Germany: In Control

Last Updated: 27 February 2018
Article by Markus J. Friedl

In July 2017, the German government amended the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung or AWV), with a view to tightening its foreign investment regime for acquisitions of 25% or more of the voting rights in a German target by investors not resident in an EU member state or part of the European Free Trade Association (EFTA). Though such acquisitions had already been subject to review by the German government since 2009 to assess whether they pose a threat to the public order or security, the debate on a potential sellout of German know-how and key industries to foreign – in particular Chinese – purchasers with governmental background continued. This discussion led the government to further sharpen the rules to control such foreign investment into German targets. In this regard, the amended AWV now identifies specific industry sectors of the German economy in which foreign investments may raise a threat to national public order or security, and thereby provides additional clarity regarding the specific industry sectors where investment will in particular be scrutinised for national security-related concerns. In addition, the AWV for the first time introduces a notification obligation for transactions relating to these industry sectors. Therefore, non-EU/EFTA investors making such investments must notify the German government, ie the Federal Ministry for Economic Affairs and Energy (BMWi), about entering into a respective acquisition agreement.

Threats to public order or security

Under the amended AWV, the relevant acquisitions or investments by non-EU/EFTA investors involving certain specific industry sectors will be scrutinised by the BMWi for threats to public order or security. In this regard, the AWV now includes a non-exhaustive list of industries of particular concern:

  • the operation of facilities, plants, or parts thereof, of critical infrastructure in the meaning of the German Act regarding the Federal Office for Information Security Technology (Gesetz über das Bundesamt für Sicherheit in der Informationstechnik – Act on the Federal Bureau of Security in the Information Technology or BSIG;
  • the development or alteration of industryspecific software involved in the operation of such critical infrastructure;
  • the execution of organisational and/or supervision measures according to the German Telecommunications Act;
  • the rendering of cloud computing services; and
  • activities in telematics infrastructure in the public health sector.

With respect to (i) and (ii) of this list, the German government is particularly concerned about the operation and supply of software to operators of so-called critical infrastructure, should non-EU/EFTA investors make an investment into such entities. BSIG defines the term critical infrastructure to include facilities, plants and parts thereof in the industry sectors energy, information technology, telecommunications, transportation and traffic, health, water, nutrition, finance and insurance, which – also constitute businesses of high importance to the proper functioning of society, as their outage or impairment would cause substantial supply shortfalls or jeopardise public security. Additional BSIG regulations further determine what constitutes critical infrastructure. The Ordinance on the Determination of Critical Infrastructures (Verordnung zur Bestimmung Kritischer Infrastrukturen nach dem BSIG or BSIKritisV) identifies for each of the seven critical industry sectors the plants (or parts thereof ) to be considered critical infrastructure by listing the exact types of plants, and stipulating the minimum supply thresholds required to be considered critical. For example, the BSI-KritisV defines a power generation plant with an installed electricity net supply of 420MW per year and a hospital with 30,000 patients per year as examples of critical infrastructure.

As a result, acquisitions or investments in the seven industry sectors listed previously for which a certain size of supply is reached will certainly raise concerns of a threat to German public security and order. However, while these amended regulations provide insight into the industry sectors that the German government will scrutinise, investors also have to be aware that this list is not exhaustive. Non-EU/EFTA buyers should not assume that investments in other sectors of the Germany economy or of smaller investments in these industry sectors will not also be viewed as a threat to German public order or security. In particular, acquisitions in the defense sector, which the amendment to the AWV has extended to include additional key technologies crucial for defense applications (for example encryption and sensor technology) are also subject to specific governmental review.

Consequently, the authority to determine that a potential transaction poses a threat to public order or security still lies with the German government, though any determination in this regard can be fully reviewed by German courts. As the German government can ultimately prohibit the transaction, non-EU/EFTA investors should review the foregoing criteria to assess whether potential acquisitions or investments in Germany might raise national security concerns – in particular whether the German target is active in one of the industries of particular concern listed above including critical infrastructure.

Notification obligation vis-a-vis the BMWi

In the event an acquisition or investment in Germany by a non-EU/EFTA investor relates to an industry of particular concern, such acquisition or investment agreement has to be notified to the German government. The amended AWV includes an affirmative obligation to notify the BMWi about the agreement regarding the acquisition or investment by any non-EU/EFTA person of a German entity or a direct or indirect holding of at least 25% of the voting shares of a German entity active in the specific industries mentioned above.

The notification to the BMWi must be submitted by the direct acquirer party to the acquisition or investment agreement. The notification obligation applies upon the execution of an agreement governed by the law of obligations (schuldrechtlicher Vertrag), ie the agreement by which the acquirer agrees to acquire the entity or the voting rights, and not with respect to the execution of the agreement in rem by which the acquirer in fact acquires the entity or the voting rights at issue. Therefore, the acquirer must notify the BMWi upon the execution of final and binding agreements which provide the acquirer with a claim to obtain legal title of the entity or the shares, which may include, but are not limited to, share purchase agreements, asset purchase agreements and agreements for the subscription of shares. The law governing the respective agreement (German law or otherwise) is irrelevant, however. The acquirer must evaluate which agreement in connection with the acquisition is considered the agreement governed by the law of obligations. To the contrary, nonbinding arrangements, letters of intent or memoranda of understanding do not trigger the notification obligation. Such notifications to the BMWi and thus the German government will not be disclosed to the public and, unlike merger filings to the German antitrust office, will not be made public on governmental websites or other public sources.

The obligation to notify the BMWi only applies to transactions involving target entities active in the specific industry sectors of particular interest, as identified in the AWV, in particular critical infrastructure entities. Therefore, the acquirer must assess whether the notification obligation is triggered with respect to the transaction in question. This places the burden on the acquirer to examine whether the requirements of the notification obligation are met or not. However, if the acquirer erroneously omits to notify the BMWI, this does not trigger any payment of a fine by the acquirer or its acting persons. Should a notification be required, the acquirer has to submit the notification to the BMWi in writing. The AWV does not stipulate the details of information to be contained in the notification or whether supporting documents must be attached. It is assumed that the notification must identify the parties to the applicable agreement and the business operations in which the acquirer and the German target entity engage. However, the acquisition agreement itself does not need to be disclosed.

The AWV does not set a time period for the notification to be made. The notification refers to the execution of the acquisition agreement, the notification can only be made after the execution of the agreement. However, it's worth noting the BMWi is entitled to initiate an in-depth review within three months following the time it learns of the signing of the agreement irrespective of whether the transaction has been completed or not. The AWV in this regard does not define what constitutes knowledge of a transaction by the BMWi for these purposes, but, based on German administrative law, it will most likely be interpreted narrowly in the meaning of actual, positive knowledge of the execution of the relevant transaction agreement. Consequently, any acquirer should be interested in submitting the notification without undue delay to start the three months review period. Otherwise, in the event the BMWI obtains knowledge through other means, the acquirer faces the risk that the BMWi may initiate a review of a transaction that occurred up to five years prior to it gaining knowledge of the transaction. Given that industries of particular concern with respect to public security and order are affected, leaving the German government without notification causes a serious risk for a maximum of five years that the transaction, even after completion, may be made subject to scrutiny and ultimately be prohibited by the German government.

Implications for non-EU/EFTA investors

Non-EU/EFTA investors have to be aware that acquisitions of German businesses in certain industry sectors may be subject to an in-depth national security review by the BMWi. Consequently, prudent non- EU/EFTA investors will in case of any doubt not only submit the required notification, but will, like in the past, apply voluntarily for a clearance certificate, which, if obtained, provides security to all parties that the German government will not prohibit the transaction.

In any case, tightened rules regarding acquisitions of or investments in German target companies regarding a possible threat to public security and order as well as extended review periods with respect to such transactions will affect the structuring of transactions envisaged by non-EU/EFTA investors and will in particular tend to delay their completion.

Therefore, transaction schedules may have to observe that transactions are deemed to be approved, in the event the BMWi has not initiated an in-depth review three months after the notification or two months after the application for a clearance order. Though the transactions can be implemented without having received approval from the German government, no acquirer would want to run the risk of being required to unwind the transaction. As a result, non-EU/EFTA investors have to pay increased attention to the foreign investment control rules set by the AWV. This includes, prior to commencing the acquisition process, a detailed analysis whether the relevant acquisition regarding a German target may impose a threat to public order or security as well as, with respect to transaction documents, appropriate stipulations regarding conditions for completion of the relevant transaction.

Originally published by IFLR

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions