Minister Altmaier: More comprehensive and proactive screening of investments in security-sensitive sectors Federal Cabinet approves amendment to the Foreign Trade and Payments Act

The Federal Cabinet today approved a draft bill to amend the Foreign Trade and Payments Act (AWG), which was submitted by Federal Minister for Economic Affairs and Energy Peter Altmaier, thereby paving the way for initiating the parliamentary procedure.

Minister Altmaier stated: "In reforming the rules on the screening of investments, we are creating the legal framework for more comprehensive and proactive screening of foreign investments, for example in companies in the critical infrastructure sector. The current situation makes it very clear that Germany and Europe as a whole need to maintain key competencies and technologies in certain sectors. This will also enable us to better protect German and European security interests".

In particular, the amendment aligns Germany's investment auditing rules to the EU Regulation establishing a framework for the screening of foreign direct investment within the Union (EU Screening Regulation), which came into force in April 2019. The required use of the benchmark of whether a foreign direct investment is ‘likely to affect’ security or public order will allow the Federal Government to screen foreign investments more proactively. In addition to looking into the impact of foreign acquisitions in Germany, a stronger focus of the screening will be on the impact investments have on other EU Member States and on EU programmes and projects. In addition, each investment requiring notification will be provisionally suspended for the duration of the screening. The newly introduced rules prohibiting on pain of criminal penalties the pursuit of further activities will prevent the parties to the acquisition from creating a fait accompli during the ongoing audit, and thus undermining the objectives of the investment review.

In addition, the Federal Ministry for Economic Affairs and Energy will establish a "National Contact Point" for the cooperation mechanism created by the EU Screening Regulation. The Europe-wide exchange of information and coordinated cooperation between the Member States and the European Commission will increase transparency and ensure better protection against critical company takeovers.

The amendment of the Foreign Trade and Payments Act is the first step towards overhauling Germany's investment screening law. In addition, the Federal Ministry for Economic Affairs and Energy will submit additional proposals for amending the Foreign Trade and Payments Ordinance.

To see the draft bill, please click here (in German).