Concept and definition of breach of trust
The term breach of trust in German criminal law refers to an offense in which a person violates their duty to manage another person’s assets and thereby causes financial loss to that person. The offense of breach of trust is regulated in Section 266 of the German Criminal Code (StGB). The purpose of this provision is to protect assets from breaches of duty committed by persons with a so-called ‘fiduciary duty of asset management’.
Breach of trust counts among offenses against property, particularly addressing financial losses not caused by classic property crimes, such as theft or fraud, but resulting from unlawful conduct in the management of others’ financial interests.
Statutory regulation of breach of trust (§ 266 StGB)
Text of the provision
Section 266 StGB (Breach of fiduciary duty) reads in excerpt:
(1) Anyone who abuses the authority granted to him by law, official order, or legal transaction to dispose of another’s assets or to bind another person, or who violates the duty imposed by law, official order, or legal transaction to safeguard another’s asset interests, and thereby causes disadvantage to the beneficiary whose interests he is required to protect, shall be punished with imprisonment for up to five years or a fine.
This provision differentiates between the so-called abuse offense (Section 266 (1) 1st alternative StGB) and the breach of trust offense (Section 266 (1) 2nd alternative StGB).
Elements of the offense of breach of trust
1. Fiduciary duty of asset management
The central element of the breach of trust offense is the fiduciary duty of asset management. This arises from law, official order, or legal transaction (especially contracts). Such a duty exists when a person is entrusted with managing another’s financial interests to such a significant degree that the assignment goes beyond mere favors or secondary duties. Typical situations include, for example:
- Managing director of a GmbH with respect to company assets
- Guardian over the assets of persons in need of assistance
- Employees authorized to dispose of the employer’s assets
The distinction between a mere secondary duty and a principal fiduciary duty is made on the basis of the intensity of the required diligence and the independence of decision-making authority.
2. Breach of duty
Criminal liability for breach of trust presupposes that the person involved has breachedtheir fiduciary duty of asset management. The breach of duty can occur either actively by commission or passively by omission. The decisive factor is whether the conduct in the particular case, according to the objective duty standard, has impaired the protected assets.
3. Economic disadvantage
To complete the elements of the offense, it is required that the entitled party’s assets suffer a disadvantage. Such a disadvantage exists if the actual economic value of the assets is reduced by the breach of duty and no equivalent compensation takes place.
4. Intent
The offender must act with intent, meaning he must know of and will the breach of duty, and at least accept the resulting economic disadvantage.
Distinction from other criminal offenses
Breach of trust must be distinguished from other property-related offenses, in particular:
- Embezzlement (§ 246 StGB): Here, the appropriation of another’s property is central, without the existence of a fiduciary duty.
- Breach of trust or theft (§ 242 StGB): While theft involves the removal of things against the will of the owner, breach of trust does not require a property offense but rather the violation of an entrusted duty.
Forms of commission: Abuse offense and breach of trust offense
1. Abuse offense
Der abuse offense exists when a person is authorized to dispose of assets in external relations, but such disposition is impermissible internally. Example: An authorized officer deliberately violates internal instructions, causing harm to the company.
2. Breach of trust offense
Here, the offender violates a fiduciary duty without legal authority and thereby causes a disadvantage to the person cared for. This variant is more broadly defined and also covers cases in which there is no specific power of disposal.
Sanctions and legal consequences
Breach of trust is punishable by imprisonment for up to five years or a fine. The severity of the penalty depends on the extent of the breach, the amount of damage caused, and other aggravating circumstances such as commercial or organized crime.
In the case of significant financial loss, ongoing criminal conduct, or abuse of a special position of trust, an increased penalty can also be considered. In addition, there may be secondary consequences such as claims for damages by the injured party, fines, professional consequences, or a ban on pursuing certain activities.
Practical examples of breach of trust
- Transfers by a club chairman to a private account
- Misappropriation of company funds by a managing director
- Abuse of powers of attorney in managing the accounts of a person in need of care
Limitation period and prosecution
The statute of limitations for prosecution of breach of trust is generally five years, but may be extended in particularly serious cases. Prosecution can occur either upon the complaint of an injured party or through investigations initiated by the state.
Summary
Der breach of trust is a key offense for the protection of others’ assets when, due to a special position of trust, management has been entrusted to the perpetrators. The legal requirements are high, and distinguishing from other property offenses is often complex. Criminal liability requires that the breach of duty was committed intentionally and caused financial loss. The punishment corresponds to the gravity of the breach and the damage caused and can have far-reaching consequences for the offenders.
Frequently asked questions
How is breach of trust prosecuted under criminal law?
Breach of trust is regulated in German criminal law under Section 266 of the Criminal Code (StGB). The elements of the offense require that the offender violates an entrusted fiduciary duty and thereby causes damage to the assets under management. Prosecution generally occurs as an ex officio offense, meaning the prosecuting authorities initiate investigation proceedings either on their own knowledge or upon receiving a report. The penalty provides for imprisonment of up to five years or a fine. In particularly serious cases, imprisonment from six months up to ten years can be imposed. Investigations in breach of trust cases are often very complex, as they involve both economic and legal issues and often require extensive examination of financial transactions and fiduciary relationships.
What is the role of the fiduciary duty of asset management in the elements of breach of trust?
The breach of the fiduciary duty of asset management is the central element of the offense of breach of trust. Such a duty always exists when a person is entrusted with the independent management of another’s financial interests. Typical examples can be found in employment or company law, such as managing directors, authorized officers (Prokuristen), association chairpersons, or trustees. The duty may arise by law, contractual agreement, or other legal obligation. In order to fulfill the elements of breach of trust, a serious breach of duty is required—one that goes beyond mere contractual breaches and is disapproved of from a social and ethical standpoint; otherwise, the matter would be purely civil law.
Is breach of trust possible in cases of negligent conduct?
The offense of breach of trust under Section 266 StGB requires at least conditional intent; negligent conduct is not sufficient. Thus, the offender must at least accept the breach of fiduciary duty and the resulting harm. This serves to protect criminal law against an expansion to mere lapses in care, which occur frequently in commercial dealings and are primarily a matter for civil law. However, if significant harm occurs due to negligence, liability for other offenses, such as negligent breach of trust, may in theory arise, but this is not provided for in German law.
How is loss defined and proven within the meaning of Section 266 StGB?
A loss in terms of breach of trust is present whenever the managed assets are economically impaired in a measurable way. This can occur through direct reductions in assets but also by creating a risk of loss, for example through risky transactions or assuming obligations. Establishing and quantifying the loss often require extensive legal and accounting review. It should be noted that the mere possibility of loss is generally not sufficient, unless a concrete financial disadvantage can be established and proven.
What legal remedies are available to defendants and injured parties in proceedings arising from breach of trust?
Defendants in criminal proceedings for breach of trust have access to all legal remedies provided in criminal procedure. These include the right to object to search and seizure orders, the right to inspect files (through counsel), and the right to legal representation. In the event of a conviction, appeals or revisions may be filed. Injured parties have the option to participate in criminal proceedings as joint plaintiffs or to assert civil claims, in particular damages, in the so-called adhesion procedure. Additionally, they remain free to pursue their claims independently before civil courts.
When does criminal liability for breach of trust become time-barred?
The limitation period for breach of trust is, according to Section 78 para. 3 no. 4 StGB, generally five years. In particularly serious cases for which imprisonment of up to ten years is threatened, the limitation period is extended to ten years. The limitation period begins upon completion of the act, that is, usually when the breach of duty is fully completed and a financial disadvantage has occurred. Under certain circumstances, the limitation period can be suspended or restarted by actions of the prosecuting authorities or by interrupted investigations.
Are there possibilities for mitigation or exemption from punishment in cases of breach of trust?
Fundamentally, several options exist for mitigation or exemption from punishment, especially if the offender compensates for the loss or makes a confession. According to Section 46a StGB, the court may mitigate or, in individual cases, entirely dispense with punishment if the offender has made substantial efforts to repair the unlawful condition, for example by paying damages to the injured party. Furthermore, post-offense behavior, especially cooperation with law enforcement authorities and remorse, is considered mitigating.
