Newsflash: Reform of the German Foreign Trade and Payments Act

The most important changes at a glance

As we already reported in our Newsflash of 27 March, the COVID-19 (corona) crisis has brought the regulations for screening foreign investments in the EU and in Germany further into focus. On 8 March, the Federal Cabinet approved the draft bill presented by Federal Economics Minister Altmaier to amend the Foreign Trade and Payments Act (Außenwirtschaftsgesetz - AWG).

This draft serves in particular to adapt the AWG to the provisions of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (so-called EU Screening Regulation).
Among other things, the draft law is intended to amend the existing regulations on investment screening. An adaptation of the Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung - AWV) will follow.

What are the main innovations of this draft?


Likely to affect public order or security

The draft law provides that the German Federal Ministry of Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie - BMWi) can examine a planned acquisition of a German company or parts thereof if, "as a result of the acquisition, public order or the security of the Federal Republic of Germany or another member state of the European Union (...) is likely to be affected".

The assessment of the expected effects of a corporate acquisition has always been inherent in investment control, as this is already conducted before concluding the transaction. What is new, however, is that it is now sufficient that public order or security is affected, whilst the previous requirement was that it posed a threat. The threshold for screening has thus been lowered.


Pending invalidity

Furthermore, the draft stipulates that all transactions that are subject to notification requirements (that is to say including cross-sectoral transactions) are provisionally invalid until they have been cleared by the BMWi. Until now, this was only the case for sector-specific transactions (e.g. in the armaments sector or concerning specific encryption software).

Consideration of the interests of other EU states

While the current screening only covers public order or security in the Federal Republic of Germany, the draft law provides that the interests of the other EU member states should also be taken into consideration.

This amendment especially takes into account the fact that, according to the EU Screening Regulation, EU member states must inform each other of any likely effect upon their own public order or security posed by a planned transaction and the state in which the transaction is to be carried out must take these concerns into account in its screening.


A further innovation of essential importance for global corporate transactions is that prohibitions of certain actions until the transaction has received BMWi-clearance are now being introduced for both sector-specific and cross-sector transactions subject to a notification requirement. These include prohibitions from


  • enabling the acquirer to exercise voting rights directly or indirectly, in particular through the transfer of bearer securities, voting agreements, etc.,
  • granting the subscription of profit distribution claims associated with the acquisition, or an economic equivalent,
  • disclosing company-related information on the domestic company that is classified as important or relates to areas of importance to public security and order in Germany.

Violations of the prohibitions of certain actions will be sanctioned. In particular, the occasional practice of closing foreign transactions prior to BMWi-clearance, through which the rights to the German company are also indirectly transferred, would then be punishable by imprisonment for up to five years or a fine.

Amendment of the Foreign Trade and Payments Regulation

The Foreign Trade and Payments Regulation (AWV) is subsequently also going to be amended. The AWV is a statutory instrument whose amendment does not have to pass through the parliamentary legislative procedure. It is to be expected that, on its amendment, the areas of critical infrastructure that subject to screening will also be expanded and concretised. Against the backdrop of the current corona crisis, this can especially be expected in the health sector.


Expansion of resources

The amendment will lead to a significantly higher number of screening procedures. The Federal Government is also reacting to this and in just the BMWi department responsible for the screening procedures is already creating 15 new posts. The staffing level is also going to be increased in the departments that will be involved, in particular the Ministry of Defence, the Ministry of the Interior and the Foreign Office.


Impact on current transactions

The draft law provides that the amendment should enter into force if possible before or at the same time as the entry into force of the EU Screening Regulation on 11 October 2020. A transitional arrangement is not planned. The effect of the amendment of the law on transactions that have already begun when it enters into force is therefore governed by the general principles:

Such transactions would presumably only have a fundamentally permissible artificial retroactive effect, with the result that transactions not yet concluded should fall within the scope of the new regime. It remains to be seen whether the AWV to be amended will include transitional provisions.


The text of the adopted draft law can be found here.

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Stephan Müller

Stephan Müller


Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 221 2091 448
M +49 173 3088 038


Mareike Heesing<br/>LL.M. (Köln/Paris I)

Mareike Heesing
LL.M. (Köln/Paris I)

Junior PartnerAttorney

Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 221 2091 320
M +49 172 5798 005