GERMANY: An introduction to Dispute Resolution: White-Collar Crime: Defence Counsel

Risk and Reward – Legal Framework and Economic Objectives 

Entrepreneurial activity operates within a framework that balances economic objectives – profit generation and value maximisation – with legal and regulatory requirements. Companies and decision-makers must navigate this complex landscape, aligning commercial opportunities and compliance obligations. The interaction between these factors is particularly evident in white-collar and criminal tax law matters, where economic decisions, in retrospect, may lead to financial losses or regulatory scrutiny.

While adverse outcomes may prompt investigations, the legal assessment of such decisions must focus on the conditions and information available at the time they were made. Enforcement authorities frequently examine whether financial losses or regulatory breaches stem from legally relevant misconduct or simply reflect the inherent risks of economic activity. The challenge for legal practitioners advising corporates and individuals in this field is ensuring that liability assessments are conducted from an ex-ante perspective – considering the decision-making context at the time rather than being unduly influenced by hindsight.

Against this backdrop, regulatory expectations are evolving, and corporate liability risks in Germany are subject to increasing scrutiny. Understanding these developments is essential for navigating the intersection between economic decision-making and legal accountability. 

Dual Exposure – Legal Risks for Individuals and Corporates 

A distinctive feature of German law is the absence of corporate criminal liability, in contrast to most other jurisdictions. As a result, criminal allegations focus primarily on the conduct of individuals, making managerial liability a central concern in white-collar and criminal tax law. This liability extends beyond an individual’s own actions and, under the principle of horizontal attribution, also encompasses the conduct of those to whom responsibilities have been delegated. Furthermore, depending on the circumstances, liability may arise in the context of departmental decision-making and, under the principle of collective responsibility applicable in German criminal law, for decisions taken by board colleagues. Additionally, managers may be held accountable for organisational deficiencies and failures in supervisory duties. 

Although a company itself cannot be held criminally liable under German law, corporate liability risks have expanded significantly in recent years, bringing far-reaching legal consequences. In particular, companies may face substantial administrative fines for regulatory offences and broad confiscation measures designed to deprive them of unlawfully obtained assets – often without the ability to offset corresponding expenses incurred in connection with the alleged wrongdoing. 

Expanding Risks – The Impact of Tightening Regulation 

Criminal allegations in business contexts are no longer confined to traditional core criminal law, which covers offences such as fraud, embezzlement, corruption and general attribution principles. These offences are now increasingly supplemented by a growing and increasingly complex network of ancillary criminal provisions, many of which are industry-specific. 

This trend is particularly evident in highly regulated sectors, such as financial services (including capital markets) and the medical and pharmaceutical industries. Beyond industry-specific regulations, companies across all sectors face heightened obligations in areas such as anti-money laundering, product liability, public procurement and data protection. Compliance failures in these areas can lead to criminal liability, administrative fines and/or asset confiscation.

In recent years, violations of export control laws and trade embargoes – not exclusively, but particularly in relation to Russia – have also gained significant prominence, extending well beyond the traditional domain of defence and arms exports. These regulatory expansions have materially increased the exposure of both individuals and corporates to criminal liability, reinforcing the need for robust compliance mechanisms and proactive risk management. 

Further obligations arise under the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz), which, since January 2024, applies to companies with more than 1,000 employees. These companies are required to implement comprehensive due diligence measures, including risk assessments, third-party due diligence and reporting obligations. Non-compliance may result in fines of up to EUR8 million, or, for companies with an annual turnover exceeding EUR400 million, up to 2% of the group’s average annual turnover. 

This trend towards increasing regulatory density and corresponding liability risks is expected to continue. In particular, the ESG (Environmental, Social and Governance) framework is likely to give rise to additional liability exposure, with the first greenwashing-related investigations already pending – both within and beyond the financial sector.

In addition to these more recent developments, numerous proceedings remain pending in the long-standing issues such as Cum/Ex, Diesel and Wirecard. These cases concern matters dating back as far as 20 years, raising the legitimate question of whether such proceedings are even justiciable in any meaningful sense. They often involve an extensive number of accused individuals, as exemplified by the approximately 1,700 persons implicated in over 300 investigative complexes in the Cum/Ex proceedings – or protracted trials, such as the ongoing main proceedings against Wirecard’s former CEO, who has been in custody since the summer of 2020. That trial commenced in December 2022 and, following multiple extensions, is currently scheduled to continue with further hearings until the end of 2025.

Prosecutorial and Internal Investigations – Siblings in Unregulated Co-Existence 

The threshold for initiating formal criminal and regulatory enforcement proceedings in Germany is remarkably low. Public prosecutors are obliged to commence investigations upon the existence of an “initial suspicion” (einfacher Tatverdacht) of a criminal offence – meaning that a mere possibility that an offence has been committed is sufficient. A qualified suspicion (dringender Tatverdacht) is required only for the imposition of coercive measures, yet the interpretation of these thresholds varies significantly in practice, depending on the court, the responsible judge and the investigating magistrate. 

In contrast, administrative offences (Ordnungswidrigkeiten) are subject to the principle of prosecutorial discretion (Opportunitätsprinzip), meaning that authorities may but are not required to prosecute them. Again, enforcement practices remain inconsistent. However, fines are legally mandated to be issued by local courts (Amtsgerichte), regardless of the complexity of the economic context. As a result, highly complex corporate enforcement cases, which often require specialised economic and financial expertise, are adjudicated by courts that also handle relatively minor infractions, such as traffic violations. Given this, corporate legal representatives often seek to establish early and structured discussions with the prosecution authorities to define clear procedural boundaries for investigations. 

While state authorities have traditionally held the primary role in fact-finding, internal investigations have gained significant importance in Germany over the past two decades. This shift can be traced back to the 2006 Siemens corruption scandal, where the prospect of significant US enforcement action – including potential sanctions by the US Securities and Exchange Commission (SEC) – prompted the company to launch a large-scale internal investigation, led in part by a major US law firm. 

Despite their growing relevance, internal investigations in Germany remain largely unregulated from a procedural law perspective. While corporate law imposes certain governance obligations, there are no statutory minimum standards governing key aspects such as employee interviews or the handling of electronic communications and data. In practice, these issues are often managed as a matter of corporate ethics rather than legal compliance. A legislative proposal to introduce a formal legal framework for internal investigations was abandoned due to a government transition, with no clear indication of its revival in the foreseeable future. 

This lack of regulatory clarity creates significant uncertainty for both companies and their legal advisers. Even fundamental questions, such as the admissibility and evidentiary weight of employee interviews conducted by external counsel or forensic accountants, are often determined on a case-by-case basis by individual public prosecutors. 

A further critical concern is the lack of effective protection against the seizure of internal investigation records. Unlike in some common law jurisdictions, Germany does not provide comprehensive attorney-client privilege for corporate investigations. As a result, interview notes and investigative documents prepared by external counsel are often not protected from seizure by authorities. 

The interaction between this uncertain legal framework and the Whistleblower Protection Act (Hinweisgeberschutzgesetz), which came into force in July 2023, remains to be seen. The legislation requires companies with at least 50 employees, as well as certain regulated entities, to establish internal reporting channels. Non-compliance may result in corporate fines, but the long-term implications for internal investigations and enforcement proceedings remain uncertain.

“Liability Risks Detox”

Beyond this background, German criminal law, particularly in the areas of white-collar and criminal tax law, would greatly benefit from a process of streamlining and refocusing. Most importantly, criminal law should not be used as a tool of economic policy or market regulation, nor should the initiation of proceedings – often launched with a dramatic “bang”, in contrast to the often much-delayed “outcome” years later – become the default response to economic distortion or crises.

In terms of procedures, there is an urgent need for a clear legal framework governing internal investigations. In particular, companies that fulfil their obligations regarding legality and compliance must be able to benefit from such efforts in a transparent and predictable manner.

Qualified legal advice is key for mitigating liability and managing criminal law risks, should they emerge.