The need for more stringent anti-corruption and compliance measures to prevent active and passive corruption, contractual obligations to compel businesses to introduce compliance management systems and the role of whistleblowers in exposing violations of the law: these are some of the issues being hotly debated at the moment. There are of course other questions that arise in day-to-day business life in connection with compliance, which are of no less practical relevance, and which can also have significant consequences for one or other party.
Termination of a contract
Suppose, for example, suspicion falls on a person authorized to act on behalf of a company (e.g. an agent or other intermediary) that he or she has engaged in corrupt practices, the question arises as to whether that person’s contract can or even must be terminated and whether a claim for damages exists. Bribery committed by an intermediary may, depending on the circumstances of the individual case, justify termination for cause. In this case, it has to be taken into account whether there is a connection between the bribery and the contract in question, the extent to which the contract is tainted by the misconduct, or the risks the principal himself may be exposed to as a result of the bribery by his intermediary agent (e.g. risk to reputation). Even the mere suspicion of corruption may justify a termination.
Since corrupt behavior on the part of the agent can be imputed to the principal and the latter can be held equally liable as if it were his own misconduct, he is under certain circumstances even obliged to terminate the contract.
Claim for damages
The principal may also be entitled to claim damages against the authorized agent. However, under German law, the party bringing a claim must provide the evidence in support of such claim. This means that the principal must prove that the agent has been guilty of, for example, bribery. Such evidence is difficult to obtain, since bribery is a so-called clandestine offence, i.e. is committed in secret, and the party or parties involved are not obliged to testify, as they could render themselves criminally liable.
Relaxation of the burden of proof
In its decision of 18 January 2018, the German Federal Supreme Court held that it suffices for the plaintiff to show that there are sufficient indications that the authorized agent entered into a bribe arrangement, in other words the plaintiff does not need to provide incontrovertible evidence for such behavior. Instead, the Federal Supreme Court places a subsidiary burden of proof on the defendant, i.e. the authorized agent. It is then up to the latter to prove the contrary, and if he fails to do so, he runs the risk of ending up being ordered to pay damages.
This decision is just one of a whole series of decisions in which the Federal Supreme Court is ascribing more and more importance to the secondary burden of proof: If a party, because of the very nature of the offence, has no possibility to gain insight into alleged events (as is the case with bribery, to cite just one example), then the court will lower the burden of proof required. The burden of proof is satisfied if there are sufficient indications for the correctness of the facts the plaintiff has presented in its submissions. In this case, a simple denial by the opposing party will not suffice. Rather, the accused party must (within reasonable bounds) rebut the plaintiff’s accusation by providing convincing evidence to the contrary. This lowers the threshold for claims for damages resulting from bribery and thus once again demonstrates the importance of compliance management systems to minimize the risk of illegal acts being committed within the company. It remains to be seen whether this case law will be extended to claims for damages for other compliance violations.
