10 February 2021
“Further tightening?“ Yes, and probably not for the last time. Last year, the German government had already adjusted the regulations of the Foreign Trade and Payments Act (AWG)/Foreign Trade and Payments Ordinance (AWV) investment screening regime. At the same time, there was a significant increase in screening cases at the responsible Ministry for Economic Affairs and Energy ("BMWi"). Last year, however, only two of three planned reform projects were implemented (please see our article from November). The full implementation of Regulation (EU) 2019/452 ("EU Screening Regulation") for foreign investment screening with further case groups of reportable acquisitions into German law will now take place in the final step with the so-called 17th AWV amendment. As a result of this reform, which is currently in the consultation phase and may be already adopted at the end of the first quarter, the number of filings will increase further compared to 2020.
Germany has an established regime for controlling foreign investments in the form of cross-sector and sector-specific investment reviews. The review regime includes - depending on the business operations of the German target company, the identity of the foreign acquirer and the percentage of shares/voting rights to be acquired - a notification requirement. The transaction is then subject to an execution prohibition until it is approved by the BMWi. The BMWi can prohibit a transaction or approve it subject to conditions in order to ensure the public order or security of the Federal Republic of Germany. The 17th AWV amendment extends the notification requirements. The draft also contains clarifications of the procedural rules.
Within the scope of the cross-sector review regime, the reportable facts (so-called regulartory examples) will be increased from 11 to 27. A large number of so-called emerging technologies are thus subject to the reporting obligation. In doing so, the German legislator partly concretises the terminology of the EU Screening Regulation, either by referring to specific German or EU laws such as the Satellite Data Security Act or certain item numbers of Regulation 428/2009 ("Dual-Use-Regulation"). This approach is to be welcomed as it leads to a much clearer delimitation of the relevant activities than the EU rules. Other countries have adopted the terminology of the EU regulation one-to-one. Nevertheless, some of the new German reporting requirements are also unclear. The draft bill contains the following additional reporting requirements:
The "sharpening" of some existing regulatory examples is to be welcomed. Thus, the legisla-tor clarifies with regard to "cloud computing services" (Section 55a (1) no. 4 AWV) that the server capacities used for the respective cloud computing service and not the total capacity of the server infrastructure used (e.g. Amazon Web Services), which may for the most part have no relation to the cloud computing service, are decisive for reach-ing the threshold value. The old version of the regulatory example had led to considera-ble legal uncertainty in cases where the target company offers services via "software as a service".
Guideline and general questions and answers
by multiple authors