GERMANY Law and Practice Contributed by: Bettina Mertgen, Felix Siebler, Michael Herold and Sebastian Faust, GvW Graf von Westphalen
Federal Office for the Protection of the Constitution. These authorities may investigate security concerns and recommend suspension or revocation of clear - ances. Where a security incident, attempted espionage, cybersecurity breach or compromise of classified information is suspected or detected, contractors are generally required to promptly report the incident to the relevant contracting authority and, where applica - ble, the competent security or cybersecurity authori - ties. Operators of critical infrastructure may also have mandatory cyber incident reporting obligations to the Federal Office for Information Security. 5.8 Foreign Ownership, Control and Influence (FOCI) Mitigation Germany addresses risks arising from foreign own - ership, control or influence primarily through its for - eign investment screening regime under the Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance. The Federal Government may review acquisitions of German defence companies by foreign investors and prohibit, restrict or approve transactions subject to conditions where national security concerns are identified. Unlike some jurisdictions, Germany generally does not rely on mechanisms such as special security agree - ments, proxy boards or government-appointed secu - rity directors. Instead, risks are addressed through the investment review process itself. In practice, the Federal Ministry for Economic Affairs and Energy may: • review proposed acquisitions of defence and security-related businesses by foreign investors; • impose conditions to safeguard sensitive technolo - gies, information or capabilities; • require commitments regarding governance, secu - rity measures or access to sensitive information; and • prohibit a transaction if it poses a threat to Ger - many’s public order or national security. Accordingly, Germany’s approach focuses on govern - ment screening and intervention in foreign investments,
rather than ongoing ownership-control arrangements such as proxy boards or security directors. 5.9 Interaction Between National Security Regulation and Other Regimes No information has been provided for this section. 6. M&A, Joint Ventures and Foreign Direct Investment in the Defence Sector 6.1 FDI Screening Legislation and Regulatory Framework Germany’s foreign direct investment (FDI) screening is governed by the Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance. The competent authority is the Federal Ministry for Eco - nomic Affairs and Energy, acting in consultation with other federal ministries. Two regimes are relevant for defence-related transac - tions. • Sector-specific screening (Sections 60–62 of the Foreign Trade and Payments Ordinance) applies to companies manufacturing, developing or modify - ing war weapons, military equipment and classified information technology, as listed in Part 1, Section A of the Export List. • Cross-sectoral screening (Sections 55–59 of the Foreign Trade and Payments Ordinance) may capture defence-adjacent companies active in any of 27 listed critical sectors, such as aerospace, semiconductors, artificial intelligence or critical infrastructure. 6.2 Transactions Subject to FDI Screening Both share deals and qualifying asset deals are in scope, covering direct and indirect acquisitions throughout the entire shareholder chain. The applica - ble voting rights thresholds are: • sector-specific (eg, military and information secu - rity): 10% for any non-German investor; • cross-sectoral, nos 1–7 (eg, critical infrastructure operators, cloud computing, telecommunications, media): 10% for non-EU/non-EFTA investors;
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