Germany will increase the screening of foreign investments
On 29 November 2019, the German Federal Ministry for Economic Affairs and Energy published Guidelines for German and European industrial policy, titled Industriestrategie 2030, (Industry Strategy 2030) which so far is only available in German.
The German initiative follows the general trend in the European Union to reflect on the competitive environment for manufacturing products and providing services in Europe and the world. According to the German Minister of Economic Affairs and Energy, Peter Altmaier, the new policy addresses two major issues: improving the framework for manufacturing and services in Germany and building a European industrial policy.
Strengthening the competitive environment in Germany
On the first issue, the policy mentions three points, (a) improving the framework for industry in Germany; (b) supporting new technologies; and (c) safeguarding technological sovereignty. Closer screening of foreign direct investments is proposed under the last heading. In this respect, situations that may endanger so-called technological sovereignty should be examined more closely.
Altmaier considers that "technological sovereignty is the essential basis for the functioning of our highly developed industrial society. It can only be secured permanently if the relevant industrial capital is available and controllable in Germany and Europe". Third country investments in critical infrastructures or defence technology companies should be closely screened in order to avoid the loss of know-how and maintain self-determination in key technological fields. Soon, a new "Strategy Paper for Strengthening the German Security and Defence Industry" will be published. The Guidelines recommend reviewing existing rules, setting up a cooperation mechanism to involve other EU Member States and the European Commission in the procedure, and specifying the test criterion "public policy or public security".
Moreover, the Guidelines accept that, in cases where the narrow scope of existing investment control rules do not allow for the imposition of restrictions or the prohibition of a takeover, the German State can support private sector players and encourage them to acquire stakes in the companies concerned as "white knights".
Finally, the German Bank for Reconstruction (Kreditanstalt für Wiederaufbau, KfW) can also consider and provide temporary participation in enterprises. This has already been done in some cases in the past.
It must thus be expected that German investment controls will become more restrictive and the procedure more onerous in the future.
As regards the European dimension of investment controls, the Guidelines mention that the European Union has already adopted a Regulation of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments (Regulation (EU) 2019/452) (as already pre-informed in our articles in the International Briefing December 2018 entitled "The EU‘s path to uniform and stricter standards for screening foreign investments" (Link) and in the International Briefing March 2019 entitled "New EU uniform and stricter standards for screening foreign investments" (Link). Germany will align its rules on screening foreign direct investments with the EU rules sometime in 2020.
Strengthening the European Union framework
The above-mentioned proposals on modifying the rules and procedures in Germany should, in the opinion of the German Minister for Economic Affairs and Energy, be accompanied by changes at the European level.
As regards the control of mergers and acquisitions, a stronger focus should be placed on the analysis of global competition. Following the discussions of the Siemens-Alstom rail merger case, France, Germany and other countries requested a more thorough assessment of potential competition from companies outside the internal market, with particular attention paid to competition from State-controlled or subsidised companies from third countries.
As far as the rules governing competition are concerned, the policy recommends an amendment to the rules for companies with market power to take account of digital business models and the dominance of platforms. The Ministers for Economic Affairs of Germany, France and Poland have presented concrete proposals for modernising the EU competition framework on this issue.
For further information please contact Dr Rainer Bierwagen.