Future screening of investments from non-EU states

On 18 June 2020, after final deliberation, the Federal Parliament (Bundestag) adopted the CDU/CSU and SPD bill to amend the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz - AWG) as well as other laws with the votes of the coalition parties.

The amending law passed by the Bundestag will now be forwarded to the Federal Council (Bundesrat), where it is to be finalized as soon as possible.

According to a press release issued by the German Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie - BMWi) on 18 June 2020, the revised rules are intended to maintain Germany's attractiveness as an investment location and at the same time protect German and European security interests, even more effectively in the event of critical company acquisitions.

Federal Minister Altmaier emphasized that the amendment is intended to better protect Germany's security interests and to make screening procedures more transparent. Together with the amendment of the Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung  - AWV) the German investment screening regime will become more effective.

Implementation of the EU Screening Regulation

As already reported in our newsflash of 9 April 2020, the purpose of the adopted amendment of the AWG is to implement the provisions of Regulation (EU) 2019/452 of the European Parliament and of the Council dated 19 March 2019 establishing a framework for the screening of foreign direct investments within the Union (so-called EU Screening Regulation).

"Likely to affect" as a new screening standard

The focus of the new provisions of the AWG is on the changed screening standards that are to be applied in future. Now, the prerequisite for a screening by the BMWi is whether an acquisition is “likely to affect” public order or security. A “threat" to the public order or security, as required by the current version of the law, is no longer necessary. 

Reforms also planned at European level

The EU Commission also wants to better protect European companies from excessive influence from other non EU countries and has published a strategy paper to this end.

Among other things, this stipulates that companies that receive financial support from a third country must notify the acquisition of EU companies to the EU Commission as the competent supervisory authority. This notification is to become mandatory above a certain threshold. Then, the transactions could only be implemented after completion of the Commission's screening. It could ultimately also prohibit the acquisition. At the same time, investments are to be examined as to whether they are possibly even in the EU’s interests.

Before the EU Commission submits legislative proposals next year, the opinions of the EU member states and other parties are now being sought.

The press release of the EU Commission of 17 June 2020 can be found here.

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