{"id":3185,"date":"2018-03-28T15:45:37","date_gmt":"2018-03-28T13:45:37","guid":{"rendered":"https:\/\/it-landgraf.de\/?p=3185\/"},"modified":"2018-04-05T15:14:37","modified_gmt":"2018-04-05T13:14:37","slug":"compliance-clauses-within-supply-chains","status":"publish","type":"post","link":"https:\/\/it-landgraf.de\/en\/compliance-clauses-within-supply-chains\/","title":{"rendered":"COMPLIANCE CLAUSES WITHIN SUPPLY CHAINS"},"content":{"rendered":"\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_section-c0cfefebc4a713af57a13737fa0d94ea\">\n.avia-section.av-av_section-c0cfefebc4a713af57a13737fa0d94ea{\nbackground-repeat:no-repeat;\nbackground-image:url(https:\/\/it-landgraf.de\/wp-content\/uploads\/3629.jpg);\nbackground-position:0% 0%;\nbackground-attachment:scroll;\n}\n<\/style>\n<div id='av_section_1'  class='avia-section av-av_section-c0cfefebc4a713af57a13737fa0d94ea main_color avia-section-default avia-no-shadow  avia-builder-el-0  el_before_av_section  avia-builder-el-first  hide_on_print avia-full-stretch avia-bg-style-scroll av-minimum-height av-minimum-height-40 av-height-40  container_wrap sidebar_right'  data-section-bg-repeat='stretch' data-av_minimum_height_pc='40' data-av_min_height_opt='40'><div class='container av-section-cont-open' ><main  role=\"main\" itemprop=\"mainContentOfPage\"  class='template-page content  av-content-small alpha units'><div class='post-entry post-entry-type-page post-entry-3185'><div class='entry-content-wrapper clearfix'>\n<\/div><\/div><\/main><!-- close content main element --><\/div><\/div><div id='av_section_2'  class='avia-section av-av_section-d18d8c2c81d10022ebd21ffa95322c35 main_color avia-section-default avia-no-shadow  avia-builder-el-1  el_after_av_section  avia-builder-el-last  avia-bg-style-scroll container_wrap sidebar_right'  ><div class='container av-section-cont-open' ><div class='template-page content  av-content-small alpha units'><div class='post-entry post-entry-type-page post-entry-3185'><div class='entry-content-wrapper clearfix'>\n\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36\">\n.flex_column.av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36{\nborder-radius:0px 0px 0px 0px;\npadding:0px 0px 0px 0px;\n}\n<\/style>\n<div  class='flex_column av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36 av_two_third  avia-builder-el-2  el_before_av_two_third  avia-builder-el-first  first flex_column_div av-zero-column-padding  '     ><style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_heading-84901f4ba30abf206e17715a9bd0cb2a\">\n#top .av-special-heading.av-av_heading-84901f4ba30abf206e17715a9bd0cb2a{\npadding-bottom:10px;\n}\nbody .av-special-heading.av-av_heading-84901f4ba30abf206e17715a9bd0cb2a .av-special-heading-tag .heading-char{\nfont-size:25px;\n}\n.av-special-heading.av-av_heading-84901f4ba30abf206e17715a9bd0cb2a .av-subheading{\nfont-size:15px;\n}\n<\/style>\n<div  class='av-special-heading av-av_heading-84901f4ba30abf206e17715a9bd0cb2a av-special-heading-h1 blockquote modern-quote  avia-builder-el-3  avia-builder-el-no-sibling '><div class='av-subheading av-subheading_above'>28. March 2018\n<\/div><h1 class='av-special-heading-tag '  itemprop=\"headline\"  >COMPLIANCE CLAUSES WITHIN SUPPLY CHAINS<\/h1><div class=\"special-heading-border\"><div class=\"special-heading-inner-border\"><\/div><\/div><\/div><\/div>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36\">\n.flex_column.av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36{\nborder-radius:0px 0px 0px 0px;\npadding:0px 0px 0px 0px;\n}\n<\/style>\n<div  class='flex_column av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36 av_two_third  avia-builder-el-4  el_after_av_two_third  el_before_av_two_third  first flex_column_div av-zero-column-padding  column-top-margin'     ><section  class='av_textblock_section av-av_textblock-35972167d9f102c5ddaec0c531c98b9e '   itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/BlogPosting\" itemprop=\"blogPost\" ><div class='avia_textblock'  itemprop=\"text\" ><p><strong>Compliance clauses are nowadays a standard component of many (framework) supply agreements between companies. When introducing these clauses into contract negotiations, they are often extremely one-sided and present a high risk for the clause addressee. The following article demonstrates approaches and arguments which can help to achieve a proper limitation of a compliance clause.<\/strong><!--more--><\/p>\n<\/div><\/section><\/div>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36\">\n.flex_column.av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36{\nborder-radius:0px 0px 0px 0px;\npadding:0px 0px 0px 0px;\n}\n<\/style>\n<div  class='flex_column av-av_two_third-9497bbf8bff73ea4c6992cc17fa9ec36 av_two_third  avia-builder-el-6  el_after_av_two_third  el_before_av_one_third  first flex_column_div av-zero-column-padding  column-top-margin'     ><section  class='av_textblock_section av-av_textblock-35972167d9f102c5ddaec0c531c98b9e '   itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/BlogPosting\" itemprop=\"blogPost\" ><div class='avia_textblock'  itemprop=\"text\" ><h2>I. Challenges for the clause addressee<\/h2>\n<p>Any person who is presented a draft of a (framework) supply agreement is highly likely to find a compliance clause in the draft. Its main content is the obligation or assurance that the clause addressee conducts his business in accordance with all applicable laws, provisions and other legal regulations; it is frequently extended to compliance with codes of conduct and guidelines of the user of the clause and is flanked by control rights which are supposed to enable a review of the clause addressee\u2019s compliance. A typical legal consequence of violations is an extraordinary right to terminate the (framework) supply agreement without notice. In addition, there are often claims for damages or indemnification.<br \/>\nIn an international context, in particular, compliance clauses are nowadays common practice and a standard component of most sample contracts. It is not unusual that they are even marked as \u201c<em>non-negotiable<\/em>\u201d. In any case they have reached such a level of importance for quite some time that they cannot be encountered with a mere \u201cwe never had them, we don\u2019t need them\u201d. Such approach would actually be all but advisable, because compliance clauses are both necessary and legitimate against the background of today\u2019s prevailing compliance requirements. At the same time however, these clauses present a high risk for the clause addressee, because depending on the drafting of the clause, each objective violation of legal regulations or additional conduct regulations established by the user of the clause, regardless of knowledge and fault, can suffice in order to trigger termination rights or penalties . From the clause addressee\u2019s point of view, it is therefore important to ensure an objectively reasonable, appropriate and fair drafting of the contractual obligations for both sides to the contract. Some approaches for this are outlined below.<\/p>\n<h2>II. Selected approaches to limiting the scope of a compliance clause<\/h2>\n<h5>1. Same obligations for both sides to a contract<\/h5>\n<p>From the clause addressee\u2019s point of view, it would at first prove useful to demand equally balanced obligations for both sides. The reason is obvious: Just like the user the clause addressee has a legitimate interest in ensuring that his contracting party acts in a compliant manner. The duty to observe laws and regulations applies to both sides anyways. At the same time, the agreement on a reciprocal drafting of the compliance clause generally increases the willingness to properly limit the compliance clause on the user\u2019s side, because he is then affected by each regulations himself as well.<\/p>\n<h5>2. Restriction of the set of rules to be observed<\/h5>\n<p>A further important approach consists in limiting the scope of the compliance clause, i.e. of such legal regulations and other provisions whose adherence to is guaranteed in the compliance clause. The main goal of the clause addressee should be to avoid to commit himself to compliance with rules and regulations that would otherwise not apply to him. This applies in particular to foreign laws, guidelines of international organizations (\u201csoft laws\u201d) as well as to codes of conduct and other sets of rules of the user of the clause. There are a number of reasons to pursue this goal:<\/p>\n<ul>\n<li>The clause addressee is not familiar with the foreign rules and regulations, so the risks of a violation are not clear for him.<\/li>\n<li>Enforcement of foreign legal regulations or other foreign regulations in the company can be problematic under co-determination law and may be blocked by the works council. There are also follow-up questions, such as who will be responsible for the training required to effectively implement new regulations. It would appear reasonable to assume that the user of the clause must do this if the set of rules and regulations comes from him and the clause addressee only adopts them at his request.<\/li>\n<li>It is acknowledged that each company has room to maneuver with regard to the &#8220;how&#8221; of its compliance organization in order to create those compliance structures for itself that correspond to its risk profile and are adequate and appropriate in accordance with the requirements of the internally responsible decision-makers. The submission to foreign rules and regulations undermines this organizational assessment and entails a far-reaching restriction of the organizational sovereignty of the clause addressee.<\/li>\n<\/ul>\n<p>Insofar as the clause addressee himself has a code of conduct, an additional strategy can be envisaged which may at least avert the obligation to a third-party code of conduct: By referring to his own code of conduct, the clause addressee may propose that both parties recognize their respective codes as substantially equivalent and that they waive the enforcement of their own code. This recognition may be performed informally by exchanging codes, without them becoming part of the supply agreement. However, there is then no obligation to comply with the code in the relationship between the parties, neither with regard to their own nor to the foreign code. If this is not desired or not achievable, a recognition agreement can alternatively be concluded, the core component of which is that the parties undertake to (only) comply with their own code. Violations of the own code would then also be a violation of the supply agreement with the corresponding statutory and\/or contractually agreed legal consequences. The idea of the mutual recognition of codes of conduct is especially promoted by the Bundesverband der Deutschen Industrie e. V. (Federal Association of German Industry) (BDI) as a fair compromise solution. (see <a href=\"https:\/\/bdi.eu\/media\/themenfelder\/recht\/downloads\/2010_BDI-Modell_Anerkennungsvereinbarung_englisch.pdf\">https:\/\/bdi.eu\/media\/themenfelder\/recht\/downloads\/2010_BDI-Modell_Anerkennungsvereinbarung_englisch.pdf<\/a>). It has already proven itself in business practice.<\/p>\n<h5>3. Scope in temporal terms<\/h5>\n<p>In addition, attention must also be paid to the scope in terms of time, which can sometimes be easily ignored. For the risk exposure of the clause addressee, it makes a big difference whether the compliance clause relates only to current and future business activities or also covers past business activities. Particularly if the latter is the case, the clause addressee should be cautious and, in any case, limit the clause to no more than the past five years.<\/p>\n<h5>4. Restriction of auditing and inspection rights<\/h5>\n<p>In addition, clause addresses should pay special attention to inspection rights which allow the user of the clause to review the adherence to the stipulated set of rules. They are often very comprehensive and extensive. Reasonable limitations can be achieved as follows:<\/p>\n<ul>\n<li>only occasion-related right of control with concrete factual indications for significant compliance violations;<\/li>\n<li>no authority of the contractual partner to carry out investigative acts within the company, but right of control only in the form of a right to information and, if necessary, the submission of documents;<\/li>\n<li>the right of control shall be subject to the reservation of business and trade secrets of the clause addressee and subject to the rights of the employees and the stipulations of data protection, if necessary by referring the information to an independent, confidential third party for evaluation of the information in suspected situations so that sensitive data does not fall into the hands of the user of the clause.<\/li>\n<\/ul>\n<h5>5. Further relevant parameters<\/h5>\n<p>Of course there is a number of other relevant parameters for restricting compliance clauses, for example:<\/p>\n<ul>\n<li>KKnowledge of the qualifications required under guarantee provisions in company acquisition contracts: the assurance of compliance status is then limited to the fact that transactions are conducted &#8220;<em>to the knowledge of the management<\/em>&#8221; in accordance with the agreed rules and regulations;<\/li>\n<li>reservations of materiality, so that only not inconsiderable\/essential violations are relevant in the context of the compliance clause;<\/li>\n<li>restrictions on the legal consequences of a violation of the rules, in particular by excluding contractual penalties and limiting claims for damages and indemnification.<\/li>\n<\/ul>\n<h2>III. Conclusion<\/h2>\n<p>There is a wide range of tools and arguments at the clause addressees\u2018 disposal in order to work towards a limitation of compliance clauses. The possibilities should be made use of, however, with due care and thorough reasoning. Because no one wants to create the impression of not being ready or capable of acing in accordance with the law.<\/p>\n<\/div><\/section><\/div>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_one_third-9deae2ff43582e0bccfb02cb654e15bd\">\n.flex_column.av-av_one_third-9deae2ff43582e0bccfb02cb654e15bd{\nborder-radius:0px 0px 0px 0px;\npadding:7px 0px 0px 0px;\n}\n<\/style>\n<div  class='flex_column av-av_one_third-9deae2ff43582e0bccfb02cb654e15bd av_one_third  avia-builder-el-8  el_after_av_two_third  avia-builder-el-last  sy-only-desktop hide_on_print flex_column_div  column-top-margin'     ><p><div  class='avia-builder-widget-area clearfix  avia-builder-el-9  el_before_av_textblock  avia-builder-el-first '><section id=\"categories-3\" class=\"widget clearfix widget_categories\"><h3 class=\"widgettitle\">Newsletter issues<\/h3>\n\t\t\t<ul>\n\t\t\t\t\t<li class=\"cat-item cat-item-265\"><a 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class=\"sy-list-margin\">\n<li><a href=\"https:\/\/it-landgraf.de\/en\/taetigkeitsgebiete\/mergers-acquisitions\/\">Mergers &amp; Acquisitions (M&amp;A)<\/a><\/li>\n<li><a href=\"https:\/\/it-landgraf.de\/en\/taetigkeitsgebiete\/corporate-law\/\">Corporate Law<\/a><\/li>\n<li><a href=\"https:\/\/it-landgraf.de\/en\/taetigkeitsgebiete\/corporate-commercial-litigation\/\">Corporate \/ Commercial Litigation<\/a><\/li>\n<\/ul>\n<\/div><\/section><br \/>\n\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_hr-fb479b19f087d3def54096c70f7e0968\">\n#top .hr.hr-invisible.av-av_hr-fb479b19f087d3def54096c70f7e0968{\nheight:8px;\n}\n<\/style>\n<div  class='hr av-av_hr-fb479b19f087d3def54096c70f7e0968 hr-invisible  avia-builder-el-11  el_after_av_textblock  el_before_av_textblock '><span class='hr-inner '><span class=\"hr-inner-style\"><\/span><\/span><\/div><br \/>\n<section  class='av_textblock_section av-av_textblock-946250ebb501c0bad51857a018bc0e61 '   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clearfix'>\n","protected":false},"excerpt":{"rendered":"<p>Compliance clauses are nowadays a standard component of many (framework) supply agreements between companies. When introducing these clauses into contract negotiations, they are often extremely one-sided and present a high risk for the clause addressee. The following article demonstrates approaches and arguments which can help to achieve a proper limitation of a compliance clause.<\/p>\n","protected":false},"author":26,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"mc4wp_mailchimp_campaign":[],"footnotes":""},"categories":[128],"tags":[],"class_list":["post-3185","post","type-post","status-publish","format-standard","hentry","category-2018-q1-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/posts\/3185","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/users\/26"}],"replies":[{"embeddable":true,"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/comments?post=3185"}],"version-history":[{"count":10,"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/posts\/3185\/revisions"}],"predecessor-version":[{"id":3305,"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/posts\/3185\/revisions\/3305"}],"wp:attachment":[{"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/media?parent=3185"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/categories?post=3185"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/it-landgraf.de\/en\/wp-json\/wp\/v2\/tags?post=3185"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}