GERMANY Trends and Developments Contributed by: Bettina Mertgen, Felix Siebler, Michael Herold and Ricarda Schelzke, GvW Graf von Westphalen
I. Export Control and Sanctions: Enforcement, Anti-Circumvention and Supply Chain Scrutiny Export controls and sanctions have become a central element of Germany’s national-security and industrial policy framework. For defence companies and manu - facturers of dual-use goods, compliance is no longer limited to obtaining export licences and screening business partners. Regulatory authorities are increas - ingly focusing on supply chain transparency, end-use controls and the prevention of sanctions circumven - tion, particularly in connection with Russia and Bela - rus. The result is a significantly broader compliance burden for companies operating in sensitive sectors. Growing focus on enforcement and anti- circumvention With the introduction of successive EU sanctions packages against Russia, regulatory attention has shifted from the adoption of new restrictions towards effective enforcement. German authorities, including the Federal Office for Economic Affairs and Export Control (BAFA), increasingly expect companies to identify and mitigate diversion risks throughout their distribution networks. Particular scrutiny is placed on exports to intermedi - ary jurisdictions that may be used to redirect goods to sanctioned destinations. Companies exporting dual-use items, advanced technologies, electron - ics, machine tools or defence-related components are therefore expected to assess not only their direct customer but also the ultimate end user and intended end use of their products. As a consequence, organisations should ensure that their compliance programmes include: • enhanced customer and intermediary due dili - gence; • risk-based end-use and end-user verification; • contractual safeguards against re-export to sanc - tioned destinations; • monitoring of unusual trade routes and payment structures; and • escalation procedures for potential circumvention indicators.
For many companies, demonstrating the effectiveness of these controls has become as important as obtain - ing the necessary export authorisations themselves. Expansion of EU sanctions measures The EU continues to expand restrictive measures directed at Russia’s military-industrial base and the circumvention networks supporting it. Recent sanc - tions packages have introduced additional export restrictions for industrial goods, advanced technolo - gies and dual-use items, while also extending controls to entities located in third countries that are consid - ered to support Russian procurement efforts. Further - more, the EU has strengthened requirements aimed at preventing indirect exports through third countries and has adopted additional measures targeting the so-called “shadow fleet” and other mechanisms used to circumvent sanctions. These developments require companies to maintain continuous monitoring of sanctions developments rather than relying on periodic compliance reviews. Contractual relationships, customer portfolios and supply chains that were compliant when initially estab - lished may require reassessment as sanctions evolve. Emerging technologies German and European export-control policy increas - ingly focuses on protecting critical technologies and preventing unwanted technology transfer. Alongside traditional military and dual-use goods, regulators are paying closer attention to emerging technologies such as artificial intelligence (AI), quantum technologies, semiconductors, advanced manufacturing equipment and cyber-related technologies. II. Foreign Direct Investment Screening and Upcoming Changes in Germany and the EU Foreign investment into Germany and Europe is becoming subject to significantly tighter government oversight. The EU is overhauling its screening frame - works, meaning that investors acquiring companies or assets in sensitive sectors should expect more regulatory touchpoints and longer deal timelines. This directly impacts the legislation in Germany and other EU member states.
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