In a judgment of 10 August 2011, the text of which has recently become available, the German Federal Court of Justice (the "Court") rejected an appeal on points of law brought by the public prosecutor against a judgment of the Higher Regional Court of Düsseldorf (see VBB on Competition Law, Volume 2010, No. 4, available at www.vbb.com) acquitting an industrial property insurance corporation, HDI-Gerling Industrie Versicherung AG ("HDI-Gerling"), from liability for the participation of its legal predecessor in a cartel.
The German Federal Cartel office ("FCO") had fined HDI-Gerling's legal predecessor, Gerling Konzern Versicherung AG ("GKA"), as well as several other insurance corporations, on account of its participation in an anti-competitive agreement on the insurance market (see VBB on Competition Law, Volume 2005, Nos. 4 and 10, available at www.vbb.com). Subsequently, GKA merged with another insurance corporation to form a new legal entity, HDI-Gerling. HDI-Gerling refused to accept liability for the conduct of its legal predecessor's employees and appealed against the FCO decision.
The liability of legal persons for administrative fines is regulated in section 30 of the German Administrative Offences Act (OWiG), which states that a fine can be imposed on a legal person if one of its organs or a senior manager infringed the company's obligations by committing an administrative offence. The Court held that the requirements of this provision were not fulfilled in the case at hand because it had been the legal predecessor's organs and senior managers who had participated in the agreements, but not the organs or employees of the new corporation. According to the Court, an extension of liability to the legal successor would only be possible in the exceptional case that both entities were virtually identical from an economic point of view. The Court considered that, where a company merely changes its name or its legal form, this exception may apply. However, given that, in the present case, two companies of approximately the same size had consolidated their respective divisions and the merger led to significant restructuring, the Court concluded that the predecessor and the successor could not from an economic point of view be regarded as the same legal person.
The Court stated that any broader interpretation of Section 30 OWiG in order to extend the liability of legal successors would be contrary to the clear wording of Section 30 OWiG and would violate the requirement of legal certainty and the prohibition of double jeopardy in criminal matters laid down in Article 103(2) of the German Constitution.
This judgment is interesting in that it is contrary to standing practice and case law at European level. It remains to be seen whether the German legislator will take the opportunity of amending the law in the framework of the upcoming eighth revision of the German Act Against Restraints of Competition (see, volume 2011, n°12, VBB on Competition Law, available at www.vbb.com) so as to remedy this situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.