid bribes amounting to EUR 100 000 between 2007 and 2011 to responsible persons of an aviation authority in a central African state to facilitate the securing more consulting service contracts for the privatisation of the African state run airports. The benefits resulting from the concluded consulting service contract were estimated to equal the paid bribes. The investigation proceedings were initiated in 2013 based on information self-reported by the company and received from foreign authorities. In the course of the investigation, MLA requests were sent to three Parties to the Convention in 2014 and 2017. Informal contacts were established with one Party prior to the execution of one of the MLA requests. The German aviation company was held liable by Cologne Local Court in 2014 and received a EUR 100 000 regulatory fine. No individual was held liable in this case."(6)

DB Schenker (Russia): "DB Schenker, a German logistics provider of the state-owned German rail company Deutsche Bahn, was commissioned to deliver car parts to Russia. Bribes amounting to EUR 1.7 million were paid to customs officers in order to get these officers to forego the customs controls and to accelerate customs clearance. The Cologne Public Prosecutor office opened an investigation in 2013 based on an anonymous report which led Schenker’s parent company DB Deutsche Bahn to self-report to law enforcement authorities. In total, seven individuals, including the former chief executive, entered into a resolution pursuant to section 153a CCP. In turn, DB Schenker was held liable by the Cologne Local Court in 2016 and received an overall regulatory fine of EUR 2 million. The punitive component of the fine is EUR 300°000 and the confiscatory component EUR 1.7 million.186 The prosecutors indicate that the amount of the confiscatory component is equal to the amount of the bribe payments because the proceeds of bribery could not be estimated."

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