GERMANY Trends and Developments Contributed by: Leif Gösta Gerling and Matthias Krämer, LPA
the JV operates. Although it is important to take these into account, they are not covered in the following assessment. In the areas of market surveillance law and merger control, German merger control regulations continue to be strictly applied in the context of (cross-border) JVs, which continue to play a central role. The enforce - ment powers of the German (antitrust) authorities in this area, however, have been tightened. In certain industrial sectors (eg, steel or telecommunications), increasingly stringent requirements are being imposed on the permissibility of JVs (especially cross-border ones). A prominent example of this was the envisaged JV between Thyssen Krupp and Tata Steel, which ulti - mately failed due to the exercise of an EU veto. Legal issues such as compliance, governance and ESG are becoming increasingly important. JVs and JV agreements must therefore include detailed provi - sions on data processing, IP, exit/deadlock mecha - nisms, sanctions, whistle-blowing and ESG reporting in order to meet these stricter requirements. Regarding the accounting guidance of JVs, the accounting principles in Germany have remained independent of International Standards (US GAAP and IAS). Under local GAAP (HGB), both the equity method and, under certain conditions, the proportion - ate consolidation method can still be applied. This method is, cum grano salis, comparable to IAS 31 until 2014. In contrast to US GAAP, for example, which has recently undergone a partial revision and adjustment of the equity method, both options remain eligible under German GAAP. German export control laws such as the Foreign Trade and Payments Act and the Foreign Trade and Pay - ments Ordinance, as well as special competition laws such as the Foreign Subsidy Regulation (FSR), play an even more important role, particularly for cross-border JVs involving countries outside the EU such as India, UAE, China or the USA. When establishing JVs involv - ing companies from these countries, any consultation usually begins with a detailed FDI and, depending on the “deal size”, FSR analysis.
In this context, it should be noted that the EU ini - tiated several investigation procedures in 2024 and 2025 regarding the participation of Chinese investors in public tenders for wind farm and railway projects. This also affects JVs established in Germany in which the Chinese JV partners contribute capital or tech - nologies. There is a growing concern that this focus on screening procedures involving Chinese investors will increasingly strain existing relations between the EU and China. Unfortunately, however, this focus can also lead to increased tensions between the EU and the national governments of member states, as the EU’s “interference” in national affairs in the context of public procurement affects opportunities for member states. This is clearly illustrated by the example of Bulgaria’s Transport Ministry’s public tender in the field of electric push-pull trains and related maintenance and training services. Initially, two bidders applied for the project: one Chinese (CRRC, a state-owned train manufac - turer) and one Spanish, with the Chinese bidder’s offer being half the amount of that of the Spanish bidder. However, the European Commission had expressed concerns about the remarkably low bid and concluded that it could only have been made possible by (undis - closed) state subsidies. Before a final decision could be made by the European Commission, the Chinese bidder withdrew its bid. In view of the remaining (twice as high) bid, Bulgaria withdrew the tender and initiated a new procedure. From a tax perspective, a recent development regard - ing tax breaks for granting shares to employees (stock options) could be of interest to JVs. It is not a pre - requisite that these be granted in the company with which the manager has a contractual relationship; a shareholding within the “group” is also possible. This means that granting shares in the holding legal entity is also permissible and even preferable. In the past this was always associated with a dry income issue, but taxation has now been restructured. Nowadays, managers will only have to pay tax when they leave the company or when the sale of the shares generates actual capital gains. This puts the modernised taxation concept closer to what we are familiar with in other industrialised jurisdictions, especially in Anglo-Saxon countries. It significantly increases the attractiveness
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