Foreign investment issues

Investment restrictions

What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?

Germany is open and welcoming towards foreign investments and, with few exceptions, places no restrictions on foreign investments. Pursuant to the German Foreign Trade and Payments Ordinance, the acquisition of 25 per cent or more of the voting rights by non-EU investors in a German company must be notified to the Federal Ministry of Economy. The threshold for such a notice is reduced to 10 per cent of voting rights, if the company, in which shares are acquired, operates ‘critical infrastructure’ (ie, infrastructure in the areas energy, IT, telecommunication, transport, health, water, food, financial services and insurance, whose impairment could endanger public safety); develops specific software for such infrastructure; is authorised to carry out organisational measures under section 110 of the German Telecommunications Act; produces (or has produced or has knowledge of such technology) technical equipment used for implementing statutory measures to monitor telecommunications; provides certain cloud-computing services; holds a licence for providing telematics infrastructure components or services pursuant to section 291b(1a) or (1e) of Book V of the German Social Code; or is a significant broadcasting, tele media or print media company contributing to the formation of public opinion. The Ministry can examine whether the acquisition endangers ‘the public order or security of the Federal Republic of Germany’. Such an examination is, however, naturally rare and is generally limited to acquisitions relating to sensitive areas such as the ones listed for the 10 per cent threshold.

Germany currently has 126 bilateral investment treaties in force (including with countries such as China, Qatar, Saudi Arabia, Singapore, Russia and the UAE) and is a party to the multilateral Energy Charter Treaty. These treaties contain wide-ranging guarantees for investors, including fair and equitable treatment, non-discrimination (national as well as most-favoured nation treatment) and protection from expropriation with full compensation. With the United States, Germany has concluded a Treaty of Friendship, Commerce and Navigation (FCN treaty), which includes similar but more limited guarantees. Moreover, unlike (most) bilateral investment treaties, the FCN treaty with the United States does not permit investors to directly enforce their rights against Germany through arbitration.

In general, German bilateral investment treaties do not contain specific market access provisions. Specific market access and investment liberalisation clauses are however contained in various free trade agreements entered into through the EU with countries such as Canada, Japan or Korea. Yet, these treaties typically contain exceptions, for example, for public security issues. Thus, whether these treaties afford relief from any applicable restrictions will depend on the respective treaty and on the facts of the case, in particular the restriction at issue.

Insurance restrictions

What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?

There are no relevant restrictions on insurance policies over project assets offered by foreign insurance companies; such policies may be payable to foreign secured creditors.

Worker restrictions

What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?

As a member of the EU, Germany is bound by and respects the EU law principle of free movement of labour within the EU. Nevertheless, to the extent employees are working in Germany, German labour law applies. Workers from outside the EU must apply for a work permit.

Equipment restrictions

What restrictions exist on the importation of project equipment?

There are no relevant restrictions on the importation of project equipment other than tariffs applying on goods imported from outside the EU. Within the EU, no tariffs apply owing to the EU law principle of the freedom of movement of goods.

Nationalisation laws

What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?

The German Constitution recognises and protects private property. It may only be expropriated for the public good and upon payment of compensation. Also nationalisation (against compensation) is possible under the German Constitution but, so far, has never occurred. No form of investment is specially protected from nationalisation or expropriation. No special law on protection of foreign investments exists.