The "Siemens/Neubürger judgement" of Munich Regional Court I and its practical implications

Munich Regional Court I upheld the claim and ruled (among other things) as follows:

1. As part of his duty of legality, a member of the Management Board must ensure that the company is organised and supervised in such a way that no violations of the law, such as bribery payments to public officials of a foreign state or to foreign private individuals, occur. In the event of a corresponding risk situation, a member of the Management Board only fulfils their organisational duty if they set up a compliance organisation geared towards loss prevention and risk control. The type, size and organisation of the company, the regulations to be observed, the geographical presence as well as suspected cases from the past are decisive for the scope in detail.
2. Adherence to the principle of legality and therefore the establishment of a functioning compliance system is part of the overall responsibility of the Management Board.

Effects on practice

1. The management board is obliged to set up a compliance organisation. This follows from the principle of legality. As a result, board members are obliged to ensure compliance with all relevant regulations within the company.
There is no patent remedy for the type and scope of the compliance organisation. The requirements must be assessed on a case-by-case basis, e.g. based on the size, type and organisation of the company, the regulations to be observed, the geographical presence and suspected cases from the past. Against this background, too, there is a question mark as to whether IDW PS 980 is the right benchmark, even if it certainly provides important points of reference and design guidelines. As with every IDW standard, it does not have the same legal effect, but is the law of the association of auditors. In view of the complexity, it may be necessary in individual cases not only to utilise internal resources within the company, but also to involve external parties.
2. The mere establishment of a compliance system ("whether") is not enough.
3. A "specification sheet" ("how") must be drawn up with requirements for the specific organisation, which must be adhered to and "lived". This must include a corresponding reporting system.
4. Immediate action must be taken in the event of suspicions/violations ("clarify, stop, penalise"). This must be documented.
5. The responsibility for compliance must be assigned to the Management Board, which bears overall responsibility. Irrespective of the principle of overall responsibility, a Management Board member should be responsible for compliance at Management Board level. This person should be granted the corresponding competences and rights to issue instructions. Notwithstanding this, all board members should devote themselves intensively to the topic of compliance and regularly review the effective functioning of the compliance organisation, obtain information and, if necessary, make adjustments, especially in the event of suspected cases or violations. In the opinion of Munich Regional Court I, delegation to a level below the management board is not permitted. The management board can delegate tasks, e.g. to a CCO or the compliance department. However, this does not relieve it of its own responsibility and liability. Appropriate monitoring by the management board is therefore essential.
6. An outvoted member of the Management Board cannot exonerate himself if the need to improve the compliance organisation is obvious. If necessary, he or she must approach the supervisory board and, if necessary, the shareholders.
7. With regard to the burden of proof, good documentation is once again required, which can be a problem, especially in the case of former board members who no longer have access to documents.

Conclusion
The strict standards set by Munich Regional Court I will stand for the time being. Siemens AG and Mr Neubürger, who has since died by suicide, have reached a settlement. Munich Regional Court I not only requires the establishment of a compliance organisation, but above all its effective monitoring by each individual member of the Managing Board. The corresponding duties of the management board must be assessed on a case-by-case basis. However, Munich Regional Court I applies a strict standard in this respect. This leads to an extension of the liability risks for board members. Against this background, every management board member must always deal with the issue of compliance with due care.