Amid rising concerns of cutting-edge technologies and important know-how being lost abroad, the German government has approved new rules to tighten the legal framework for investment screening in Germany. In future it will be easier to block the sale of strategically important companies to foreign investors. The rules do not need parliamentary approval.

Due to the changed security circumstances in the field of civil security-related technologies, the tightened investment screening rules place an emphasis on businesses that operate critical infrastructure, that develop industry-specific software for the operation of critical infrastructure, which are entrusted with monitoring activities according to Sec. 110 of the Telecommunications Act (Telekommunikationsgesetz – TKG), and which offer cloud computer services or key companies for telematics infrastructure products.

In the field of armament technology, further key defense technologies – such as goods from the areas of sensor technology and electronic warfare as well as the equipment necessary for their production – will be examined in future with a view to a possible threat to essential security interests of the Federal Republic of Germany. The reference to-date to the War Weapons List in the sector-specific procedure has been supplemented in order to address the changed security environment.

Given the increasing number and complexity of the acquisition processes, the procedural rules, including time-limits – for the examination of a takeover are also adapted to the fresh challenges. In future, in cases of doubt, the application for a so called clearance certificate will play an even more important role in order to further accelerate the review procedure and to obtain legal certainty. A clearance certificate is a formal confirmation of the Economic Affairs Ministry (Bundeswirtschaftsministerium – BMWi) to the purchaser that the acquisition does not raise any concerns with respect to public policy or security. It provides legal certainty to the purchaser, the seller and the target. Outside the defence and security sector investors were not required to notify any investment in the past. Now, the review period of four months does not start to run prior to such notification. BMWi has up to five year – starting from the signing of the promissory contract – to initiate a review procedure. Therefore, in cases of doubt, investors should apply in any event for a clearance certificate with BMWi.