GERMANY LAW AND PRACTICE Contributed by: Daniel Möritz, Jan Bonhage, Hendrik Bockenheimer, Carl-Philipp Eberlein, Markus Ernst, Matthias Rothkopf, Christoph Wilken and Alexander Rang, Hengeler Mueller
1. Legal System and Regulatory Framework 1.1 Legal System
Reviewable Foreign Investments In the defence sector, including items on the export control list and IT encryption sector (producing, or having produced, public authority-approved IT prod - ucts for processing of classified information), the MoE can screen any direct or indirect investment of a non- German investor in a German company reaching or exceeding a screening threshold of 10% of the voting shares (sector-specific screening). Regarding German target companies in any other sector, the MoE can screen any investment by a non- European investor (ie, non-EU/non-EFTA (European Free Trade Association) investor) reaching or exceed - ing applicable screening thresholds. A 10% or 20% screening threshold (depending on the target’s activi - ties) applies to certain particularly security-relevant transactions, including investments in target compa - nies holding listed critical infrastructure in the energy, water, nutrition, IT and telecommunications, finance and insurance, health, transport and traffic sectors, as well as media and other particularly sensitive busi - nesses – for example, listed critical technologies in the areas of aerospace, AI, quantum mechanics, robot - ics, and semiconductors. In other areas, the screening threshold is 25% of the voting shares. The acquisition of a German company, or a specific business line of such company, by way of an asset deal also lies within the scope of German FDI screen - ing. Follow-up investments by existing investors above the applicable 10%/20%/25% entry threshold are review - able if the cumulated post-closing voting rights share reaches or exceeds subsequent thresholds of (20%, 25%), 40%, 50% or 75%. FDI Filing and Clearance Requirement An FDI filing and clearance requirement applies to any (particularly sensitive) transactions subject to the lower 10% or 20% entry screening thresholds. Such acquisitions only become fully effective upon FDI clearance of the transaction. The statutory filing and clearance requirement is complemented by crimi - nally sanctioned gun-jumping prohibitions, including on the exercise of voting rights in the target company
Germany is a traditional civil law jurisdiction with codi - fied sets of rules applicable to contracts, corporate law and other commercial law matters. Regulation applicable to businesses operating in Germany is set at EU, national, state and local level, with the most relevant cornerstones of the legal framework for for - eign direct investment (FDI) coming from the EU and national level. Germany has a sophisticated court system with spe - cialised courts for tax, social security matters, employ - ment and public law, and the Federal Constitutional Court is the eminent court for matters of constitutional law. In addition, courts established at the EU level – in particular, the ECJ – have jurisdiction over certain Germany introduced an FDI screening regime in 2009, having introduced one in defence matters in 2004. The German Federal Ministry for Economic Affairs and Energy (MoE) carries out the FDI screenings and involves other ministries and authorities. A sector-spe - cific screening applies for the defence (including items on the export control list) and IT encryption sector (for IT products used for classified information). The cross-sectoral screening applies to all other sectors. Generally, the MoE can screen any FDI in the scope of the FDI screening, either upon FDI filing or its own initiative (ex officio). The MoE may restrict or prohibit a transaction if it is likely to affect public order or secu - rity and it may unwind completed transactions. If no filing is made, the possibility of an ex officio screening – and thereby transaction insecurity – generally lasts for up to five years after signing. The FDI screening rules are regulated in the Foreign Trade Act and the Foreign Trade Ordinance, as well as in certain specific laws such as those on critical infrastructures. Certain aspects are further specified in a general ruling and the regulatory guidelines of the MoE. matters concerning questions of EU law. 1.2 Regulatory Framework for FDI
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