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Health-Care Related Additions Development or production of personal protective equipment; Development, production, or marketing of material pharmaceuticals wesentliche Arzneimittel , including holders of respective statutory permits; Development or production of medical products designed for diagnosis, prevention, monitoring, prediction, prognosis, treatment or easement of life-threatening and highly contagious infectious diseases; Development or production of in-vitro-diagnostics used in connection with life-threatening and highly contagious infectious diseases.
Applicability to Share and Asset Deals. The Amendment codifies that German FDI control is not limited to the acquisition of shares but equally applies to asset deals. Notification Modalities. The Amendment clarifies that FDIs triggering a notification obligation are to be notified immediately after signing of the acquisition agreement.
Investor-Related Screening Factors. In line with the EU Screening Regulation, the Amendment formally introduces screening factors that focus on the background and activities of the individual investor. According to the German Ministry, these changes are of clarifying nature only, as investor-related factors have previously been considered as well. Pursuant to the Amendment, the German Ministry may now take into account whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or more than insignificant funding, has already been involved in activities affecting the public order or security of the Federal Republic of Germany or of a fellow EU member state, or whether there is a serious risk that the foreign investor, or persons acting for it, were or are engaged in activities that, in Germany, would be punishable as a certain criminal or administrative offence, such as terrorist financing, money laundering, fraud, corruption, or violations of the foreign trade or war weapon control rules.
In line with the EU Screening Regulation, grounds for screening shall be expanded to include public order or security of a fellow EU member state as well as effects on projects or programs of EU interest. Tightening the Standards. This would give the German Ministry more discretion and room to maneuver as it could prohibit a transaction in order to prevent an impairment that has not yet materialized but that is likely to occur as a result of the contemplated FDI.
Expanding Sector-Specific Screening. Pursuant to the Draft AWG Amendment, not only the production and development of such goods would qualify for a sector-specific control, but also expressly the modification or use of such goods. The same shall apply if the respective company no longer produces, develops, modifies or uses but still has the relevant knowledge e.
Shortly afterwards, the German government confirmed its intention to tighten the rules even further. This will likely involve lowering the threshold to review acquisitions by non-EU investors from 25 to 15 percent of voting rights. Contract lawyers from Linklaters Responsibility. Our lawyers are enthusiastic, committed people who relish the challenges and opportunities that they encounter every day. Search for a lawyer by name or use one of the filters. Our business team members are enthusiastic, committed people who relish the challenges and opportunities that they encounter every day.
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However, the first ever veto over an investment — announced under stricter rules introduced in — has been followed by proposals for even stricter controls. What can potential investors expect even now, and more so if these stricter controls come into force? Delays : The longer review deadlines as well as the introduction of a notification requirement for the acquisition of critical infrastructures are increasingly causing delays in relation to the closing of transactions.
More in-depth reviews : In the first 13 years of the existence of the German foreign investment regime only 36 out of notified transactions were subject to an in-depth review. This number has been exceeded in the past year alone. More commitments by foreign companies : In an increasing number of cases, the Ministry requires commitments from the acquirer to secure a non-objection certificate.
However, the BMWi has already indicated it would add clarifications with regard to the start and end of review periods, and consider implementing an option to prolong review periods in individual cases to accommodate the involvement of all stakeholders involved. As the Regulation provides for the involvement of other Member States and the European Commission in a national foreign direct investment review procedure, it cannot be excluded that the new FDI Regime will stipulate longer review periods.
It should at least be expected that review procedures will factually be prolonged to effectively implement the EU-wide cooperation mechanism under the Regulation. It will be interesting to see whether and how the BMWi adjusts its practice to accommodate the uncertainties the revised FDI Regime entails for foreign investors in Germany. In particular, providing more guidance in the course of pre-notification discussions would be essential to mitigate some of such uncertainties and to allow foreign investors to conduct a meaningful and comprehensive feasibility assessment for their potential acquisition.
If you have any questions regarding the above, do not hesitate to contact Michael J. Ulmer or Mirko von Bieberstein or your usual firm contact. Key elements of the upcoming changes While the draft bill for the amendment of the AWG is still subject to change, its key elements are noteworthy: Change in the review standard Under the current FDI Regime the BMWi assesses whether a proposed transaction poses a threat to public order or security for Germany. Suspensive effect The validity of any transaction subject to mandatory filing will be suspended pending BMWi clearance.
National point of contact A national point of contact will be established within the BMWi to implement the EU-wide cooperation mechanism under the Regulation. However, according to statements of the BMWi, changes of the AWV will potentially include the following: Additional sensitive sectors Within the cross-sector review procedure new critical sectors will be defined. Investor focus The Regulation foresees certain criteria for assessing a foreign direct investment.
Review periods It is not yet fully clear whether the new FDI Regime will alter the current review periods. Foreign investors will be required to notify transactions they would not have notified in the past. In consequence, the number of foreign direct investments being scrutinized by the BMWi will increase. German foreign direct investment review procedures will become more complex and will potentially comprise an increased scope of information to be submitted by the parties to a transaction.
The larger number of transactions to be reviewed by the BMWi, combined with the coordination with other Member States and the European Commission, seem to make longer review procedures inevitable. The review may result in restrictions or, in the worst case, prohibition of an acquisition.
The GFTPO distinguishes between cross-sectoral reviews and sector-specific reviews in explaining the details of the review procedure. A cross-sectoral review may be conducted if the investor 1 is located outside the European Union and the European Free Trade Association EFTA region, and 2 the investment comes under the scope of German foreign trade law. The latter is the case if the investor acquires a direct or indirect participation of at least 25 per cent of voting rights in a German company.
This includes voting rights of third or intermediate holding companies in which the investor holds at least 25 per cent of the voting rights and voting rights of other shareholders with whom the investor agreed on the joint exercise of voting rights. The latest amendment introduces examples of German companies whose acquisition may threaten public order or security:.
The BMWi must be notified in writing about acquisitions within the scope of the abovementioned example industries, according to the new rules. The BMWi may conduct an in-depth review only if it notifies the acquirer and the target within three months from the day it becomes aware of an acquisition, or at the latest five years from the conclusion of the acquisition agreement.
A certificate of non-objection is now deemed to be granted if the BMWi does not launch an in-depth review within two months from the request compared to one month previously. The acquisition may be restricted or prohibited within four months compared to two months previously after a full set of documents requested by the BMWi for the purpose of the in-depth review has been submitted.
Moreover, this review period shall be suspended as long as the BMWi enters into negotiations with the parties concerned. In order to protect German security interests, special rules apply when target companies operate in sensitive security areas in particular the defense sector and are acquired by 1 foreign investors including EU-resident investors or 2 German companies which were set up in order to circumvent the rules on foreign investments. These special restrictions apply to the acquisition of a direct or indirect participation of 25 per cent or more of the voting rights in manufacturers and developers of the following:.
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