New German Government Publishes Coalition Agreement

New German Government Publishes Coalition Agreement

December 10, 2021, Covington Alert

On 7 December 2021, Germany’s newly-assembled coalition government comprising the Social Democratic Party (SPD), the Green (Bündnis 90/Die Grünen) and the Free Democrat Party (FDP) signed its coalition agreement (hereinafter “Agreement”) outlining its policy priorities over the next four years.

The Agreement covers a wide range of topics ranging from the government’s strategy to address climate change to the government’s approach to foreign policy. The agreement also references a range of compliance related topics that will be addressed in this Alert.

Corporate Sanctions Act

The Agreement contains some vague information on the government’s plans to overhaul Germany’s corporate sanction laws. The Agreement states that the government intends to “protect honest businesses from unlawful competitors”. The Agreement furthermore states that the government will “revise the rules on corporate sanctions, including the amount of fines, in order to improve the legal certainty for companies with regard to compliance obligations and to create a precise legal framework for internal investigations”.

Based on this limited information it is difficult to assess whether the government intends to simply revise existing rules on corporate sanctioning that can mostly be found in the German Administrative Offenses Act (Ordnungswidrigkeitengesetz, “OWiG”) or whether it intends to introduce a genuine corporate criminal law as the last government attempted. After years of back and forth, the last government had finally agreed on a new corporate sanctions act, which would have placed the sanctioning of companies in Germany on a new legal basis. Amongst others, the draft law established new and higher sanctions against companies and also provided for statutory regulations on the implementation of compliance measures and a legal framework for internal investigations. After the government had finally agreed on a draft, the law failed to make it through parliament before the end of the legislative term. In particular the CDU, which was part of the government at the time, and the FDP, which is part of this new government are believed to be the reason why the draft law failed.

It remains to be seen whether and, if so, how the newly-assembled government will take up the efforts of the old government. Of the three governing parties only the Greens expressly committed in their election program to the introduction of new legislation addressing the issue of corporate liability. It can therefore be expected that both the Greens and the SPD, which in the past has been a strong advocate for the introduction of a corporate criminal law, will push for more aggressive legislation than the FDP which will most likely stick to its traditional pro-business stance and try to avoid any additional burdens on businesses.

EU Whistleblower Directive

The Agreement also states that the government intends to implement the EU Whistleblower Directive (EU Directive (EU) 2019/1937). The Directive came into force on 16 December 2019. The Directive aims to introduce uniform minimum standards for the protection of employees reporting violations against EU law.

The implementation deadline for it to pass into national law by the EU Member States is 17 December 2021. Germany will miss the deadline as the last government failed to agree on a draft. The new government announced in its Agreement that it intends to introduce an implementation law that will go beyond the minimum requirements of the Directive. The law will afford protections to whistleblowers not only when they report violations of EU law, but also if the whistleblower reports significant violations of national laws or other significant misconduct, if the disclosure is in the public interest. The timeline of this new law is unclear, but considering the December 17 deadline it can reasonably be assumed that the new whistleblower law will be among the earlier legislative initiatives of this new government.

Supply Chain Due Diligence Act

The Agreement also briefly mentions the German Supply Chain Due Diligence Act that was passed last July (for detailed information on the key provisions of the law see our Covington Alert). The government expressed its commitment to the Act and explained that it might introduce “improvements” without  giving details on what areas of the Act it is referring to. Under the Due Diligence Act, companies in scope will be required to implement various due diligence measures in their own business operations and in their supply chains to identify and mitigate human rights and environmental-related risks.

The government expressed its commitment to support various related EU legislative initiatives:

• EU Supply Chain Due Diligence Directive: The Agreement contains a brief reference to the anticipated EU Directive that is expected to be passed in the coming years. The German government signaled its support for an EU supply chain law which is“ based on the UN Guiding Principles on Business and Human Rights that does not overburden small and medium-sized enterprises”. The European Commission is expected to publish its proposal for a mandatory human rights and environmental due diligence law this December. The Commission has signaled that it aims to put forwardan ambitious draft, which will likely apply to a wide range of companies doing business in the EU, including entities based outside the EU (this Client Alert contains detailed information on the EU initiative).
• Import Controls: The government expressed its support for the EU's proposed ban on the import of products from forced labour which EU Commission President Ursula von der Leyen announced on 15 September 2021 in her State of the Union Address. To date, no drafts have been published yet and it is unclear what the timeline will be for this new law.
• EU law to combat deforestation: And lastly, the government explained that it supports the EU Commission's proposal for a Deforestation-Free Products Regulation. The European Commission’s new legislative proposal, published on 17 November 2021 would introduce a range of measures for EU operators and traders aimed to ensure that certain commodities bought, used, and consumed on the EU market no longer contribute to global biodiversity and forest loss and are “deforestation-free”. For an in-depth analysis of the EU proposal and a similar UK initiative, please see this recently published Alert.

If you have any questions concerning this alert, or the Agreement more broadly, please contact any of the Covington team members listed.