Managing directors may be liable for their company’s violations of competition law. Having said that, the Bundesgerichtshof (BGH), Germany’s Federal Supreme Court, has severely limited managing directors’ liability (Az.: I ZR 242/12).
Under earlier case law, the liability of managing directors in the event of competition violations was interpreted more broadly. Liability was a serious prospect even if the managing director became aware of competition violations committed by employees but made no effort to stop them. In a ruling from June 18, 2014, the BGH distanced itself from this precedent. In doing so, we at the commercial law firm GRP Rainer Rechtsanwälte note that it significantly reduced the scope of managing directors’ liability for violations of competition law.
According to this ruling, managing directors shall only be personally liable for unfair trading practices if they were either actively involved or ought to have prevented the competition violations because of an affirmative obligation to act pursuant to the general principles of tort law. The BGH held that a managing director’s status as an executive body and general responsibility for business operations do not by themselves give rise to a duty on his or her part towards external third parties to prevent violations of competition law. However, personal liability shall still apply if the managing director personally commits or orders the competition violation in question.
While the managing director’s duty to manage the business in a prudent manner was said to encompass ensuring that legal infringements such as competition violations do not occur, the BGH went on to say that this duty exists only in relation to the company and not external third parties. In the case of general liability, this would impose an almost incalculable risk on the managing director.
This judgement does not fundamentally preclude personal liability on the part of managing directors in the event of competition violations but rather limits its scope. Liability on the part of a managing director requires that the competition violation be based on conduct that can be blamed on the managing director. By way of example, the BGH cited unlawful use of a company name or a company’s general approach to advertising and marketing, matters which would normally be decided at an executive level by managing directors.
It is possible for managing directors to be faced with liability vis-à-vis their company. Lawyers who are experienced in the field of company law can serve as an expert point of contact when it comes to issues pertaining to managing directors’ liability.
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