As part of the implementation of Directive (EU) 2024/1226 on the harmonization of criminal law on penalties (EU Directive on Criminal Sanctions), significant amendments and additions to Sections 18 and 19 of the German Foreign Trade and Payments Act (AWG) will soon be made and will lead to tighter sanctions for offences and administrative offences under foreign trade law.
Background to the change in the law
The aim of the EU Directive on Criminal Sanctions is to ensure uniform enforcement of sanctions throughout Europe and to increase effectiveness in punishing violations of EU restrictive measures. The focus is on protecting the integrity of the internal market, ensuring legal certainty and harmonizing the range of penalties in the EU Member States.
On 27 November 2024, the German Federal Government submitted a draft law amending the German Foreign Trade and Payments Act and other legal provisions (draft law) in order to implement the EU Criminal Sanctions Directive by 20 May 2025 on time.
The draft law is essentially based on the minimum standard specified by the EU Directive on Criminal Sanctions. In particular, it does not cover sanctions that were first to be found in EU sanctions regulations after the entry into force of the EU Directive on Criminal Sanctions, such as the obligation to agree on a “no-Russia clause” (Article 12g of Regulation (EU) No. 833/2014).
Tightening of the criminal offences according to § 18 AWG
New circumvention-related offences
The newly introduced § 18 (1) no. 3 AWG provides for new circumvention-related criminal offences. Accordingly, among other things, the concealment of assets or the provision of false information to conceal the owners of economic resources for the purpose of circumventing a prohibition is punishable.
In addition, § 18 (6a) AWG specifies standard examples of particularly serious cases in certain circumvention offences. However, the draft law does not provide for a general offence of circumvention of sanctions, because a diversion of goods commonly referred to as “circumvention” can in any case be punished as a violation of the export ban under section 18 (1) no. 1 letter a AWG.
Reckless violations of dual-use goods
So far, non-intentional violations of bans and licensing requirements on the basis of EU embargoes can only be punished as an administrative offence under Section 19 (1) OWiG, the maximum fine is up to 500,000 euros according to Section 19 (6) AWG.
According to Section 18 (8a) of the draft law, violations of prohibitions and licensing requirements on the basis of EU embargoes in connection with listed dual-use items (Annexes I and IV of Regulation (EU) 2021/821), which are not intentional, but nevertheless recklessly committed, will in future be punishable by imprisonment of up to three years or a fine. This represents a considerable aggravation.
It is particularly difficult to assess when a violation is to be classified as “reckless”. There is no legal definition. The definitions to be taken from the literature on foreign trade law are regularly based on the fact that the offender acts with particular recklessness or indifference to his duties and thereby disregards what is clearly recognizable to him and to any third party.
Reporting obligations
The reporting obligations under Section 18 (5a) of the AWG will be extended. What is new is the possible criminal liability for violations of the so-called “everyman’s duty” in connection with information obtained in the performance of a professional duty that concerns funds to be frozen or economic resources. This does not apply to legal professions, provided that this information was obtained in their professional capacity (Section 18 (13) AWG). This emphasizes the importance of distinguishing between professional confidentiality and reporting obligations.
Cancellation of the grace period
The two-day grace period after the publication of new EU sanctions acts, which was previously provided for in Section 18 (11) AWG, will no longer apply in future. This regulation was classified as contrary to European law, as it deviates from the requirements of the EU Sanctions Directive.
Increase in the range of fines for violations by companies
A significant change concerns the increase in the framework for fines against legal entities or associations of persons pursuant to §§ 30, 130 OWiG in the event of violations by companies. The maximum amount in § 19 (7) and (8) AWG for intentional offences under § 18 (1) AWG is increased to up to 40 million euros. This tightening illustrates the increased requirements for due diligence obligations and is intended to have a deterrent effect.
Consequences of the change in the law for companies
Effects of the tightening of criminal offences
The changes mean a significant tightening of compliance requirements, especially for companies that trade in dual-use goods. Reckless behavior, which was previously only an administrative offense, can now result in criminal consequences. Companies need to evolve their internal control systems and ensure that employees are fully trained on the new regulations. The role of export control officers is also becoming increasingly important.
Challenges posed by undefined legal terms
The amendments to the law contain numerous vague legal terms such as “recklessness”, the interpretation and application of which could be challenging in practice. Companies and their compliance departments must therefore increasingly establish training and testing mechanisms.
Increase in the range of fines
This is a significant challenge, especially for large companies with international operations, as compliance violations can now jeopardize not only the image, but also financial stability. It is recommended that compliance systems be comprehensively reviewed and adapted in order to identify and minimise potential risks at an early stage.
Result
The amendments to the AWG implement the EU Directive on Criminal Sanctions and significantly tighten the law on sanctions. It is becoming increasingly important for companies to optimize their internal control systems and ensure compliance with foreign trade regulations.
In addition, the importance of raising awareness of sanctions law among the workforce is emphasized. In addition to technical solutions, companies should therefore also rely on continuous training to ensure compliance with the new regulations.
Even if the exact timetable with regard to the draft law is unclear against the background of the upcoming federal elections, the EU Directive on Criminal Sanctions must be implemented by 20 May 2025, so that the amendments to the AWG can be expected to come into force by that date at the latest. The prompt implementation of the legislative changes in corporate practice is essential in order to minimize legal risks.
