Day of business law 2019: “And who pays my fine?”

Whoever is involved in business takes risks and the lawgiver contributes to this.
The introduction of new penalties painfully increased existing penalties as well as authorities lacking a sense of humour increasingly make previous rogues into delinquents.
Whoever sails close to the wind in a constitutional state will, after a somewhat daring manoeuvre, find himself more frequently on the side of the persecuted and this costs money. Money for legal procedures, defence, compensation, and, of course, penalty payments. Just recently four members of the executive board at the Anditz AG were fined for 5 million Euros for incorrect employment of about 200 Croatian workers, and this per person! The EuGH found such a fine deemed out of proportion. Still a fine of several tens of thousands of euros remained.

This is a lot of money even for managers and therefore there is a need for contractual security. Is the presumed beneficiary of the infringement, the business, able to take over the bill? Or does it even have to?
What are you allowed to agree to in advance? Or at least, in retrospect? And: How much of this can be covered by insurance?

This year’s Business Law Day of the Walter Haslinger Foundation was dealing with these questions. Our chambers had once again invited high profile experts from business and science.

Gerald Spindler, one of the greats of German corporate law, spoke to a full house about German attempts of dealing with enormous cartel penalties. This was the opposite direction: Businesses are attempting, so far unsuccessfully, to seek compensation from responsible persons against penalties given to them based on their turnover, in the region of hundreds of millions.

Professor Martin Karollus from Linz was explaining the Austrian legal situation and in which cases and to what extent business executives can receive compensation for penalties and have their legal costs covered or at least receive them in advance.
Basic message: Not much chance with deliberate acts, more chance with negligence, but a general “no worry packet” for managers and leading employees is not going to happen.
Awkward fact: Whoever recompenses too generously in order to keep the management in place is running the risk of himself being persecuted for fraud. Therefore it is essential to proceed correctly.
Vienna professor Stefan Perner showed to what extent businesses and managers are able to buy insurance cover and what the limits are.
Insurance companies are reticent so far: there is reasonable cover for legal procedures but not financial penalties.

 

28. November 2019

 

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