In Germany, acquisitions of companies by foreign investors are subject to investment control in certain sensitive areas. The control regime is aimed at safeguarding essential security interests and limiting foreign influence on German key industries and technologies. It varies depending on the industry concerned: A notification and clearing requirement only applies to acquisitions in the areas of certain military and IT security products. Other acquisitions in industries relevant to Germany’s public order or security are subject to voluntary notification. In such cases, companies may ask for a comfort letter from the authorities, the so-called certificate of non-objection.
In the past, the German Federal Ministry of Economic Affairs and Energy has generally issued such comfort letters swiftly. However, various factors indicate that the Ministry has changed its approach, especially with regard to Chinese inventors: (i) review periods, which were previously very short, have increased significantly; (ii) the recent denial of a certificate of non-objection for the acquisition of Osram’s lamp division Ledvance; and (iii) the revocation of the certificate of non-objection for the acquisition of Aixtron by Chinese investors, which had initially been granted. This is due to a fear of strategic investments in leading German companies by state driven and state financed foreign investors, particularly in the technology sector.
According to a recent strategy paper, the German Federal Governmentcurrently assesses an expansion of foreign investment control, particularly in the high tech sector. In this context, the governments of Germany, France and Italy have also asked the EU Commission in a joint declaration to develop an EU instrument to control foreign acquisitions of EU companies based on economic criteria. Hence, an expansion of foreign investment control can be expected on the legislative level as well.
In view of these recent developments, parties involved in transactions with foreign investors, particularly Chinese ones, should (i) take foreign investment control even more serious than before and (ii) insist upon contractual safeguards, which take into account the increased risks and secure their legal position.