Germany: Recent Amendments on Review of Foreign Investments

July 17, 2017


  • Acquisitions of 25% or more of a Germany company by a foreign investor remain subject to the German foreign trade law. 
  • Certain industry sectors of the German economy have been identified in the recent amendments to be of particular interest. 
  • The review by the German government remains based on a discretionary standard, which makes the outcome of any review difficult to predict. 
  • Foreign buyers should consider requesting a clearance certificate prior to entering into the investment. 
  • If a foreign buyer fails to notify the German government upon the signing of the investment, the investment might be challenged for up to five years by the German government. 


The German government agreed last week to amend the German Foreign Trade and Payments Ordinance (AWV) to address potential concerns raised by foreign investments in certain sectors of the German economy. The amended AWV identifies specific sectors of the German economy in which foreign investments may raise a threat to German public order or security. Moreover, the amended AWV provides for: (i) a new notification obligation of transactions involving foreign investors; (ii) an extension of the current foreign investment review timeframe; and (iii) an extension of deadlines for potential governmental interventions. The amendments are not yet in effect but will become effective within the coming days upon the official publication thereof. 

Existing German law already permits the German government to prohibit transactions in which foreign investors will acquire at least 25% of the voting rights in a German entity if the acquisition constitutes a threat to public order or security. Additional information on the current German foreign investment framework is available in our prior Dechert OnPoint Recent Developments on Review of Foreign Investment into Germany: Is the German Government Tightening the Rules?1 from November 2016. The amended AWV provides additional clarity on what non-EU or EFTA investors may be considered to be a threat to German public order or security and also spells out additional requirements that must be followed by parties to such transactions. 

Specification of Threats to Public Order or Security 

The amended AWV expressly states that threats to public order or security may be of particular concern with respect to foreign acquisitions involving business operations in security-critical technology and identifies the following specific industries of concern: 

  • Operation of facilities, plants or parts thereof, of critical infrastructure, in particular regarding 
    • energy, 
    • information technology, 
    • telecommunications, 
    • transport and traffic, 
    • health, 
    • water, 
    • nutrition, and 
    • finance and insurance; 
  • Development of industry-specific software, which serves for the operation of critical infrastructure; 
  • Execution of organizational and/or supervision measures according to the German Telecommunications Act; 
  • Rendering of cloud computing services; 
  • Activities in telematics infrastructure. 

Even as amended, the German regulations do not provide guidance as to the kind of investor that might be viewed as a threat to German order or public security. The amended regulations, however, provide meaningful guidance insofar as they now identify the areas of the economy that the German government considers most sensitive in this regard. 

New Notification Obligation and Prolonged Review Timeframe 

The amended AWV imposes an affirmative obligation to notify the Federal Ministry for Economic Affairs and Energy (BMWi) regarding certain foreign investment transactions and sets forth an extended timeframe for BMWi to review such transactions. First, any non-EU/EFTA person signing an agreement for the acquisition of at least 25% of the voting shares of a German entity involved in the activities mentioned above must notify BMWi in writing after the signing of the agreement. Second, prior to the amended AWV, BMWi was entitled to initiate an in-depth review within three months of the signing of an acquisition agreement, if the potential investor had been informed of such review. Once the amended AWV goes into effect, BMWi may initiate its review within three months following BMWi’s knowledge of the signing of the transaction agreement and has up to five years following the signing of a transaction to initiate its review – in other words, BMWi can initiate a review of a transaction that occurred up to five years ago if it just gained knowledge of the transaction within the prior three months. BMWi would be required to notify the potential investor and the German target about the initiation of the review procedure within three months of having knowledge of the transaction. Such notification must be made in writing and must be delivered within the three month period. In the case of a public takeover offer, the deadline commences (i) with BMWi’s knowledge of the announcement of the result of such an offer or (ii) with BMWi’s knowledge of the announcement of the closing of the investment. However, BMWi will not be able to initiate a review if more than five years have passed from the date of the signing of the acquisition agreement. The amended AWV does not define what constitutes “knowledge” of a transaction by BMWi for these purposes, but, based on German administrative law, most likely it will be interpreted narrowly, i.e., actual, positive knowledge of a transaction rather than when BMWi could have known about it based on public press reports or other sources. 

Extension of Deadlines for Governmental Interventions 

The amended AWV provides for several extensions of deadlines of potential governmental interventions. The potential foreign investor may request a binding “clearance certificate” from BMWi prior to the execution of a planned investment. If BMWi does not open an in-depth review within two months (formerly one month) from the receipt of the buyer’s written application for such clearance, the approval is deemed to have been issued. Should BMWi initiate a review, the acquisition may be restricted or prohibited within a four month period (formerly two months) starting with the submission of complete documentation of the transaction. Under the amended AWV, this review period will be tolled during any negotiations between the involved parties. 

Specification of Circumvention Transactions 

The current AWV already stipulates that transactions that are structured in a manner to avoid BMWi’s review are presumed to be a circumvention of the law and still are subject to the review requirements. In particular, the amended AWV now clarifies that circumvention transactions may be presumed if the potential investor is located within the EU or EFTA but (i) does not engage in substantial economic activities or (ii) does not have a permanent presence in the form of premises, personnel or equipment in the EU or EFTA. For example, if a non-EU/EFTA company creates a special purpose vehicle in the EU to acquire a German company in one of the specified sectors, and that vehicle does not otherwise have business activities, the foreign investment review requirements would be triggered despite the general exclusion for acquirers who are based in EU/EFTA member states. 

What Do Investors Need to Know Now? 

The amended AWV provides more legal certainty for foreign investors contemplating acquisitions of German targets. First, the amended AWV now identifies those areas of economic activity which may trigger an in-depth review by the BMWi. 

Second, the newly added extension of the investment review period to five years from the signing of the acquisition agreement provides a definitive timeframe during which BMWi may initiate a review and provides investors an opportunity to control the calendar. If BMWi learns on its own of an acquisition, it must determine within three months whether to initiate an in-depth review, and it must notify the transaction parties (during the same three month period) if it intends to do so. Parties that do not affirmatively notify BMWi of a transaction must be aware that BMWi can initiate a review anytime during the five year period after the signing of an acquisition agreement, as long as it acts within three months of gaining “knowledge” of the transaction. By contrast, if the investor notifies BMWi about the potential investment and requests a “clearance certificate,” BMWi must initiate an in-depth review within two months or else the certificate will be deemed to have been issued. Investors who affirmatively notify BMWi about a transaction therefore can reliably calculate the time period during which BMWi may initiate a review and need not be wary of potential review exposure for up to five years. 

Third, the standard of “public order or security” is an equitable principle, with its expected uncertainties. 

To protect both foreign investors and German investment targets operating in the specified industries, relevant acquisition agreements should include a closing condition that BMWi has not prohibited the transaction. Such condition would be deemed fulfilled if: (i) BMWi issues a “clearance certificate” or (ii) such certificate has not been issued within two months from the receipt of the investors’ written application for such clearance, as clearance from BMWi is then presumed. 

Potential investors should have the amendments of the AWV – especially the notification obligation – in mind when it comes to strategic planning of investments in German companies. We will be happy to assist you in this regard. If you wish to dive deeper into this topic, please feel free to reach out to anyone of the authors listed below. 


1) Recent Developments on Review of Foreign Investment into Germany: Is the German Government Tightening the Rules?

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