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On December 19, 2018, the German government decided to further tighten the rules of the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV). The amendment broadens the scope of foreign investment control by the German Ministry for Economic Affairs and Energy by lowering the threshold for reviews from 25 percent to 10 percent of the voting rights for direct or indirect acquisitions of German companies. The amendment applies to sector-specific reviews (e.g., military products acquisitions and security-sensitive IT products) by foreign investors as well as cross-sector reviews (e.g., critical infrastructure) by investors from outside the EU (or EFTA). As regards companies in other areas whose business activities do not affect sensitive industries or critical infrastructure, the 25 percent threshold will remain. Furthermore, the scope of application of the AWV was extended by incorporating media companies as critical infrastructure. The amendment of the AWV entered into force on December 29, 2018.

Authors: Corinna Kammerer

International merger control

I. Legal framework for foreign investment control

The AWV and the Foreign Trade and Payment Act (Außenwirtschaftsgesetz – AWG) provide the legal basis for foreign investment control in Germany. 
The AWV differentiates between cross-sector reviews pursuant to sections 55-59 of the AWV and sector-specific reviews pursuant to sections 60-62 of the AWV.

1. Amendment of rules governing sector-specific reviews

Prior to the entry into force of the amendment, the German Ministry for Economic Affairs and Energy could commence a sector-specific review where:

  1. a non-German purchaser (including from another EU Member State) acquired at least 25 percent of the shares and voting rights in a domestic company; and 
  2. the target company develops or produces:
  •  goods that are listed in a detailed annex to the Military Weapons Control Act (Kriegswaffenkontrollgesetz – KWG);
  • products with IT security features that are used to process government-classified information; or
  • certain products that fall within the scope of specific foreign trade regulations.

With the entry into force of the twelfth amendment of the AWV, the acquisition is subject to review by the German Ministry for Economic Affairs and Energy once the foreign investor acquires a share of 10 percent or more of the voting rights in a domestic company.