GERMANY Law and Practice Contributed by: Leif Gösta Gerling, Matthias Krämer, Anna Reuber and Jiabao Gerling-Li, LPA
For transactions falling within the scope of German FDI control, restrictions on co-operation with JV parties may be imposed, particularly when national security or foreign policy considerations are at stake. The BMWK has the authority to prohibit or impose conditions on a foreign investment if it is deemed to pose a threat to public order or national security. This includes cases where one of the JV parties is linked to a state or entity that is subject to international sanc - tions. National Security Regulations and Foreign Investment Germany has a strict regulatory framework for nation - al security, which also applies to the creation of JVs involving foreign investors. Any acquisition reaching certain thresholds (10%, 20% or 25% of voting rights) must be notified to the BMWK, particularly in sensi - tive sectors such as defence, cybersecurity or critical infrastructure. Restrictions on Foreign Participation in Joint Ventures In certain circumstances, foreign participation in a JV may be subject to restrictions. For instance, restric - tions may apply if the threshold of 25% of voting rights is exceeded, or according to specific thresholds (10% or 20%), depending on the sector. The BMWK also monitors investors established in the EU when they are suspected of circumventing the rules via a European subsidiary controlled by a com - pany from a third country. The BMWK has the author - ity to approve or decline transactions, including those involving JVs. It may also instigate an ex officio review procedure up to five years after the JV agreement has been signed, even in the absence of prior notification. Notification obligations are the sole responsibility of the investor, including in the case of JVs. Sectors Subject to Specific Restrictions and Requirements Sensitive sectors subject to specific requirements in terms of foreign investment control include: • defence; • critical infrastructure (energy, telecoms, health, transport);
• sensitive technologies (AI, semiconductors, cloud computing, autonomous vehicles, satellites); • critical raw materials; • influential media; and • large-scale agriculture. Any JV involving foreign investment in these areas may be subject to a review procedure. The BMWK is planning to expand the list of sensi - tive sectors to include cybersecurity and strategic raw materials, while lowering thresholds and strengthen - ing requirements in sensitive cases. 3.4 Competition Law and Antitrust Antitrust Regulations Applicable to Joint Ventures German antitrust regulations do not differentiate between full-function and non-full-function JVs. According to Section 37 (4) of the German Act against Restraints on Competition (GWB), any combination of undertakings that enables one or several undertakings to directly or indirectly exercise a material competi - tive influence on another undertaking is considered a concentration. In addition, the German merger control regime is applicable to any acquisition of joint control over an existing undertaking. Joint control is defined as the ability for two or more entities to exert significant influ - ence over the operations of a company. This control can be established de jure or de facto through veto rights on strategic business decisions relating to the company under joint control. German merger control also applies to the acquisition of minority shareholdings of 25% or more of the capi - tal or voting rights of a company, even if such holdings do not confer significant influence over the company. JVs are subject to a dual regime: merger control and control of anti-competitive agreements. Section 1 of the GWB establishes the rules for evaluating anti- competitive agreements, which are pertinent to the assessment of the collaborative aspects of a JV. The collusive effects of co-ordination between JV parties are particularly emphasised in this regard.
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