Sanctions and their effects, Part 3

Lawyer Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm have in the third part even more examples of what effects sanctions can have.

Frequent tax evasion without sanctions-Deluxe

The
BGH
(judgement of 30.01.1970, file no. V ZR 139/68) denied – completely in the tradition of the Reich Court – foreign (camouflage) companies with actual administration in Germany legal capacity – the notarial assignment of a land charge with deed of 04.10.1966 was therefore null and void.

The BGH (ruling of 29.01.2001, Az. II ZR 331/00) put an end to the mass nullity of insurance, banking and real estate transactions of this kind by transforming foreign companies into sole proprietorships, legally responsible BGB companies or OHGs after (possibly temporary) management from within Germany. Companies incorporated in the EU are not affected (
EuGH
, judgment of 5 November 2002, Ref. C-208/00); British, for example, only again after the brexite, unless a bilateral treaty would recognise them, just as the German-American Friendship Agreement of 1954 guarantees legal capacity to the Corporation and LLC.

The obligation to keep accounts with transparent tax liability(s) was not complied with on a massive scale in those cases where foreign companies are still not correctly treated as sole proprietorships, BGB companies or OHGs. Paradise and Panama papers, Bahamas and Luxembourg leaks in connection with real estate, banking and insurance transactions revealed the difficulty of correctly establishing beneficial owners, Section 3 GWG. Sanctions against countries without cross-border reporting under the
“OECD Common Reporting Standard” (CRS)
, there is no such thing: As before, one can also evade punishments and sanctions through trustees, but remains susceptible to blackmail by those contemporaries who know the actual circumstances better.

Guidance and obfuscation by finance ministers and legislators

To a certain extent, the
Bundesfinanzministerium (BMF)
by his letter of 11.12.2017 (Gz. IV A 3 – S 0325/17/10001) about the fact that the account truth is fulfilled, § 154 AO. The question there, but also with the GWG is “who is the beneficial owner”, i.e. boss in the ring, beneficiary, helmsman, owner etc., § 3 GWG:

Even if it is a corporation, there are natural persons behind it – possibly only at the end of a chain of cover companies, which investigators can identify for journalists; notaries and land registries and tax offices are rather rare. This deplorable state of affairs could still be sanctioned by US authorities if, for example, a German notary public were to be placed on a sanctions list for an oligarch (indirectly) because of the securitisation of real estate, and later also found himself on the same list?

Are sanction cases insurable at all – what threatens managing directors and board members?

Criminal law protection provides protection in the event of criminal liability, precisely because a criminal conviction is imminent – after a conviction for intent, the costs must be reimbursed. More often, managers find sub-limits in their “special policies”, for example of 5 TEUR – this can pay for up to less than 10 hours of a prominent defender. Even the amount of usual defender’s fees on a time basis are often sparsely regulated – the manager might end up in the rain? Not to mention the costs for private experts, who at best should produce a retroactive certificate of cleanliness, which are rarely insured. Geographically, there are often gaps in coverage as well, something if you ask yourself whether merchant ships could be controlled and possibly boarded by the US navy because of the Iran sanctions; similar to the Nigerian pirates?

From the equivalent of 8,000 euros to four years in prison, the new punishment for Russians who participate in US sanctions to the detriment of their home country – whether as employees or shareholders – will range from 2018. Imagine that the Vatican Bank employs Russian and American staff? Punishments imposed as such will hardly be able to be insured anywhere.

D&O could also pay for pure errors without proven criminal liability. In the event of a claim, perhaps only the company owns the legal rights – the (ex-)manager then realises too late that it is not his head that is at stake in the insurance cover, but the “share-holder value”?

Apparently, some German transport insurers also pay in the case of purely US sanctions, but more often in the case of larger losses only after years of litigation. The claim adjuster’s motto should then be emphasised “we are not here to provide you with the equity you need” – or perhaps “we often compare ourselves more pleasantly with your future insolvency administrator – why should we decide on your claim right away?

Managers could also be kidnapped as alleged terror supporters: Like the Germans Kahaled el-Marsi and Murat Kurnaz. Some (terror) suspects have already had a bounty imposed on their heads – if they have a known (manager) address in Germany, they could be “persuaded” to agree to travel with them to the USA. Even a stopover in Poland or Thailand would then be a good prospect to get to know the physical limits once in a lifetime – and afterwards to complain about deficits in the efforts of one’s own government for a timely release.

by Dr. Johannes Fiala and Dipl.-Math. Peter A.Schramm

by courtesy of

www.experten.de (published on 22.06.2018)

Link: https://www.experten.de/2018/06/22/sanktionen-und-ihre-auswirkungen-teil-3/

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About the author

Dr. Johannes Fiala
PhD, MBA, MM

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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