GERMANY TRENDS AND DEVELOPMENTS Contributed by: Daniel Möritz, Jan Bonhage, Hendrik Bockenheimer, Carl-Philipp Eberlein, Markus Ernst, Matthias Rothkopf, Christoph Wilken and Alexander Rang, Hengeler Mueller
Moreover, the German government expanded the scope of the sector-specific FDI regime. This extend - ed regime covers, among other things, targets that develop, manufacture or modify military or defence technologies and goods listed in Part I Chapter A of the German Export List, as well as further defence technologies subject to classified patents and utility models. German FDI screening standard In line with most other FDI screening regimes, the Ger - man screening standard of “public order and security” is rather generic and leaves some regulatory leeway for the MoE. The recent amendments of the standard have reinforced this regulatory trend. The screening criterion of a “likely effect” on public order or security has replaced the “actual and serious threat” that was previously required. Thus, the MoE’s margin of discre - tion has increased considerably. Furthermore, the protected interest “public order or security” is not limited to the German perspective. The scope of the screening includes the security interests of other EU member states and certain EU projects and programmes. In any case, investments in security-sensitive sectors and businesses (eg, defence, critical infrastructure and security-cleared businesses) – as well as certain types of investors (eg, state-financed investors fol - lowing particular state industrial policy) – tend to be scrutinised intensely by the MoE. The MoE considers (German) vulnerabilities as well as (foreign) threats when screening FDI. Vulnerabilities: critical infrastructure and sensitive targets Although the German FDI screening is not limited to specific sectors or industries, it is not carried out across all sectors with the same regulatory intensity. The defence sector has traditionally been at the core of (national) security considerations. In addition to this, the German FDI scheme emphasises the security sen - sitivity of its critical infrastructure. Current laws pro - tect a broad range of infrastructures in many sectors, including energy, water, IT/TC, health, finance and insurance, as well as logistics, transport and traffic.
For each critical sector, German laws on critical infra - structure define the installations and systems (or parts thereof) belonging to the critical infrastructure, and the relevant thresholds. Those thresholds are generally derived by assuming that infrastructures supplying at least 500,000 persons are to be considered critical. A broadening of the scope of critical infrastructures is in discussion. Software providers creating or amending sector-spe - cific software for the operation of critical infrastructure are also considered particularly critical if the software has been specifically developed or modified for criti - cal infrastructure use. The German FDI scheme also addresses critical technologies (as outlined earlier). Relevant threats The German FDI screening regime historically had no specific indication of what acquirer-related factors were considered (potentially) critical. This changed in 2020. The German FDI laws since then specify that the MoE may, in particular, consider whether the acquirer is controlled by a foreign government (eg, owing to state funding “beyond a marginal extent”) or poses the “serious risk” of committing certain criminal or administrative offences. Such factors have also been emphasised by the EU Screening Regulation. The German authorities may also use specific guid - ance for investors from certain countries on a case-by- case basis. By way of example, the German govern - ment published its China strategy in July 2023, which notes that Chinese investments pose particular chal - lenges for Germany due to the political and economic circumstances in China. The new German government envisaged to further update its China strategy. The MoE has considerable leeway when assessing acquirer-related risks for public order or security. However, the mere fact that a foreign state is involved in certain FDI (eg, via a state fund) does not mean that the MoE will necessarily intervene. German FDI interventions in recent years The publicly known MoE interventions in the past five years underline that interventions typically occur in scenarios where both a German vulnerability and a perceived foreign threat are involved. This may be
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