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Investment Review in Germany: It has been one year.

  • Germany
  • International trade


On 18 July 2018 it has been a year since the German government reformed investment of the acquisition of domestic companies by foreign buyers. The new regime has not attracted much attention until its anniversary in July 2018 when it managed to make two headlines in one month.

The New Investment Review in Retrospect

Since coming into force, the reformed provisions on the review of acquisition of domestic companies by foreign buyers have increased the workload of the Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie (“BMWi”)).

According to BMWi, before the investment review was reformed, in 2016 there were 39 applications for a certificate of non-objection (Unbedenklichkeitsbescheinigung) in the area of cross-sectoral review (sektorübergreifende Prüfung) and 3 notifications in terms of sector-specific review (sektorspezifische Prüfung). By contrast, in 2017 there were 57 applications for a certificate in the area of cross-sectoral review and 9 notifications in sector-specific review. In most cases, the acquisitions are directly or indirectly conducted by Chinese companies.

In only one case did BMWi decide to undertake a formal cross-sectoral review. However, our understanding is that the review was not carried out because the foreign buyer withdrew from the acquisition.

Nevertheless, in March 2018 the German Federal Council (Bundesrat) requested the German government to lower the threshold for the investment review in sec. 56 of the Foreign Trade and Payment Ordinance (Außenwirtschaftsordnung (“AWO”)) from 25% to 10% of the voting rights.

In July 2018 two cases became public that might provide a justification for this request.


An acquisition of 20% shares of the German transmission system operator 50Hertz by the Chinese state-owned corporation State Grid Corporation of China (”SGCC“) was thwarted by the German government. The German government-owned development bank KfW (Kreditanstalt für Wiederaufbau) temporarily acquired the shares at issue. The decision was justified by reasons of public order and/or security and the resulting interest in the protection of critical energy infrastructure. 50Hertz operates around 10,000 kilometres of electricity network in Eastern and Northern Germany which supplies around 18 million people.

Although 50 Hertz was qualified as a critical infrastructure, the German government could not impede the acquisition by the SGCC by means of the investment review, because the current intervention threshold is 25% of the voting rights. SGCC acquisition attempt was, however, slightly below.

The press release to the transaction can be found here.

Leifeld Metal Spinning AG

The second case occurred almost at the same time and the new regime was able to record a premier in terms of its application. At the end of July 2018 it was publicly disclosed that the German government intended to prohibit an acquisition of Leifeld Metal Spinning AG (”Leifeld“) by the French company Manoir Industries, which in turn is controlled by the Chinese company Yantai Tahiti Corporation (”Yantai“). Leifeld is a technology leader in the manufacture of materials for aviation and aerospace. Some of the materials are used in the nuclear industry. Against this background, Yantai applied for clearance of an acquisition with BMWi in accordance with sec. 61 of AWO, but the BMWi raised concerns in terms of essential security interests. Before the BMWi could officially issue its prohibition of the acquisition, Yantai officially announced its withdrawal from the acquisition.

What’s coming next?

It remains to be seen what will be the next step of the German government and whether it follows the suggestion of the German Federal Council to lower the threshold of voting rights. However, rumours are spreading that the German government might indeed review the regime and tighten requirements for acquiring ownership or control by foreign parties.

At the same time it should be noted that the European Commission has proposed an EU-wide Foreign Direct Investment screening regulation to provide a co-operation mechanism between Member States to mitigate against potential security risks posed by investments from third countries into the EU. Currently, the Members of the European Parliament are evaluating the Commission’s proposal.