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
Government Decision Process In sector-specific screening (defence and certain IT encryption companies), the MoE may issue a transac - tion ban or security-related orders in agreement with the Federal Foreign Office, the Federal Ministry of the Interior and the Federal Ministry of Defence. For all other sectors, the prohibition of a transaction requires the consent of the federal government (full cabinet including the chancellor and ministers), and security- related orders require the approval of the Federal For - eign Office, the Federal Ministry of the Interior and the Federal Ministry of Defence, as well as consultation with the Federal Ministry of Finance. Appeals by Investors Against MoE FDI Decisions The foreign investor and other affected transaction parties may generally challenge in court any binding decision of the MoE in FDI screening proceedings. For example, an injunction proceeding aiming for time - ly FDI clearance in relation to a proposed Chinese semiconductor investment was unsuccessful before the Berlin courts in early 2022. A Chinese investor also challenged an FDI blocking decision in court and obtained a favourable judgment in November 2023 for his investment in Heyer Medical (final). However, this judgment had a focus on procedural matters such as due process requirements rather than on substantive security-related considerations. Moreover, another investor won a court case based on the argument that the MoE is not free to terminate an FDI screening with - out a proper final decision (case regarding the German oil refinery PCK; final). In May 2025, a court confirmed the prohibition of an intended redemption of shares of the KLEO GmbH by the Chinese majority shareholders on procedural grounds (the total collateral required to secure the costs of the proceeding was not provided). Further FDI-related litigation is pending in court. Gun-Jumping Rules Foreign investors may sign acquisition agreements for German target companies prior to obtaining FDI approval. However, acquisitions subject to the man - datory FDI filing requirement may not be completed prior to the MoE’s FDI clearance. As long as no FDI clearance has been obtained, it is prohibited to exer - cise voting rights or to disclose certain sensitive infor - mation about the target company to the acquirer. A breach of these requirements (“gun-jumping”) may
rights via German companies, to provide specified services and to make certain investments; • continued transparency measures, including dis - closure or co-operation obligations towards the MoE, and implementation of compliance manage - ment systems; and • certain participation rights in strategic decisions, or even a (pre-emptive) purchase right, for the Ger - man government. In the past, when the MoE or any of the other involved ministries or authorities had security concerns, they frequently aimed to conclude mitigation agreements. In some cases, the MoE might also have requested unilateral commitments on the part of the buy-side and/or the target. More recently, the MoE has instead implemented such remedies in an administrative order. The initial draft of a mitigation agreement is normally provided by the MoE. In many cases, there is certain room for negotiation on contractual commitments. The MoE typically insists that it may enforce key commitments against the involved parties and that non-compliance with these commitments will trigger contractual penalties. In the case of an administrative order, the MoE typically provides an opportunity for comments based on a draft of the remedies. 7.4 National Security Review Enforcement The MoE has broad discretion when deciding on enforcement measures and often requests security- related remedies under a mitigation agreement or an administrative order. As a last resort where there are public order or security concerns, the German government may fully or partially block FDI by way of a prohibition decision (see “Government Decision Process”), which may require unwinding an already closed transaction. So far, the German government has only prohibited a few transactions in its screening practice, but it has also discouraged some transac - tions prior to a decision. In recent years, the application of the FDI screening rules by the German authorities has tightened. By way of example, several Chinese investments in hi- tech, healthcare and infrastructure sectors have failed owing to security concerns in the FDI screening pro - cess.
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