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Corruption is not an 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 health sectors, as well as in public procurement. 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 under the Administrative Offences Act, 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. Germany has strong institutional and legal frameworks. 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.
Last updated: December 2015
The German judiciary is characterised by a high degree of professionalism and independence from political interference (ICS 2015), and judicial corruption does not present an obstacle to doing business. Companies can effectively enforce property and contractual rights, and German courts are available to foreign investors in the event of an investment dispute. Businesses perceive the courts to be very effective in settling commercial disputes and challenging government regulations (GCR 2015-2016). The country’s legal framework is strong and well implemented, contractual arrangements and commercial law are fully respected, and property rights are protected (ICS 2015). Few citizens consider bribery and abuse of power to be widespread within the German courts (European Commission, Feb. 2014). 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.
German police are not corrupt. German police services reliably protect companies from crime (GCR 2015-2016), and the necessary mechanisms to investigate and punish abuse and corruption in the police and security forces are in place (HRR 2014). A very low percentage of citizens perceive corruption, bribery and abuse of power within the police as a problem (European Commission, Feb. 2014).
The German public services sector is transparent and corruption-free. Companies report that it can be quite burdensome to deal with government administrative requirements (permits, licences, reporting, etc.), but irregular payments and bribes are almost never exchanged when obtaining public services and licences (GCR 2015-2016). Germany has transparent laws and policies to promote competition and to facilitate dynamic business formation, and the process for launching a company and completing licensing requirements is transparent and straightforward (ICS 2015). Between one-third and half of respondents believe bribery and abuse of power are widespread among public officials conducting various forms of business inspections, and officials issuing business and building permits (European Commission, Feb. 2014).
Corruption in the German land administration is not an obstacle for businesses. Companies may face corruption risks when dealing with the construction sector (ICS 2015). Corruption is reportedly prevalent in large-scale construction projects due to close ties between local authorities and companies (NISA 2012). Almost half of surveyed citizens perceive bribery and abuse of office to be widespread among officials issuing building permits (European Commission, Feb. 2014). Businesses believe that property rights are well protected (GCR 2015-2016), and property owned by foreigners is fully protected under German law; expropriation is only executed for public purposes and is subjected to non-discriminatory principles (ICS 2015). Registering property is more time-consuming and costly than the average in the OECD countries (DB 2015). Germany has increased the property transfer tax, making it more expensive to register property (DB 2015).
The Neuruppin prosecution authority has been investigating four managers of a Dutch construction company in connection with the construction of the new Berlin airport. An airport manager confessed to having received cash payments totalling EUR 150,000 in return for approving without verification the payment of invoices by the Dutch construction company amounting to EUR 65 million. The airport manager has been taken into pre-trial custody (ABCR, July 2015).
Companies rank tax regulations as the biggest challenge to doing business in Germany (GCR 2015-2016), but corruption and demands for bribery payments in the tax administration are very unlikely. The German law explicitly prohibits the tax deductibility of bribes. Few citizens consider bribery and abuse of power to be widespread among tax authorities (European Commission, Feb. 2014).
The German customs and border administration is corruption-free and highly transparent, and there is almost no mention of irregular payments at the border in relation to importing and exporting goods (GETR 2014). Only a small percentage of surveyed citizens believe that bribery and abuse of office are widespread among customs officials (European Commission, Feb. 2014), and businesses do not consider customs procedures to be burdensome (GCR 2015-2016). Trading across borders in Germany is less costly and less time-consuming than the average in other OECD countries (DB 2015).
Companies may contend with some corruption risks when dealing with the German public procurement sector (ICS 2015). Identified risks are collusive biding, 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). Almost one-third of companies perceive bribery and corrupt practices to be widespread among businesses in Germany, while just one out of ten believe it is common practice to use bribery to win contracts in their sector (E&Y 2013). More than two-thirds of companies believe that close links between business and politics in Germany leads to corruption (European Commission, Feb. 2014). Public procurement provisions make it mandatory for contacting authorities to exclude bidders who have been sentenced for corruption offences. German authorities have increased penalties for bribery and price-fixing by companies competing for public contracts (ICS 2015).
In one corruption case, the former technical chief of the Berlin-Brandenburg airport was sentenced to one year of probation and fined USD 250,000. The offender was found guilty of bribery, fraud and attempted bribery. Investigations revealed that the former technical chief had demanded a company to pay USD 625,000 in return for a planning contract, and that he had submitted invoices with additional charges totalling USD 62,500, which he kept for himself (HRR 2014). Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.
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. It includes German public officials in domestic and foreign transactions, members of parliament, delegates, and EU officials (ABCR, July 2015). Active and passive bribery of employees or agents of a company is criminal even if it does not involve a distortion of competition (Global Compliance News, Nov. 2015). Companies can be held civilly liable for corruption offences committed by their representatives under the Administrative Offences Act, 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 offence, and up to EUR 5 million for each negligent criminal offence. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on their intent, benefit and value (CMS 2014). Other relevant legislation includes the Money Laundering Act, which criminalises offences including fraud, forgery and embezzlement, and imposes due diligence and reporting requirements on financial institutions and the majority of the wholesale and retail sector. Public procurement is regulated by the EU Procurement Directives and various domestic codes, which make it mandatory for authorities to exclude companies found guilty of corruption in Germany and abroad from bidding on public tenders. Whistleblowers have some legal guarantees against arbitrary dismissal in the public and private sector. 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.
Freedom of expression is protected by the constitution, and freedoms of the press and internet are unrestricted and respected in practice. German media is also evaluated as free of political interference and being editorially independent (FotP 2015). The media plays an important role in combating corruption through reporting (NISA 2012). 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’s media environment is considered 'free' (FotP 2015).
Civil society organisations (CSOs) operate without restrictions in Germany (FitW 2015), and only groups that actively fight against free democratic values can be banned. CSOs in Germany fulfil 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).
- World Economic Forum: Global Competitiveness Report 2015-2016.
- US Department of State: Investment Climate Statement 2015.
- Clifford Chance: Anti-Bribery and Corruption Review, July 2015.
- GRECO: Fourth Evaluation Round: Evaluation Report Germany, January 2015.
- Global Compliance News: "Germany expands commercial bribery", 30 November 2015.
- Business Insider UK: 'Dozens of German Business execs are trying to escape prosecution for corruption in Greece', 30 August 2015.
- CMS: CMS Guide to Anti-Bribery and Corruption Laws, September 2014.
- Federal Ministry of Interior: Rules on Integrity, March 2014.
- US Department of State: Investment Climate Statement 2014.
- Freedom House: Freedom in the World – Germany Country Profile 2014.
- Eurobarometer: Special Eurobarometer 397 – Corruption Report, 2014.
- US Department of State: Country Report on Human Rights Practices for Germany - 2014.
- World Economic Forum: The Global Enabling Trade Report 2014.
- European Commission: Businesses' attitudes towards corruption in the EU, February 2014.
- European Commission: EU Anti-Corruption Report: Annex 5, Germany, February 2014.
- Transparency International: Global Corruption Barometer 2013.
- US Department of State: Country Report on Human Rights Practices for 2013 – Germany.
- Ernst & Young: Navigating today’s complex business risks – Europe, Middle East, India and Africa Fraud Survey 2013.
- Freedom House: Freedom of the Press – Germany Country Profile 2013.
- OECD: Germany: Follow-Up to the Phase 3 Report & Recommendations, April 2013.
- The Local: "Doctors’ group admits widespread corruption", 13 January 2013.
- GRECO: Third Evaluation Round - Interim Compliance Report on Germany, 28 November 2012.
- Transparency International: National Integrity System Assessment Germany 2012.