DGAP-News: 'Compliance Officers need Scepticism and Sensitivity': 180 Company Representatives at Nörr Stiefenhofer Lutz 'Compliance Day'

NÖRR STIEFENHOFER LUTZ / Legal Matter

29.10.2009 

Dissemination of a Corporate News, transmitted by
DGAP - a company of EquityStory AG.
The issuer / publisher is solely responsible for the content of this announcement.

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Dr. Christian Pelz calls the recent Federal Supreme Court judgement on
liability of internal auditors a 'thunderbolt for German compliance
officers: This judgement has caused alarm'. With these clear words, the
specialist in criminal and tax law opened his address to this year's
Compliance Day of the international law firm Nörr Stiefenhofer Lutz in
Munich. Since the publication of the judgement (File No. 5 StR 394/08) in
the summer, the Nörr lawyer is dealing with the possible consequences. Pelz
briefly informed approx. 180 in-house lawyers and compliance practitioners
in the Kempinski-Hotel about the effects on their daily work.

But there was more for the guests. Seven prominent lecturers spoke about
innovations in the most varied areas of compliance. The spectrum ranged
from employee data-protection and whistle-blowing through cartel law and
fictitious self-employment to the effects of the EU REACH Regulation
(registration, evaluation, authorisation and restriction of chemicals) for
companies in their day-to-day business.

Legal Theory fails to keep Pace with Compliance Practice

In autumn 2006, the Nörr Partner Prof. Dr. Thomas Klindt, head of the
compliance practice at the law firm, initiated the successful series which
took place this year for the fourth time. 'Legal research on the subject of
compliance is not keeping pace with the increasing significance of the
subject in practice' emphasised the expert for product safety and
technology law at the opening of the seminar - exchange among practitioners
is therefore all the more important.

The guests accepted this offer. In particular, the Federal Supreme Court
judgement, commented upon by Rechtsanwalt Pelz, triggered discussions on
the margin of the conference. There was widespread agreement that the
highest German criminal judges took the opportunity of a case of fraud in
Berlin to reveal, in an 'obiter dictum', their views on the tasks of
compliance officers. The consequences for compliance officers according to
criminal law expert Pelz: They must, according to the judges, prevent all
legal violations taking place in the company - in particular criminal
offences. They are therefore in the position of a guarantor and as such can
themselves be criminally liable by omission - a far too great extension of
their responsibility according to the expert. 'They practically already
have one foot in jail' concluded Pelz to the approval of the listeners in
the hall.

Unclear Definitions of Compliance result in Liability Risks

As the cause for the comprehensive liability, the lawyer identified the
unclear definitions of compliance. 'The court was guided only by the
comments in the literature, with the addition of the marketing claim of
many companies that they are compliant in all areas'. The term 'compliance'
has been displayed like a banner in recent years while the scope of the
work of those responsible has only seldom been clearly defined. Many of the
guests agreed. But Pelz also discovered something good in the judgement:
'It compels us to develop compliance to reconsider its function'.

A similar transition as that in compliance itself is being experienced at
present in European chemical law, as Nörr lawyer Martin A. Ahlhaus
explained. The 'REACH'-Directive of the Commission revises the legal
obligations of manufacturers, importers and dealers completely. 'Not only
chemical firms are affected' declared the public law expert. 'Whoever
imports DVD players or sells text markers can very rapidly be covered by
the REACH obligations'. Many companies, in Ahlhaus' experience, are unaware
that the new regulations apply to them too. A classic case for the
compliance department.

REACH as Challenge for Communications Departments

The 'first deliveries have already been detained by the customs due to
defective accompanying papers' according to the Nörr Stiefenhofer Lutz
lawyer. The issue will also ultimately be significant for the
communications departments of firms affected, the consumer can immediately
demand information on the substances in the products sold. Time presses.
Already since last year, firms are threatened with prohibitions on bringing
goods to the market if they do not conform to REACH. At the end of 2010, a
further intensification will take place. 'This issue will be severely felt
by many companies' said Ahlhaus. 'In the internet there is already a form
letter from the Federal Environmental Office in circulation with which
consumers can demand information from the companies'.

Günther Dorn, leading government director in the Bavarian State Office for
Data Protection came across as significantly more business-friendly than
the federal authorities. He understands the desire for data screening to
combat corruption. It is often as 'between the devil and the deep blue
sea'. He explained on the basis of the newly introduced § 32 Federal Data
Protection Act what legal possibilities to compare data exist and what must
be observed thereby. He also allowed himself a side-swipe at the legislator
'I would wish clear rules for practitioners instead of weak consideration
provisions. The politicians must get off the fence'. Dorn encouraged the
company representatives to make their views on the Employee Data Protection
Act heard. 'Advice from practitioners is badly needed there'. While data
protection is taken seriously, there is also awareness of the strictures of
daily practice, said the official to the applause of the listeners.

Comparison of Employee Data is permissible

The subject of data protection was also dealt with by Rechtsanwalt Dr. Jyn
Schultze-Melling, specialist for IT compliance. He also spoke in favour of
pragmatic solutions and explained the binding corporate rules, the American
'safe harbor' principle and the problems with cloud computing for data
protection law. Problems arise in particular 'if data leave the circled
wagons of Europe'. In Asia and America also, 'the basket in which one has
laid one's egg, should be well upholstered' according to Schultze-Melling.
The basic requirement for effective IT compliance is, however, the
inventory with the help of the responsible technicians. Ultimately, hardly
anyone knows were data are at any particular time. 'Now is the time to
clear out the attic and to bring IT structures up to date from a data
protection point of view' advised the lawyer in view of the amendment to
the Data Protection Act which came into force on 01 September.

Another current development has its roots on the other hand in a legal
amendment which took place somewhat longer ago. In cartel law, increasingly
compensation claims are made against companies which participate in price
fixing or other cartel law breaches. 'Since 2005, the amended German cartel
law contains provisions on claims due to cartels, for example, only a few
days ago the first case of the cement transport cartel ended' reported Nörr
Partner Dr. Alexander Birnstiel. The dangerous aspect of this development
is that the costs for which the cartel participants are responsible are not
calculable. Unlike in the case of fines, the amount of damages is not
limited and in addition even the witnesses in the cartel proceedings can be
claimed against. In official cases in the which the penalty may be a fine,
the witnesses are protected as thanks from the authorities for revealing
the cartel.

Victims of Cartels should think about Compensation Claims

'The dam in this area will very rapidly break' prophesied the cartel expert
- alone because the EU Commission itself claims against the members of the
lift cartel and intends thereby to create an example. In parallel,
companies which deliberately buy up civil law claims against cartel members
are being established for the purpose of enforcing these combined claims in
court. 'Such claims are already pending in the cement and bleach cartel
cases' said Birnstiel. For managers of companies damaged by cartels, action
may be required above all after the conclusion of an official cartel
proceeding. In order to avoid liability, they should, however, carefully
examine whether the company can claim against cartel participants.

While this kind of manager liability is rather based on negligence, auditor
and tax adviser Andreas Sand considered deliberate misconduct of company
executives. With many examples, he showed how managers attempt creatively
to damage their own companies. 'To proceed against managing directors
internally is really a tightrope act' according to the expert from the Nörr
NSL Consulting AG.

Sensitivity in dealing with criminal Managers

The damage caused yearly by financial crime is more than 10 million EUR
according to relevant studies, in 35% of the cases, top management is
involved. 'Healthy scepticism and great sensitivity' was the auditor's
recommendation to compliance officers. 'A standard approach does not
exist'. In the heat of the investigations, however, it should not be
forgotten that the auditing and compliance department must also comply with
the law.

The seminar concluded with a subject which is often neglected - fictitious
self-employment. Dietmar Will, Chief Compliance Officer of Audi AG,
outlined the company's measures to avoid unwelcome surprises in this area.
'The demarcation between employment and services is much more difficult in
practice than is understood in theory' said the lawyer. Instructions,
integration in the organisation and separation between freelance and the
company's own employees must at all times pass the tests of the tax
investigation of illicit working. 'Even the naming of a freelancer in an
e-mail out of office notice as a substitute, can be an indication that the
department does not maintain the distinction as required' according to
Will. Clear rules and comprehensive training of those responsible are used
to protect the Ingolstadt company against problems, since otherwise tax
investigations, accusations of illicit working and considerable arrears
demanded by the social insurers could be the result.

In addition: Compliance training can be obtained through the computer. The
demo-version 'E-Learning Kartellrecht' of Nörr Stiefenhofer Lutz and
Digital Spirit provides an introduction.

See under: www.noerr.com/en/desktopdefault.aspx/tabid-35/35_read-21



Dr. Michael Neumann
NOERR STIEFENHOFER LUTZ 
Rechtsanwaelte Steuerberater Wirtschaftspruefer * Partnerschaft
Brienner Str. 28
80333 Muenchen / Germany
Tel. +49-(0) 89-28 628-226
Mobile: +49-(0) 171-125 14 28
E-Mail: michael.neumann@noerr.com





29.10.2009  |[![CDATA[|[a href="http://www.dgap.de"|]Financial News transmitted by DGAP|[/a|]]]|]

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