The Federal Ministry for Economic Affairs and Climate Action (BMWK) is planning to further tighten the investment screening procedure for assessing foreign direct investments in Germany. This is laid down in a key points paper of the BMWK for a corresponding "Investment Review Act".


Background and context
Already under the current legal situation, the BMWK may examine the direct or indirect acquisition of or investment in a domestic company by a (non-EU) investor on a case-by-case basis. This is to ensure that foreign direct investments do not have any detrimental effects on the public order and security in Germany or the EU. If public security is endangered, approval for the involvement of a foreign investor in a German company can be denied (Fieldfisher already reported on this).

In recent years, the regulations for assessing foreign direct investments have been continuously tightened due to their growing importance, most recently with the 17th amendment to the Foreign Trade and Payments Ordinance in mid-2021, which expanded the list of cases requiring a foreign direct investment filing and subsequent screening from predominantly military-related areas to numerous civilian areas.


Planned amendments
With the planned amendments, the regulations on investment control are to be significantly expanded again, especially against the background of an impending influence of foreign (non-EU) investors on German infrastructure and a possible takeover of German know-how. In the process, the group of critical sectors for which particularly strict screening rules apply is to be enlarged. This includes the semiconductor industry in particular. Another sensitive aspect concerns the reversal of the burden of proof for investments in "particularly security-relevant sectors": Under the current draft, the BMWK would first assume that business in these sectors is "safety-critical". It would then be up to the companies concerned to prove otherwise.

According to a BMWK spokeswoman, the key points of the law are currently being agreed upon by the departments.


Outlook
The BMWK's project follows a general European trend. The EU Commission has also announced that it will present a proposal for stricter regulation of non-European and especially Chinese investments by the end of the year. The focus of these efforts is primarily the protection of European security and economic interests.


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