The federal cabinet agreed today to a prohibition in the investment screening procedure for Elmos Semiconductor SE. A Chinese company had intended to acquire a chip factory owned by Elmos in Dortmund via a subsidiary in Sweden. The prohibition has been imposed because the acquisition would have endangered Germany’s public order and security. A milder response, such as an approval of the sale under certain conditions, would not have sufficed to counter the perceived dangers.

Minister Habeck said: “We need to take a close look at take-overs involving signficant infrastructure or where there is a risk that technology will transfer across to buyers from non-EU countries. It is particularly important for us that Germany’s and Europe’s technological sovereignty be protected in the semiconductor industry. Germany naturally is and will continue to be an open destination for investment, but we aren’t naive.”

As Europe’s largest economy, Germany is an attractive destination for foreign investment due to its innovative and technological capabilities. Many of these investments are highly welcome and important for a flourishing economy. But some investments can harm our country’s security. It is then up to the Federal Government to ensure that such negative effects of foreign direct investment on the public order or security of the Federal Republic of Germany are avoided. To this end, the Federal Ministry for Economic Affairs and Climate Action can work with the other relevant ministries to screen a specific direct or indirect acquisition of a domestic company or a stakeholding in a domestic company by a foreign purchaser from outside the EU. The benchmark is whether the acquisition poses a threat to public order or security.

In this cross-sectoral investment screening procedure under sections 55 ff. of the Foreign Trade and Payments Ordinance, a prohibition can only be imposed with the approval of the Federal Government, i.e. a decision by the cabinet is required. This is stipulated in section 13 (3) sentence 1 of the Foreign Trade and Payments Act.

In a next step, the Federal Ministry for Economic Affairs and Climate Action will serve the prohibition on the buyer and seller. In formal terms, this is an administrative act.

You can find more information about investment screening here.