On 12 July 2017, an amendment to the German Foreign Trade and Payments Ordinance (the Ordinance) was adopted. The amendment aims to tighten control by the German government over acquisitions of domestic companies by foreign investors. It aims to protect critical infrastructures in Germany and was introduced in parallel to a current initiative by Germany, France and Italy for a joint foreign investment control regime on the EU level. The amendments will enter into force following its publication in the official gazette, which is expected shortly.

Main elements

Closer review of foreign investments in the field of critical infrastructure – obligation to notify acquisitions

All forms of investments in Germany made by investors who are based outside the European Union (EU) and European Free Trade Association (EFTA) may be reviewed in a cross-sectoral examination and prohibited on grounds of public order or security by the Federal Ministry of Economic Affairs and Energy (the Ministry). The amended Ordinance lists examples of security-relevant sectors and focuses on so-called critical infrastructures, such as energy, information technology and telecommunications, transport and traffic, health, water supply, food, as well as finance and insurance. Certain acquisitions of companies active in these sectors now fall under a mandatory filing regime and we expect such acquisitions will be examined more closely in the future.

Significant extension of time limits

While the Ordinance granted the Ministry the right to open an in-depth review within three months following the conclusion of an agreement if it informed the direct acquirer accordingly, these three months now only start when the Ministry becomes aware of the conclusion of such an agreement. Additionally the review period is no longer two, but four months. The period for granting a clearance has been extended from one to two months as well. The limitation period for the Ministry to investigate a transaction is now five years following the conclusion of the agreement. The new deadlines may therefore only provide transaction certainty at a much later date.

Involvement of indirect acquirers in the examination procedure

The Ministry may now require submission of documents also from the indirect acquirers in order to involve them in the process.

Prevention of so-called “circumvention transactions”

Other changes concern the so-called “circumvention transactions”, i.e. transactions which appear to be structured to avoid an investigation by the Ministry. If the immediate acquirer is located within the EU or EFTA but exerts no significant independent economic activity or has no permanent presence (premises, personnel or equipment) of its own in the EU or EFTA, such acquirer may be regarded as foreign.

Sector-specific examination

The sector-specific control relating to e.g. war weapons is expanded to include other military related products as well. The specifications relating to circumvention mentioned above apply as well. The time limits for opening the examination procedure and the final decision will be extended from one to three months.