Foreign Direct Investment Screening in Germany – most recent developments
Related people
19 June 2020
What foreign investors need to consider
Germany is one of the few countries in the world where the doors are wide open to foreign investment. With an export-oriented national economy, Germany thrives where markets are open for cross-border trade and investment. Germany’s trading partners benefit as well: cross-border trade and investment is not a one-way street.
Most recently, Germany introduced changes to its rules on the screening of Foreign Direct Investment (FDI). Some of the changes had been planned long before the Covid-19 virus came to Germany, others were introduced in the face of the crisis.
Most importantly:
- Transactions concerning critical infrastructure are now subject to a suspensory effect, i.e. they cannot be completed without approval of the Ministry of Economic Affairs and Energy (the Ministry);
- Further business activities, particularly in the healthcare sector, were defined to form part of Germany’s critical infrastructure, including producers of personal protective equipment, essential therapeutics, in vitro diagnostics in the field of infectious diseases and medical devices for infectious diseases; moreover, businesses delivering services necessary to ensure the proper functioning of governmental communication infrastructure of the Federal Agency for Digital Radio Safety were qualified as critical infrastructure;
- Sharing information prior to clearance (“gun jumping”) has been made a criminal offence; and
- In determining whether a foreign direct investment is likely to affect security or public order, the amendments clarify that the Ministry may take into account whether the purchaser is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding.
Germany is not alone with the tightening of its rules on FDI screening: the corona pandemic left its mark on FDI screening in many jurisdictions around the world.
For investors, the multi-jurisdictional analysis of FDI screening rules and requirements is of strategic importance. Sellers seek transaction certainty and expect that investors will be able to discuss issues and challenges on an informed basis.
For the success of future transactions, it is crucial to recognise and take into account developments in the FDI space at an early stage. A&O is monitoring the current developments in detail. We have been advising on FDI screening for many years. Operating with global reach and local depth, we are happy to use our broad wealth of experience and our close working relationship with responsible decision-makers in the interests of our clients.
