Germany

Germany Corruption Report

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Snapshot

Germany_250x166.jpgCorruption is not a significant obstacle for businesses in Germany, and companies are unlikely to encounter bribery or other corrupt practices. Fraud and corruption risks are most prevalent in the construction and public procurement sectors. Germany has strong institutional and legal anti-corruption frameworks. The German Criminal Code applies to individuals – not companies – and makes it illegal to offer, pay or accept a bribe. Companies can be held civilly liable for corruption offenses committed by their representatives under the Act on Regulatory Offences, with fines up to EUR 10 million and confiscation of all economic advantages obtained through bribery. Facilitation payments are prohibited, and small-value gifts and hospitality may be considered illegal depending on the intent, benefit, and value. Enforcement of foreign bribery has increased significantly in recent years, and a large number of prominent German companies and individuals from businesses have been successfully prosecuted.

Legislation Summary
Compliance Guide

Last updated: January 2018
GAN Integrity

Judicial System

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There is a low risk of corruption when dealing with Germany’s judiciary. The judiciary is characterized by a high degree of professionalism and independence from political interference (ICS 2017). Over two-thirds of companies judge the independence of the judiciary to be fairly good or very good (JS 2017). Companies indicate that bribes and irregular payments in return for favorable judgments are rare (GCR 2015-2016). Few citizens consider bribery and abuse of power to be widespread in the German courts (Eurobarometer 2017). Companies report sufficient trust in the efficiency of the legal framework to settle disputes and challenge regulations (GCR 2017-2018). Only a fraction of judges indicate having faced inappropriate pressure to decide a case (ENCJ 2017). Nearly half of judges believe some judges in Germany are promoted on basis other than merit and experience (ENCJ 2017).

Companies can effectively enforce property and contractual rights, and German courts are available to foreign investors in the event of an investment dispute (ICS 2017). The country’s legal framework is strong and well implemented, contractual arrangements and commercial law are fully respected, and property rights are protected (ICS 2017). Enforcing a contract in Germany takes slightly less time and costs less compared to other OECD high-income countries (DB 2018). Germany is a member of the International Centre for Settlement of Investment Disputes (ICSID) and has ratified the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

There is a low risk of corruption when dealing with Germany’s police. German police services reliably protect companies from crime (GCR 2017-2018), and the necessary mechanisms to investigate and punish abuse and corruption in the police and security forces are in place (HRR 2016). Only about one in eight Germans perceive corruption, bribery and abuse of power within the police as a problem (Eurobarometer 2017).

Public Services

The public services sector is transparent and corruption risks are low. The regulatory and legal systems can be complex, but they are transparent and consistent with international norms (ICS 2017). Irregular payments and bribes are almost never exchanged when obtaining public services and licenses (GCR 2015-2016). Around a third of Germans believe officials issuing business permits are corrupt (Eurobarometer 2017). However, no respondents reported actually paying a bribe to officials (Eurobarometer 2017). Germany has transparent laws and policies to promote competition and to facilitate dynamic business formation (ICS 2017). The German legal system’s predictability and impartiality are widely appreciated both by Germans and foreigners (SGI 2017). The government rarely makes unpredictable decisions and there is a strong degree of legal protection against unlawful administrative acts (SGI 2017).

Starting a business takes almost twice as many steps as the OECD high-income average (DB 2018). Dealing with construction permits in Germany takes fewer steps and less time than the OECD high-income average (DB 2018).

Land Administration

There are moderate corruption risks in the German land administration. Companies may face corruption risks when dealing with the construction sector (ICS 2017). Corruption is reportedly prevalent in large-scale construction projects due to close ties between local authorities and companies (NISA 2012). Around a third of Germans believe officials issuing building permits are corrupt (Eurobarometer 2017). Property owned by foreigners is fully protected under German law and companies express confidence in the protection of property rights in practice (ICS 2017, GCR 2017-2018). Expropriation is only executed for public purposes and is subjected to non-discriminatory principles (ICS 2017). Registering property is more time-consuming and costly than the average in the OECD countries (DB 2018).

The former CEO of state-owned real estate company BLB, Ferdinand Tiggemann was sentenced in 2017 to seven years of imprisonment. Tiggemann took bribes amounting to EUR 178,000 from criminals in exchange for information about the location of upcoming public works, allowing the criminals to buy the land and resell it to BLB at a significant profit, in the North-Rhine Westphalia region, costing taxpayers millions of EUR (Der Spiegel, Feb. 2017).

Tax Administration

There is a low risk of corruption in Germany’s tax administration, but the complexity of the tax system imposes a significant burden on businesses. Companies indicate that bribes and irregular payments when making tax payments are uncommon (GCR 2015-2016). Few citizens consider bribery and abuse of power to be widespread among tax authorities (Eurobarometer 2017). German law explicitly prohibits the tax deductibility of bribes. Tax rates and regulations are ranked as the biggest obstacles to doing business in Germany (GCR 2017-2018). The complexity of the tax system imposes higher compliance costs on firms and individuals (SGI 2017); businesses spend considerably more time on filing taxes than elsewhere in OECD high-income countries (DB 2018).

In 2017 it emerged that for decades a group of bankers has been able to manipulate the German tax system in an unethical, but not necessarily illegal, way which has led to an estimated loss of EUR 32 billion to the German state (BBC, Jun. 2017). It has furthermore been revealed that despite a warning from State Commissioner August Schäfer in 1992 and the testimony of five whistleblowers, the practices were allowed to continue for more than two decades (BBC, Jun. 2017).

Customs Administration

There is a moderate to low risk of corruption in Germany’s customs administration. Companies indicate that bribes and irregular payments during customs procedures are rare (GETR 2016). Companies are generally satisfied with the efficiency and time-predictability of customs clearance procedures (GETR 2016). Burdensome import procedures are cited by a number of businesses as among the most problematic factors for importing into Germany (GETR 2016).

In 2015, two customs officers were investigated over corruption; one for waving customs duties in return for a concert ticket and another for helping a Southeast-Asian company evade taxes (Welt, Nov. 2016). Another officer was convicted in 2016 for aiding and abetting tax evasion and fraud; he received a prison sentence of four years and ten months (Welt, Nov. 2016).

Border compliance procedures in Germany are far less time-consuming and costly when it comes to importing compared to the OECD high-income average (DB 2018). However, companies spend significantly more time and money on export border compliance compared to the OECD high-income average (DB 2018).

Public Procurement

There is a moderate risk of corruption when dealing with public procurement in Germany. Companies indicate that the diversion of public funds and favoritism in the decisions of government officials are not common (GCR 2017-2018). Businesses report that bribes and irregular payments in the process of awarding public contracts and licenses are fairly uncommon (GCR 2015-2016). However, two out of five companies perceive bribery and corrupt practices to be widespread among businesses in Germany (EY 2017). Furthermore, more than two-thirds of companies believe that close links between business and politics in Germany lead to corruption (Flash Eurobarometer 2015). Identified risks are collusive bidding, conflicts of interest in the evaluation of bids, the involvement of bidders in the design of specifications, unclear selection or evaluation criteria, and tailor-made specifications for particular companies (European Commission, Feb. 2014). Public procurement provisions make it mandatory for contacting authorities to exclude bidders who have been sentenced for corruption offenses. German authorities have increased penalties for bribery and price-fixing by companies competing for public contracts (ICS 2017). Germany is set to introduce a national single registration point for firms that have violated procurement, antitrust, and labor laws among others; these companies are then to be excluded from contracts and concessions (EUWID, Oct. 2016).

In one corruption case, the former technical chief of the Berlin-Brandenburg airport, Jochen Großmann, was sentenced in 2014 to one year of probation and fined USD 250,000 for bribery, fraud and attempted bribery (The Local, Oct. 2014). Großmann attempted to solicit a bribe of EUR 500,000 from a potential contractor for work on the airport’s deficient smoke extraction system (The Local, Oct. 2014). Another manager at Berlin-Brandenburg airport was sentenced in 2016 to three and a half years of imprisonment in addition to repaying the EUR 150,000 bribe he took in exchange for clearing additional payments worth EUR 25 million to the firm Imtech without review (The Local, Oct. 2016). Imtech was responsible for the troubled fire safety system at the airport, which has thus far delayed the opening of the airport for years (The Local, Oct. 2016).

Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.

Legislation

Germany is among the world’s top enforcers of anti-corruption legislation and may punish corrupt acts abroad that violate German domestic laws. German anti-corruption legislation is largely divided between the Criminal Code and the Administrative Offences Act. The German Criminal Code applies to individuals and makes it illegal to offer, pay or accept a bribe. The Law on Fighting Corruption (in German) has expanded the scope of individuals covered by the act, now including German public officials in domestic and foreign transactions, members of parliament, delegates, and EU officials (GLI 2018). The Law has also expanded the capabilities of German authorities to prosecute foreign bribery (GLI 2018). The level of enforcement in relation to foreign bribery cases has steadily increased in the past few years (GLI 2018). Active and passive bribery of employees or agents of a company is criminal even if it does not involve a distortion of competition (GLI 2018). Companies can be held civilly liable for corruption offenses committed by their representatives under the Act on Regulatory Offences, or if individuals with management functions intentionally or negligently omit necessary supervisory measures designed to prevent criminal activities. Fines can be up to EUR 10 million for each intentional criminal offense, and up to EUR 5 million for each negligent criminal offense. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on their intent, benefit and value (CMS 2016). Other relevant legislation includes the Money Laundering Act, which criminalizes offenses including fraud, forgery, and embezzlement, and imposes due diligence and reporting requirements on financial institutions and the majority of the wholesale and retail sector. Whistleblowers have some legal guarantees against arbitrary dismissal in the public and private sector, but there is no strong separate law regulating whistleblowing (WLG 2016). Public officials are obliged to report reasonable suspicion of corruption to the highest service authority or law enforcement agency under the Act on Federal Civil Servants.

Germany has ratified the OECD Anti-Bribery Convention and the United Nations Convention Against Corruption (UNCAC), and it has signed the Council of Europe’s Civil and Criminal Law Conventions against Corruption.

Civil Society

Freedom of expression is protected by the constitution, and freedoms of the press and internet are unrestricted and respected in practice (HRR 2016). German media is also evaluated as free of political interference and being editorially independent (FotP 2016). The integrity of the media environment is regulated by the Press Code, published by the German Press Council, which establishes common guidelines for ethical conduct among journalists. Germany has a Freedom of Information Act, but some public authorities have applied the act very restrictively and delay or deny the release of information (SGI 2017). Germany’s media environment is considered ‘free’ (FotP 2017).

Civil society organizations (CSOs) operate without restrictions in Germany (FitW 2017), and only groups that actively fight against free democratic values can be banned. The right to peaceful assembly is respected in practice, although hate groups, including those advocating Nazism are outlawed (FitW 2017). CSOs in Germany fulfill a watchdog role which is effective when supported by the media and public opinion, but limited in the opportunities for influencing government policy (NISA 2012).

Sources

The site provides a wealth of practical anti-corruption resources to support a solid preventative approach, covering subject such as processes, due diligence, practical tools to support compliance program implementation and also compliance and integrity training.

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