Jurisdictional thresholds

What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?

The BMWi is entitled to review all acquisitions of German companies where the investors acquire ownership of at least 25 per cent of the voting rights. The type of review depends on the sector concerned (see question 3 for further details).

Notification of an acquisition to the BMWi is mandatory if:

  • an investment is subject to the sector-specific review; or
  • an investment is subject to cross-sector review and falls within the category of a threat to the German public order or security (laid out in section 55, paragraph, 1 sentence 2 AWV).

In contrast to merger control, other elements such as turnover or purchase price do not trigger a notification or filing obligation.

Investors who are not subject to a notification obligation are nevertheless advised to either notify the BMWi of the acquisition or to apply for a certificate of non-objection in cases where it is conceivable that the BMWi could see a threat to the public order or security:

Voluntary notification to the BMWi sets in motion a time limit of three months for the BMWi to initiate a cross-sectoral review procedure (section 55, paragraph 3, sentence 1 AWV). This creates legal certainty for the investor who might otherwise be subject to a review procedure for up to five years after the acquisition - provided that the BMWi learns of the transaction.

Investors who are not subject to a notification obligation may also apply for a certificate of non-objection according to section 58 AWV. Such certificate confirms that the BMWi does not object as regards Germany’s public order and security. The certificate is deemed issued if the BMWi does not open a cross-sectoral review procedure within two months of receipt of the application (section 58, paragraph 2, sentence 1 AWV).

National interest clearance

What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees?

The AWV provides for three ways to start a review procedure:

  • the investor applies for a certificate of non-objection;
  • the investor applies for clearance; or
  • the BMWi initiates a review procedure.

For investments that are subject to the cross-sectoral review, the investor may apply for a certificate of non-objection. The certificate provides legal certainty that the transaction does not pose a threat to German public order or security (section 58 AWV, see question 8).

For investments that are subject to sector-specific review, the investor must apply for clearance (sections 60 and 61 AWV). The investor initiates the review procedure by notifying the BMWi of the planned acquisition (section 60, paragraph 3, sentence 1 AWV). The BMWi will issue clearance where the review procedure reveals no threat to essential security interests (section 61 AWV).

In addition to the foregoing, the BMWi may initiate the review procedure in regard to any investment it learns of and that raises concerns with regard to the AWV. In this case, the BMWi will officially inform the parties involved and require further statements and data (section 55, para 3 AWV).

The review procedure consists of two stages: a preliminary examination and an examination in detail, including an investigation. In most of the cases, the review procedure is concluded within the first phase. The BMWi will only enter into the second stage, a formal investigation, if the preliminary examination gives rise to concerns about the transaction’s compliance with investment control rules.

There are no standard application forms. Pursuant to a decree dating from 2 September 2013, the application should include the following information:

  • the name and place of business of investor and target;
  • an explanation of the business of investor and target;
  • the shareholder structure of investor and target;
  • the annual consolidated financial statements of investor and target of the past three years;
  • business contacts with public sector customers of the past five years;
  • the acquisition agreement; and
  • information on the short, mid and long-term strategy post-completion.

This list is non-exhaustive, and the BMWi may request any further documents it deems necessary to reach a decision. The documents must be in German.

The application must be submitted to the BMWi. The BMWi does not charge any fees or expenses, the applicants must bear their own expenses.

Which party is responsible for securing approval?

Both investor and target are legally obliged to comply with the foreign investment rules. The notification obligations, however, depend on the type of review applicable: investments subject to cross-sectoral review may be notified to the BMWi either by the investor or by the target. For investments subject to the sector-specific review, it is the investor who must apply for clearance.

Review process

How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?

The timeline for the review process is highly dependent on the procedure applied.

Cross-sectoral review procedure

The BMWi may initiate the review procedure within three months of acquiring knowledge of the conclusion of the investment contract. A review procedure is legally precluded if more than five years have passed since the conclusion of the investment contract.

The BMWi may furthermore only prohibit an investment or impose conditions on the investment within the first four months since the investor provided complete information on the transaction. Ongoing negotiations between the BMWi and the investor suspend the limitation period. The law does not limit the duration of such negotiation periods.

In the event of an application for a certificate of non-objection, the certificate will be deemed issued if the BMWi did not formally initiate an examination procedure within two months after the application was filed.

Sector-specific review procedure

The BMWi may initiate the procedure within three months after the submission of the application. Clearance will be deemed granted if the BMWi does not react within the three-month period.

The authorities do not publish data regarding the duration of the procedure. Experience indicates that clearance for cross-sectoral investments takes two to three months. The preliminary assessment of sector-specific investments usually takes one to three months. The process may be lengthened considerably where the BMWi launches the second stage of the review procedure (in-depth examination).

Regardless of the legal time limits, the investor may try to accelerate the procedure by cooperating with the authorities and by providing the necessary information as early as possible.

Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?

In principle, nothing prevents the parties from closing the transaction before obtaining the approval of the BMWi. However, the validity of both transaction and underlying transaction contract may be affected by the BMWi’s decision.

Transactions without notification obligation

The lack of approval does not affect the legal validity of the actual transaction nor of the transaction contract. However, if the BMWi prohibits the investment, the prohibition renders both actual transaction and underlying transaction contract invalid. Consequently, the parties are advised to obtain clearance before concluding the transaction, or to conclude the contract under the condition that the BMWi approves the investment.

Transactions with notification obligation

In contrast to the above, contracts that include a notification obligation remain provisionally invalid until the approval of the BMWi has been obtained.

Involvement of authorities

Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?

The BMWi is open to discuss with the investor the possible hurdles and concerns involving the acquisition contemplated. Where the investor is able to provide comprehensive information on the planned acquisition, such discussions might facilitate the subsequent investigation and examination procedures. The transaction, however, needs to be rather advanced.

When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?

The AWV alone governs the two-stage foreign investment review procedure described in question 9. However, investors are free to rely on the assistance of public relations and political advisers before and throughout the review procedure.

What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?

In cases where voluntary notification applies and the investor has abstained from making that notification, the BMWi is authorised to initiate a review procedure within five years of the transaction. Such review might result in a retroactive conditional approval or prohibition of the foreign investment. In cases of voluntary notification in which the investor did notify the BMWi, any review procedure is precluded if the BMWi has not initiated a procedure within three months of the notification. In cases of mandatory notification, any review procedure is precluded if the BMWi has not initiated a review procedure within three months after the investor has produced complete information on the planned acquisition.

Therefore, investors are strongly advised to notify the BMWi of a planned investment in case of the slightest doubt. It is the fastest way to obtain legal certainty as to the admissibility of the planned investment and minimises the risk of the BMWi’s retroactive interference with the transaction.

Where the BMWi blocks an investment, it is authorised to prohibit the exercise of the voting rights of the target or to appoint a trustee assigned to rescind the investment. In addition, the authorities may take further measures in order to execute the prohibition.