- Germany should combat white-collar crime more efficiently — and take a more European approach
- A look at France shows how this could be done
Exactly five years ago, on September 30, 2020, the major diesel criminal trial against Audi CEO Stadler and his colleagues began in Munich. Ironically, the trial is still ongoing.
Against this backdrop, when you look at the major corporate scandals of the last 20 years in Germany, four things stand out: First, there are big headlines, followed by sharp criticism of those responsible, which indeed causes serious damage to the reputation of the companies and their brands.
Then endless court proceedings begin, culminating in verdicts that can only be described as disappointing in light of the original headlines — if verdicts are handed down at all.
Six reasons why white-collar crime must be a top priority in Germany
Even though scandals repeatedly make headlines in this country — whether it’s Dieselgate, Cum-Ex or Wirecard — legal proceedings remain slow. Judgments, if they are handed down in Germany at all, are often unsatisfactory. Overall, our country suffers from lengthy proceedings, low penalties and a patchwork of jurisdictions.
These facts raise serious questions about German practices in dealing with white-collar crime. This leads to the question of whether we can and must take more consistent and effective action against corporate crime, following the positive example of other important European partners, especially France and the United Kingdom.
This would not only lead to greater efficiency and transparency, but above all — as the example of other countries shows — to welcome changes in behavior in the corporate sector. Ideally, this would also reduce the number of cases requiring criminal prosecution in the future.
In all this, the problem is less a lack of willingness to investigate, than an outdated legal framework. Germany has no corporate criminal law, which means that proceedings drag on for years — and sanctions usually fall far short of international standards. In short, there is a lack of three things: A systematic approach, speed and a deterrent effect.
This issue should also be an important item on the agenda for Chancellor Friedrich Merz in particular. He regularly emphasizes, quite rightly, how important it is for Germany to engage more closely with the European dimension. Cross-border, reform-oriented learning on the subject of white-collar crime is particularly well suited to this.
This is true not only because of the Chancellor’s economic expertise, but also because his main coalition partner, the SPD, should at least be willing to take up this issue.
Example 1: The Audi scandal
In June 2023, a three-year criminal trial in Munich over the diesel emissions scandal against former Audi CEO Rupert Stadler ended with a “deal.” Whether this deal will hold up remains to be seen once the proceedings are finally concluded.
Those involved in the trial apparently believed that the prospects of a conviction in further proceedings would not improve and that success would be uncertain and risky.
The prosecution concluded that it would be better to end the case quickly than to invest more time and risk a total loss.
Rupert Stadler and Co. now have a criminal record, but many public reactions expressed disappointment and talk of another “Pyrrhic victory.”
It is true that harsh sentences in cases of white-collar crime are generally difficult to achieve. But after the enormous efforts to uncover the truth and eight years since the scandal began, the court’s settlement appears to be, at best, a partial success for the justice system.
Example 2: The Volkswagen scandal
In 2018, just three years after the far-reaching diesel fraud scandal involving German car manufacturers came to light, the German government succeeded in imposing a (in the German context) substantial sanction on the Volkswagen Group, which also includes Audi.
Although there is no corporate criminal law as such in Germany, VW had to accept a fine of €5 million and a profit skimming of €995 million, which were imposed in accordance with the German Administrative Offenses Act (OWiG).
In the United States, on the other hand, VW — which avoids providing a clear breakdown of the figures — appears to have paid several billion dollars to the authorities alone. Some speculate that the figure is around five billion U.S. dollars. Added to this are approximately 27 billion dollars in penalties, compensation for car owners, etc. worldwide. The discrepancy between Germany and the United States is striking.
Three important questions for Germany
First, why is Germany relatively weak in detecting white-collar crime and imposing penalties compared to other countries?
Second, why is it that, despite enormous efforts, the judiciary all too often only manages to conclude corporate crimes with results that resemble a “Pyrrhic victory”?
Third, is Germany missing something that others have? In short: Isn’t it time for a German corporate criminal law with internationally standardized procedures, which does not currently exist?
U.S. authorities as the biggest fear factor
When international companies come under fire and become the subject of criminal investigations, they fear above all the law enforcement agencies in the United States — especially the Department of Justice (DOJ).
This is because U.S. law claims worldwide jurisdiction over crimes committed by international companies. The U.S. authorities can also impose potentially ruinous restrictions on access to the U.S. market as sanctions.
The British judiciary is considered the little brother of the U.S. judiciary. Its most important authority in this area, the Serious Fraud Office (SFO), has successfully handled numerous major cases against companies (Barclays, Rolls-Royce, BAE Systems, Glencore — all prominent British corporations).
Germany lacks power and instruments
In contrast, German authorities and companies have sought cooperation with U.S. and British authorities in international corporate scandals for years (for example, in the Siemens and Daimler cases, to name just two), but they did so to support criminal prosecution and also to limit the damage to German companies.
This defensive cooperation strategy has been successful overall. However, it has only confirmed the role of the United States as the global sheriff in corporate crime. And unlike the impressive toughness that British authorities normally show toward their own top companies, Germany does not seem to be up to the task — not even in the case of German companies.
How does this compare with the situation in Germany? What German prosecutors have uncovered and prosecuted over the past 20 years is impressive (Siemens, Eurofighter Austria, Bernie Ecclestone, to name but a few).
So, Germany is not weak in combating white-collar crime per se. The reason why they still lag significantly behind in international comparison is because they do not have the means to take effective action — and to impose penalties that are likely to lead to lasting behavioral changes at the corporate level.
Since German law continues to focus on crimes committed by individuals, with companies playing only a subordinate role, the judiciary is at a disadvantage.
Added to this are complex and lengthy proceedings, inconsistent legal frameworks and law enforcement structures, and overburdened local prosecutors who naturally work with limited resources.
The only real weapon available to the German authorities, administrative offense law, provides for only minor fines by international standards and can only have a real impact on corporate behavior through additional asset recovery. While France can impose fines of two billion euros in a single case, Germany has no legal means of imposing fines.
Interestingly, in the United States, the United Kingdom and now also in France, there are cooperation procedures between companies and authorities that supplement, but can also replace, the usual judicial investigation procedures. These cooperation procedures have three key characteristics: They are fast, painful and radical.
“Fast” means an average duration of proceedings of around two years. “Painful” means extremely high procedural costs and very high fines (both of which are borne by the companies). And “radical” means that companies (after serious findings) usually have to replace their top management, demonstrate massive and documented improvement efforts and accept a monitor — or a “probation officer.”
However, these proceedings — often harsh, sometimes brutal — make sense for the state because they require only limited investigative effort, result in high fines and bring about rapid change in the business behavior of the companies concerned.
They also make sense for the companies because they are relatively quick to resolve, limit paralysis and reputational damage and recognize serious efforts to overcome the problems.
The general public perceives that justice is being served, and that legal peace is being restored within a reasonable time frame, while individual criminal responsibility continues to be pursued.
Over the past decade, political pressure has grown in Germany to enact stricter and more effective regulations against corporate crime. In the lengthy legal policy discussions typical of the country, many legitimate concerns about Anglo-Saxon practices have been raised.
Despite these concerns (and with the clear intention of making improvements and tightening regulations), the Merkel government attempted to adopt international standards in 2020 with a draft “corporate sanctions law.” However, the law was never passed by the German Bundestag.
The German-French comparison
A comparison with France is particularly revealing in this context. As expected, the proceedings in the United States and the UK — whether against Alstom, Technip or Airbus— were long condemned on the French side as blatant examples of U.S. imperialism and economic warfare.
As a result, there was resistance and certainly no cooperation on the part of the French authorities or French companies. Throughout these investigations, nationalist and anti-American undertones dominated the public debate. “Betrayal” and “sell-out” were terms frequently used by representatives of the French security authorities in the media.
The French government, for its part, had already gone further. In 2014, it had created an investigative authority in Paris similar to the Serious Fraud Office in London — the Parquet National Financier (PNF).
Finally, France went on the offensive in the fight against corruption with the Sapin 2 law passed in 2016. The aim was to bring French business practices into line with international standards, create the necessary legal framework and procedures and establish a level playing field with the authorities in the United States and the UK.
France can reform itself. Can Germany do the same?
For France, this meant a fundamental change, especially in the relationship between the judiciary and businesses. Traditionally, both sides saw each other as adversaries. Companies that were found guilty of criminal offenses fought back with all their might and rarely, if ever, cooperated.
With the introduction of new regulations to combat compliance violations in companies and to promote transparency and cooperation, a new chapter in French legal history was opened in 2016.
France was rewarded for its ability to act and its pragmatism. Its authorities have now established themselves alongside those of the United States and the UK as players in the fight against international white-collar crime.
Focus on the EU level in the fight against white-collar crime
Looking ahead, three key questions arise in Germany:
1. How should corporate scandals be dealt with legally in Europe in the future?
2. Does a purely national approach still make sense?
3. Should Germany harmonize its requirements and procedures with those in France and the UK?
After Brexit — and thus the end of internal cooperation between British judicial authorities within the EU — a major reform leading to stricter German procedures and authorities is more necessary than ever.
No one knows what corporate scandals will look like in the future. Will they revolve around data breaches? Corporate-inspired digital manipulation of democracy or dangerous violations of AI regulations? Or climate crimes and crimes against our livelihoods, as well as cross-border tax offenses?
However, we know one thing for sure: Corporate crime requires appropriate legal means.
Let’s end the David versus Goliath game
National authorities and procedures for combating crime are like a battle between David and Goliath. Continuing on the current course — especially in Germany, with its focus on individual prosecution, scattered local prosecutors and the instruments of the Administrative Offenses Act (OWiG) — is almost a farce. At the very least, it is inappropriate.
Relying on the United States to combat white-collar crime is not a solution either. “More Europe” — in the sense of greater integration and more comprehensive Europeanization of the relevant procedures — has not been very popular in Europe over the past 15 years. At least on this issue, the time seems ripe for new initiatives at the national and European level.
Why corporate criminal law is crucial
De facto, corporate criminal law is already a reality in Germany through criminal prosecution practice, but it is rather “hidden” in the OWiG legal code which is far less impactful and nowhere near as clear and strong as the corresponding criminal provisions are in the United States, the United Kingdom and France.
German procedures seem rather complex and inefficient, as they lack the procedural tools, internal investigations and (deferred) prosecution agreements offered by leading Western partner countries.
Contrary to the opinion of international observers, this is in no way “advantageous” for German companies. Rather, the complexity of German procedures and their international incompatibility are a competitive disadvantage — not only for the country and its judicial system, but also for companies.
Simply put, they invite multiple proceedings, multiple penalties, confusion, errors and discrimination.
Arguments for a German initiative
Following the failure to pass the Corporate Sanctions Act, there is a clear need for action in Germany. Recent evidence of this can be found in the numerous German “cum-ex” tax evasion cases involving banks, shareholders, investors, large law firms and politicians.
They are already on their way to becoming a new German procedural monster. A senior prosecutor in this case has already resigned out of frustration with the Cum-Ex proceedings.
However, Germany’s obvious need for action should not be addressed by numerous small adjustments to existing German law that increase complexity. Germany should look at the bigger European picture and consider new regulations.
Instead, Germany should work with France to examine how joint action can be taken in this area. A system that preserves European legal traditions and is enriched by the efficiency of Anglo-Saxon systems is recommended.
France is the leader on the continent in this regard. The experience gained there should be used for a German approach based on institutional comparability and complementarity.
Conclusion
Comprehensive and cross-border compatible regulation can only be beneficial. This applies to the judiciary, to businesses and to the idea of accountability, transparency, and, quite literally, legal peace and fairness.
The country with the greatest economic power in Europe has every reason to prove that it can become more capable of action and partnership in this area. Perhaps Paris and Berlin could even extend such an initiative to the EU member states so that they can join in.
The core idea is not only to create compatible and effective national and European regulation, but also national and European institutions that could act on an equal footing with the “American sheriff.”
This would indeed be a major step forward for the often-discussed but rarely realized “European sovereignty.” Europe would thus become a strong transatlantic partner of the United States.
Afterword
In recent months, the legal policy landscape in Germany has changed only in isolated cases. The introduction of a corporate sanctions law, which failed at the time, was not taken up again by the traffic light coalition — despite corresponding announcements in the coalition agreement. There is still no independent corporate criminal law.
Although certain regulatory progress has been made with the Supply Chain Due Diligence Act (2023), the Whistleblower Protection Act (2023) and the reform of the BaFin (from 2021), these changes tend to affect the regulatory and administrative levels. Substantial criminal law reforms, such as those implemented in France or the United Kingdom, are still pending in Germany.
Meanwhile, the discussion at the European level is gaining momentum: harmonization proposals for criminally relevant corporate obligations in the areas of environmental, AI or financial offenses are on the table. Germany could play a formative role here — but has not done so thus far.
The diagnosis formulated in this article therefore remains valid: Germany’s approach to combating white-collar crime is cautious, fragmented and lacking in strategic clout. It is time for Germany to step out of the role of observer and cooperator — and set standards itself.
