FAQ on investment screening under the Foreign Trade and Payments Act (AWG) and the Foreign Trade and Payments Ordinance (AWV)

The provisions on investment screening under the German foreign trade and payments legislation are set out in the Foreign Trade and Payments Act (AWG) – particularly Sec. 4, 5, 13, 14a and 15. These provisions are further elaborated on in Sec. 55 ff. of the Foreign Trade and Payments Ordinance. Investment screening includes both the cross-sectoral screening procedure (Sec. 55-59 of the Foreign Trade and Payments Ordinance) and the sector-specific screening procedure (Sec. 60-62 of the Foreign Trade and Payments Ordinance).

Cross-sectoral screening covers acquisitions where a non-EU resident gains direct or indirect control of at least 25% or the voting rights in a German company. If the German company is active in a sector that is particularly relevant to the security of the country, this threshold is set at 10% of the voting rights (Sec. 55a(1) no. 1-7 of the Foreign Trade and Payments Ordinance, for example for operators of critical infrastructure, the media and the healthcare sector) or at 20% of the voting rights (Sec. 55a(1) no. 8-27, particularly for emerging technologies such as semiconductors, AI, additive manufacturing and quantum technology).

Sector-specific screening covers all acquisitions where a foreigner – including persons and/or companies from other EU Member States or EFTA countries – gains direct or indirect control of at least 10% of the voting rights in a German company producing goods which are listed exhaustively in Section 60 of the Foreign Trade and Payments Ordinance, particularly certain military equipment.

No, as a general rule, investment screening covers all types of business activities.

However, under the cross-sectoral screening procedure, special rules apply for target companies that fall into several of the categories of Section 55a(1) of the Foreign Trade and Payments Ordinance (cf. section C). And there are also special rules for companies that are subject to sector-specific screening (cf. section D).

Sector-specific screening covers all acquisitions where a foreigner – including persons and/or companies from other EU Member States or EFTA countries – gain direct or indirect control of at least 10% of the voting rights in a German company producing goods which are listed exhaustively in Section 60 of the Foreign Trade and Payments Ordinance, particularly certain military equipment.

Cross-sectoral screening covers only those acquisitions in which a non-European resident acquires a German company or shares of this company. This includes indirect acquisitions where, for example, the direct acquirer is based in the EU but the indirect acquirer is not.

No. The rules of the Foreign Trade and Payments Ordinance on investment screening only apply to acquisitions of shares in German companies and to business transactions substituting or pre-empting such acquisitions of shares. This includes asset deals (cf. Sec. 55(1a) of the Foreign Trade and Payments Ordinance), securities lending or transferring shares in a German company by way of security as collateral for a loan.

As a general rule, the provisions of the Foreign Trade and Payments Ordinance apply to acquisitions in which the investor gains direct or indirect control of at least 10, 20 or 25% of the voting rights (Sec. 56(1) and Sec. 60a of the Foreign Trade and Payments Ordinance).

The 10% threshold applies to the categories set out in Sec. 55a(1) no. 1-7 of the Foreign Trade and Payments Ordinance (particularly to operators of critical infrastructure and certain media companies) and to sector-specific screening procedures (particularly certain companies in the defence sector).

The 20% threshold applies to the categories set out in Sec. 55a(1) no. 8-27 of the Foreign Trade and Payments Ordinance (particularly to certain companies in the healthcare sector and emerging technologies such as semiconductors, AI, additive manufacturing and quantum technology).

For all other acquisitions, the 25% threshold applies.

No. In contrast to the investment screening procedures of some other states, the application of Germany’s investment screening rules is not dependent on a minimum purchase price, minimum turnover, minimum number of employees etc.

In cases where the acquirer already holds a share of the voting rights that is above the thresholds set out in Sec. 56(1), not every further increase in the share of voting rights is subject to investment screening rules. Please consult Sec. 56(2) of the Foreign Trade and Payments Ordinance and the information on further acquisitions in section B of our FAQs.

The acquisition of a further share of the voting rights as part of a financing round does not fall within the scope of investment screening rules if the percentage share of the (direct or indirect) voting rights of the investor (according to the rules under Sec. 56 of the Foreign Trade and Payments Ordinance) after the conclusion of the financing round is not higher than before the financing round.

As a general rule, an acquisition can be screened under Sec. 55 ff. and Sec. 60 ff. of the Foreign Trade and Payments Ordinance if a non-EU or foreign acquirer directly or indirectly acquires a stake in a German company. If this is the case, internal restructuring within a company group generally falls within the scope of investment screening rules.

Pursuant to the new Section 55(1b) of the Foreign Trade and Payments Ordinance, however, different rules apply in cases where the controlling company stays the same, changes are limited to the investment and no shareholders from a previously uninvolved jurisdiction come in. These cases are excepted from the scope of cross-sectoral investment screening.

As a general rule, mere internal restructuring is also subject to investment screening. However, if the risk posed to assets protected under Sec. 55(1) and Sec. 60(1) of the Foreign Trade and Payments Ordinance remains the same and the possibilities of foreign or non-EU acquirers or state agencies to exert influence over the company do not change, most of these acquisitions should be unproblematic.

If a company falls into one of the categories set out in Sec. 55a(1) no. 1-7 of the Foreign Trade and Payments Ordinance, the 10% threshold pursuant to Sec. 56(1) no. 1 of the Foreign Trade and Payments Ordinance applies. This (lower) threshold applies irrespective of the fact whether the company falls into any further categories that are subject to the screening threshold under Sec. 56(1) no. 2 of the Foreign Trade and Payments Ordinance.

The acquisition of shares in a company which falls into one of the categories set out in Sec. 55a(1) of the Foreign Trade and Payments Ordinance is already subject to a lower investment screening threshold (either 10 or 20% depending on the category) than acquisitions of shares in other companies (25%), cf. Section 56(1) of the Foreign Trade and Payments Ordinance.

The latter are also subject to reporting requirements (Sec. 55a(4) of the Foreign Trade and Payments Ordinance).

Acquisitions subject to reporting in the explicitly mentioned particularly screening-relevant sectors are also subject to restrictions with regard to the closing of the transaction. Particularly security-sensitive actions such as the exercise of voting rights or the transmission of certain particularly security-sensitive information is prohibited on pain of sanctions. This is to ensure that the parties involved in the acquisition will not simply go ahead with the transaction and make it a fait accompli, thus undermining the objectives of investment screening (cf. Sec. 15(3) and (4) of the Foreign Trade and Payments Act and the penalties set out in Sec. 18(1b) of the Foreign Trade and Payments Act; please also see question E.4).

As a general rule, these provisions equally apply to all categories set out in Sec. 55a(1) (with the exception regarding the screening threshold mentioned above).

The new rules that have been introduced through the 17th revision of the Foreign Trade and Payments Ordinance such as the new reporting requirements for acquisitions of shares in companies within the meaning of Sec. 55a(1) no. 12-27 of the Foreign Trade and Payments Ordinance apply as a general rule to all legal transactions (signing) that have been concluded after the entry into force of the revision (Sec. 82a of the Foreign Trade and Payments Ordinance).

No. The question as to whether the legal transaction has already been closed at the time the Federal Ministry for Economic Affairs and Energy obtains knowledge of the transaction does not have any effect on the Ministry’s investment screening rights.

The provisional application of the EU-UK Trade and Cooperation Agreement started on 1 January 2021. As investment screening is an instrument that seeks to guarantee the public order or security of the Federal Republic of Germany or of other EU Member States or relating to certain EU programmes, the UK and Northern Ireland have been treated as non-EU states under the investment screening procedure as of 1 January 2021 (cf. Article EXC.1(1) and (2) and EXC.4 of the Trade and Cooperation Agreement). Investors from these countries are thus subject to the entirety of the rules set out in Sec. 55 ff. of the Foreign Trade and Payments Ordinance.

Acquisitions where the legal transaction was signed before the end of 2020 but the closing will take place in 2021 will not be screened by the Federal Ministry for Economic Affairs and Energy. This has been a discretionary decision made by the Federal Minister for Economic Affairs and Energy in coordination with the European Commission in favour of the companies affected. Acquisitions where the signing took place or will take place after 1 January 2021, will be subject to the regular investment screening procedure.

As a general rule, a distinction needs to be made between initial and further acquisitions in the context of investment screening. Within the meaning of Sec. 55 ff. of the Foreign Trade and Payments Ordinance, an initial acquisition is deemed to have occurred once the acquisition of shares for the first time exceeds the relevant screening threshold (Sec. 56(1) of the Foreign Trade and Payments Ordinance) for a particular target company. It does not matter whether the investor already held a share of the voting rights below the threshold before the initial acquisition or not. In all cases where an existing shareholder whose share of the voting rights has already reached or exceeded the (initial) screening threshold – i.e. where an initial acquisition has already occurred – any additional investment in a company will be considered a ‘further acquisition’ for the purpose of investment screening.

Acquisitions, including further acquisitions of shares, that lie below the relevant screening threshold for a target company are, as a general rule, not relevant for the purposes of investment screening (except in cases where this leads to an atypical acquisition of control, cf. question B.3.)

Sec. 56(2) of the Foreign Trade and Payments Ordinance now for the first time clearly states the cases in which further acquisitions are subject to investment screening. Pursuant to this section, the right to screen investments no longer automatically applies to all further acquisitions but only to such acquisitions in which the total share of the voting rights held by an existing shareholder reaches or exceeds the share of voting rights set out in Sec. 56(2) of the Foreign Trade and Payments Ordinance (drawing near or exceeding further thresholds under corporate law). These thresholds are set at 20, 25, 40, 50 and 75% of the share of voting rights. If a shareholder already holds at least 75% of the share of voting rights, there is no right to screen any further acquisitions (for example a squeeze out).

Yes. A further acquisition is considered a separate legal transaction within the meaning of the transitional arrangements. This means that the relevant date is the date of the further acquisition.

Yes, in cases of an atypical acquisition of control as set out in Sec. 56(3) of the Foreign Trade and Payments Ordinance.

These are cases where the acquisition of voting rights entails the granting of additional rights that allow the acquirer to exert influence over the company or gain access to sensitive information. An atypical acquisition of control is not subject to reporting requirements – even in cases where the target company falls into one of the categories set out in Sec. 55a(1) of the Foreign Trade and Payments Ordinance.

This is possible in cases where this concerns not the shareholder rights which, as a general rule, coincide with the acquisition of a certain share of the voting rights, but instead concerns shareholder rights which have been agreed in a separate contract. However, the mere existence of such separately agreed investor or shareholder rights is not sufficient to warrant the application of Sec.56(3) of the Foreign Trade and Payments Ordinance. The additional rights need to provide the investor with a a degree of influence over the company that together with his share of the voting rights is comparable to the influence imparted by one of the applicable screening thresholds.

No. An acquisition within the meaning of the new Sec. 56(3) of the Foreign Trade and Payments Ordinance requires that the legal transaction underlying the acquisition of shares be signed after 30 April 2021.

The Federal Ministry for Economic Affairs and Energy has the right to subject acquisitions where the acquirer comes from the EU or EFTA to a screening procedure pursuant to Sec. 55(1) of the Foreign Trade and Payments Ordinance if there are indications that the specific structure of the acquisition is abused to undermine the right to investment screening pursuant to Sec. 55(1) of the Foreign Trade and Payments Ordinance.

Such an abusive approach can particularly occur in cases where an investor from the EU or EFTA acts as immediate acquirer but the actual acquirer in financial terms comes from a third country (Sec. 55(2) of the Foreign Trade and Payments Ordinance). According to Sec. 55(2) of the Foreign Trade and Payments Ordinance, indications of such an abusive approach in particular include cases where

• the direct acquirer does not maintain any significant business operations of its own other than the acquisition or
• does not have any permanent establishment of its own including offices, staff and equipment within the European Union.

These cases need to be distinguished from indirect acquisition scenarios (cf. Sec. 56(4) and (5) of the Foreign Trade and Payments Ordinance), particularly acquisitions where a German or EU shelf company is used as an acquisition vehicle, as is typical practice. In these cases, the legal acquisition structure already provides for a sufficient link between the target company and the (indirect) non-EU acquirer, which – if the other screening requirements are met – give the Federal Ministry for Economic Affairs and Energy the right to screen the investment.

An abusive approach also exists in cases where several acquisitions of the same German company are coordinated in such a manner that, when viewed separately, none of the acquisitions represents a stake within the meaning of Sec. 56.

The indications mentioned above are exemplary in nature and cannot be refuted. There may be other circumstances which indicate such an abusive approach in individual cases; however, in such cases, there is a right of reply.

The term ‘critical infrastructure’ has been borrowed from the Act on the Federal Office for Information Security (BSIG) and is defined in more detail in the relevant ordinance defining critical infrastructures (BSI-KritisV). The same goes for the definition of the ‘operators’ of such facilities.

The provision only covers producers whose software has been specifically designed or modified to be used in one of the facilities listed in the ordinance defining critical infrastructure (BSI-KritisV). An investment screening is always an intervention by the administration into the rights of others, which is why it is initially up to the public sector to prove that the requirements for such an intervention are met. However, companies have the obligation to contribute to the clarification of the facts of the case in the administrative procedure.

Essential components for unmanned aircraft within the meaning of 55a(1) no. 14 of the Foreign Trade and Payments Ordinance include, for example, attitude control computers, flight control computers or components related to the controlling and monitoring of the unmanned aircraft in connection with its control unit.

Yes. There are no minimum thresholds for shares of turnover (or the like). What counts is that military equipment – which is subject to sector-specific screening – is among the products you develop, manufacture etc.

In cases where your product or technology portfolio is also subject to cross-sectoral screening, the Federal Ministry for Economic Affairs and Energy has the right to carry out both screening procedures – the sector-specific and the cross-sectoral screening – in parallel.

Under the cross-sectoral and sector-specific screening procedures, the reporting requirement solely lies with the direct acquirer (Sec. 55a(4), Sec.60(3) sentence 7 of the Foreign Trade and Payments Ordinance).

As a general rule, you can apply for a certificate of non-objection and/or report the acquisition already before the signing of the acquisition contract. However, there must be a clear intention to acquire the company at that point in time.

Please note: The reporting requirement only applies from the moment the acquisition contract is signed.

If you apply for a certificate of non-objection or report the acquisition before the signing, you need to be able to submit the necessary documents.

The Federal Ministry for Economic Affairs and Energy will only be able to screen the investment if the documents correctly reflect the (subsequent) acquisition procedure. Any deviations will be to the detriment of the companies involved. The documents must correctly reflect the acquisition procedure at the latest at the moment the reporting requirement starts to apply.

The certificate of non-objection is an administrative act within the meaning of the Federal Government’s Administrative Procedure Act and as such, as a general rule, binding. Revocation or withdrawal are only permissible in cases provided by law. If cases where a certificate is revoked or withdrawn, the screening deadline starts afresh (cf. Sec. 14a(7) sentence 1 no. 1 of the Foreign Trade and Payments Act).

Please consult the requirements set out in Sec. 58(1) of the Foreign Trade and Payments Ordinance in conjunction with the new general administrative act of 27 May 2021.

Under investment protection procedure, no costs or fees are currently incurred. The applicant only bears its own costs.

The potential documents to be submitted are set out in Sec.14a(2) of the Foreign Trade and Payments Act in conjunction with Sec.55a(4), Sec.58(1) and Sec.60(3) of the Foreign Trade and Payments Ordinance and the general administrative act of 27 May 2021 (Federal Gazette OS 11.06.2021 B2).

The general administrative act states which documents have to be submitted already at the time of the submission of the report or the application for a certificate of non-objection and which additional documents need to be submitted if a screening procedure is launched.

In addition to this, the Federal Ministry for Economic Affairs and Energy can request all companies or persons that are involved in the acquisition procedure to submit additional documents which are necessary for duly conducting the screening.

The investment screening procedure is a regular administrative procedure which is carried out based on the Federal Government’s Administrative Procedure Act. Pursuant to Sec.23(1) of the Administrative Procedure Act, the official language is German. This means that, as a general rule, all documents need to be submitted in the German language (by taking into account Sec.23(2) of the Administrative Procedure Act).

A confirmation of the receipt of the documents is provided by the Federal Ministry for Economic Affairs and Energy only upon request.

The Federal Ministry for Economic Affairs and Energy will decide whether to open a screening procedure on a case-by-case basis, based on the information available and in coordination with the Federal Ministries whose remit is affected by the case. The screening deadlines set out in Sec.14a of the Foreign Trade and Payments Act are exclusion deadlines.

Conducting contractual negotiations is possible and useful in cases where an ongoing screening procedure has revealed a risk which can be removed by concluding a public-law contract. In such cases, a special type of public-law contract will be concluded in lieu of a judicial order. Whilst the contractual negotiations are ongoing, the deadline is delayed as set out in Sec.14a(6) sentence 1 no. 2 of the Foreign Trade and Payments Act. There is no fixed time limit for the negotiations. However, the acquirer or the Federal Ministry for Economic Affairs and Energy can at any time declare in writing that they consider the negotiations to have failed, which will reactivate the deadline.

Up until 16 July 2020, the Foreign Trade and Payments Ordinance included a number of different provisions on deadlines. As part of the first revision of the Foreign Trade and Payments Act, consolidated rules on deadlines were laid down in Sec.14a of the Foreign Trade and Payments Act. The provisions of Sec.14a of the Foreign Trade and Payments Act now apply to all cases of cross-sectoral and sector-specific investment screening.

Pursuant to Sec.30 of the Foreign Trade and Payments Act, the new rules on deadlines apply to all legal transactions that the Federal Ministry for Economic Affairs and Energy obtains knowledge of after the entry into force of the first revision of the Foreign Trade and Payments Act (17 July 2020). This means that there may be cases where the contract was signed before the first revision of the Foreign Trade and Payments Act entered into force. If the Federal Ministry for Economic Affairs and Energy has obtained knowledge of a legal transaction before the date the revised Foreign Trade and Payments Act entered into force, the old rules continue to apply.

Pursuant to Sec.14a of the Foreign Trade and Payments Act, the Federal Ministry for Economic Affairs and Energy can open a screening procedure within two months of obtaining knowledge of the signing of the contract. The obtaining of knowledge is equivalent to the receipt of the report on an acquisition or an application for the issuing of a declaration of non-objection.

Once the Federal Ministry for Economic Affairs and Energy has received the documents in full, it can order restrictions or obligations to act within four months. The deadline can be extended if the screening procedure reveals particular actual or legal difficulties. The deadline can be extended by a further month if the acquisition particularly affects the defence interests of the Federal Republic of Germany and the Federal Ministry of Defence asserts the existence of this circumstance in the procedure.

This is exhaustively regulated by Sec.14a of the Foreign Trade and Payments Act. The Federal Ministry for Economic Affairs and Energy can open a screening procedure within two months of obtaining knowledge of the signing of the contract but no later than five years after the contract was signed.

A legal transaction to which, as a general rule, investment screening rules apply, can be rendered null and void until the moment the Federal Ministry for Economic Affairs and Energy clears the acquisition or until the conclusion of the entire screening procedure (Sec. 15(2) of the Foreign Trade and Payments Act).

In cases where a sector-specific or cross-sectoral acquisition is subject to reporting requirements, the parties involved in the acquisition need to take into account the legal and actual restrictions that apply to the closing as set out in Sec.15(3) and (4) of the Foreign Trade and Payments Act.

If the Federal Ministry for Economic Affairs and Energy opens an investment screening procedure, all companies and persons involved in the acquisition are not only subject to the reporting requirements already mentioned but also extensive information and cooperation obligations. These apply to all cases of sector-specific screening and some cases of cross-sectoral screening involving certain types of domestic companies.

The provisions of Sec.15(4) sentence 1 no. 3 of the Foreign Trade and Payments Act prohibiting the disclosure of information take account of the fact that also a ‘de facto’ closing of a legal transaction can affect the investment screening procedure. The type and content – or substance – of the information or technologies involved will be different in each individual acquisition case. Under the wording of the Act, the decisive fact is whether this information refers to parts of the company or assets of the company which affect the essential security interests of the Federal Republic of Germany or which must be given particular consideration in the context of the screening procedure of an impairment of the public order or security of the Federal Republic of Germany.

Which aspects will be of interest in each individual case crucially depends on the domestic company’s business activities and its technological expertise. Domestic companies should usually have a good sense of which company-related information and technologies are potentially security-relevant and must not be shared whilst the investment screening procedure is ongoing.

In addition to this, Sec.15(4) sentence 2 of the Foreign Trade and Payments Act allows the Federal Ministry for Economic Affairs and Energy to issue further instructions.

The obligations and legal effects described in Sec.15 of the Foreign Trade and Payments Act start to apply the moment the relevant legal transaction is signed. The prohibitions imposed by Sec.15(4) of the Foreign Trade and Payments Act – on pain of sanctions – only apply in cases where a legal transaction exists. This means that a legal transaction must have been signed. The prohibitions do not apply in the time before the signing.

This means that a potential investor is not prevented from obtaining information that allow him to assess the potential investment on the basis of a pre-contractual legal relationship with a potential seller. However, it should be in the very interest of the seller not to diminish the value of his company by providing too much information too early.

Instructions or prohibitions issued by the Federal Ministry for Economic Affairs and Energy are administrative procedures within the meaning of the Federal Government’s Administrative Procedure Act, which means that acquirers and target companies can use the appeals options provided for by the Code of Administrative Procedure. As the administrative acts that are related to investment screening are issued by a supreme federal authority, no objection proceedings are conducted. Rescissory action brought against an administrative act does not have suspensive effect.

Further information by the Federal Ministry for Economic Affairs and Energy can be found here.

You can contact division VB 1 (investment screening) at investitionspruefung@bmwk.bund.de.