Germany to Further Tighten its Foreign Direct Investment Control Law
The changes will expand the notification requirements for tech-related transactions significantly.
The German federal government published a draft 17th amendment to the Foreign Trade and Payment Ordinance ("AWV"), which is expected to become effective in March 2021.
The AWV already has in place a notification requirement under its cross-sectoral review procedure (applying to all companies not active in defense or encryption-technology products). These requirements—extended in light of the COVID-19 pandemic—will remain. The new AWV will require a notification if a non-EU acquirer plans to acquire 10% or more of the voting rights in a German company if it is active in any of the following sectors:
- Satellite earth exploration systems;
- Goods using artificial intelligence to perform abusive acts;
- Autonomous cars or drones or related components;
- Industrial robots (including their components);
- Micro- or nano-electric circuits;
- Cyber defense IT-products or their components;
- Airline or air cargo services or aircraft or aerospace products;
- Nuclear technology products;
- Quantum technology products;
- 3D printing technology products;
- Products for data grids (e.g., 5G);
- Smart-meter gateways or security modules for such gateways;
- Raw materials deemed critical for Germany's economy;
- Products covered by secret patents;
- Supply of food or farming (above certain thresholds); or
- Protection of governmental secrets.
In the future, the sectoral review procedure will require a notification if the target is active in any of the goods listed in part 1 section A of the export list, defense products covered by secret patents, encryption-technology products, or if the target provides infrastructure deemed essential for Germany's defense.
The amendment is expected to include procedural changes to the German government's review process.
These changes should be viewed in light of another blocking decision last year. According to press reports, the acquisition of a German company active in radar, governmental communication infrastructure, and 5G technology by a China-based defense company was blocked.
Despite the new rules (if passed as presented), Germany can be expected to remain open to foreign investments, as it has been in the past.
