Germany Strengthens Foreign Investment Control: New Rules to Thoroughly Screen Investments in Enlarged Number of Key Industries -

Germany ends its longtime liberal approach to foreign investments by increasing its intervention possibilities at the national level and by lobbying a stricter regime at the EU level. Since the takeover of German robotics champion KUKA by a Chinese investor last year, the public and political pressure on increasing protection against certain foreign investment was high. The expected change now has taken off through a set of new and amended provisions, and it will affect not only non-EU investors eying German targets but also owners of German businesses who are now facing additional hurdles when selling those businesses.

Under the current German Foreign Trade Regulation (“FTR”), the German Ministry for Economic Affairs and Energy (“Ministry”) has the power to examine whether the public order or security of Germany is endangered if a person not resident in the EU or an entity not based or headquartered in the EU acquires a German company (e.g., by acquiring the shares or assets of such company) or directly or indirectly acquires an equity participation of 25 per cent or more in a German company. Only in transactions where this threshold is met may the Ministry assert jurisdiction to prohibit or restrict such investments. Foreign investors may, in advance of entering into a definitive acquisition agreement, voluntarily apply for a certificate of non-objection (negative clearance) in order to obtain transaction security as soon as possible.