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A Practical Approach to the New German Foreign Investment Regime – Lessons to be Learned from Merger Control

Published online by Cambridge University Press:  06 March 2019

Florian Stork

Abstract

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The author presents in this paper the new German foreign investment regime entered into force in the spring of 2009. He sets out the basic principles of the regime as well as its enforcement in practice. According to the new German foreign investment regime, the German Federal Ministry of Economics and Technology (BMWi) may examine and prohibit purchases of German companies by foreign investors if they pose a severe threat to public policy or security. Certain transactions, however, fall within the “safe harbour” or are otherwise exempted so that the BMWi has no right of interference. The author presents several exemptions from the scope of application of the regime, which can be either identified from the wording of the law by reverse argument or derived from the spirit and purpose of the new foreign investment regime. Furthermore, by presenting the concept of so called “critical infrastructures”, the paper gives valuable guidance to practitioners on what the German administration might consider relevant for public policy or security. The last part of the paper summarizes the filing and the review process. The parties may, in order to receive clearance for their transaction, notify their transactions to the BMWi and receive a certificate of non-objection. While, this notification is wholly voluntary, parties who do not apply for clearance bear the risk that their transactions are blocked or unwound if the BMWi decides to investigate the transaction within three months from signing ex officio.

Type
Developments
Information
German Law Journal , Volume 11 , Issue 2 , 11 February 2010 , pp. 260 - 274
Copyright
Copyright © 2010 by German Law Journal GbR 

References

1 The EU comprises Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.Google Scholar

2 The EFTA comprises Iceland, Liechtenstein, Norway and Switzerland.Google Scholar

3 See, Rudiger Theisemann, Aussenwirtschaftsrecht and Corporate Investments in Germany - New Hurdles for Foreign Investors, 10 German Law Journal No. 11 1495 (2009).Google Scholar

4 BMWi, Frequently asked questions about the legislation concerning the acquisition of German enterprises by foreign investors (Amendment of the German Foreign Trade and Payments Act and the implementing regulation), Question 15, available at: http://www.bmwi.de/BMWi/Redaktion/PDF/Gesetz/faqs-13-gesetz-zur-awg-englisch,property=pdf,bereich=bmwi,sprache=de,rwb=true.pdf, last accessed 27 January 2010.Google Scholar

5 The amendments are published in Federal Law Gazette I 2009, 23 April 2009, p. 770.Google Scholar

6 The English translation of Section 53 AWV reads:Google Scholar

  1. “(1)

    “(1) The BMWi may, within a period of three months following the conclusion of the contract governed by the law of obligations on the acquisition of voting rights, examine the purchase of a resident company or a direct or indirect acquisition of shares of such a company by a non-EU resident in order to determine whether the purchase will jeopardise the public policy or public security of Germany; in cases involving a public offer, the period begins with the publication of the decision to make the offer or with the publication of the fact that control of the company has been attained. This shall not apply if the direct or indirect share of voting rights held by the non-EU purchaser in the company in question after the purchase is less than 25%. When the share of voting rights held by the non-EU purchaser is being calculated, any voting rights held by other companies in the company to be purchased shall be allocated to the non-EU purchaser where the non-EU purchaser holds 25% or more of the voting rights of the other company. The voting rights of third parties with which the non-EU purchaser has concluded an agreement on the joint exercise of voting rights shall also be accorded to the purchaser. Branches and permanent establishments belonging to the purchaser shall not be considered as EU resident. The BMWi may under the preconditions of sentences 1 and 2 also examine the purchase of a EU resident company or a direct or indirect participation in such a company by a EU resident company in which a non-EU resident holds at least 25% of the voting rights if there are indications that an abusive arrangement or circumvention transaction has taken place in order to circumvent an examination pursuant to sentences 1 and 2. Non-EU purchasers from Member States of the EFTA shall be afforded the same treatment as EU resident purchasers. The BMWi shall notify the purchaser of its decision to examine an acquisition pursuant to the first sentence.

  2. (2)

    (2) If the BMWi has informed the purchaser of its decision to examine an acquisition in accordance with the first sentence of Section 53(1), the purchaser shall be required to communicate to the BMWi all documents relating to the purchase pursuant to sentence 2. The documents to be communicated shall be determined by the BMWi by means of an announcement in the Federal Gazette. The BMWi shall inform the Federal Government of the results of the examination. The BMWi may, within a period of two months following receipt of the complete documents, prohibit or issue orders where necessary in order to safeguard the public policy or public security of the Federal Republic of Germany. Prior consent has to be obtained from the Federal Government before a purchase is prohibited or orders are issued.

  3. (3)

    (3) At the written request of a purchaser, in which the outlines of the planned purchase, the purchaser and his field of business must be presented, the BMWi shall issue a certificate stating that there is no objection to the acquisition (certificate of non-objection), if the purchase raises no concerns concerning the public policy or public security of the Federal Republic of Germany. The certificate of non-objection shall be deemed to have been issued if the BMWi does not open an examination procedure pursuant to Section 53(1) sentence 1 within one month of receipt of the application.

  4. (4)

    (4) In order to implement a prohibition the BMWi may take the necessary measures. In particular it may: 1. prohibit or limit the exercise of voting rights in the purchased company where they belong to or are to be allocated to a non-EU purchaser, or 2. appoint a trustee to reverse a purchase that has already taken place.”

7 Council Regulation (EEC) No 2913/92, 12 October 1992 established the Community Customs Code.Google Scholar

8 Rainer Traugott and Philipp Strümpell, Die Aktiengesellschaft, 186, 190 (2009); Harmut Krause, Betriebs-Berater, 1082,1086 (2009); Oliver von Rosenberg, Juliane Hilf, and Martin Kleppe, Der Betrieb, Section 831, 832 (2009); Christoph H. Seibt and Bernward Wollenschläger, Zeitschriftfür Wirtschaftsrecht und Insolvenzpraxis, 833, 835 (2009); Thomas Voland, Europäische Zeitschriftfür Wirtschaftsrecht, 519, 520 (2009). This has significant practical relevance because many private equity funds have their registered seat on the Channel Islands.Google Scholar

9 See, Section 53(1) of the AWV (otherwise all large, globally active companies were EU residents).Google Scholar

10 E.g. the formation of a EU resident letterbox company, see Explanatory Memorandum, BT-Drs. 16/11898, 12.Google Scholar

11 Explanatory Memorandum, BT-Drs. 16/11898, 12.Google Scholar

12 Rainer Traugott and Philipp Strümpell, Die Aktiengesellschaft, 186,191 (2009); Harmut Krause, Betriebs-Berater, 1082,1086 (2009).Google Scholar

13 Oliver von Rosenberg, Juliane Hilf and Martin Kleppe, Der Betrieb, 831, 833 (2009); Christoph H. Seibt and Bernward Wollenschläger, Zeitschriftfür Wirtschaftsrecht und Insolvenzpraxis, 833, 836 (2009); Georg-Pottmeyer in Hans-Michael Wolffgang/Olaf Simonsen, AWR, Section 52, para 22; Friedrich in Ernst Hocke/Siegfried Berwald/Heinz D. Maurer/Friedrich, AWR, Section 52, para 23 (the latter two with regard to the similarly structured Section 52 AWV); dissenting Thomas Voland, Europäische Zeitschriftfür Wirtschaftsrecht, 519, 520 (2009): only share deals.Google Scholar

14 Georg-Pottmeyer in Hans-Michael Wolffgang and Olaf Simonsen, AWR, Section 52, para 22; Friedrich in Ernst Hocke, Siegfried Berwald, Heinz D. Maurer, Friedrich, AWR, Section 52, para 23 (both with regard to the similarly structured Sec. 52 AWV); dissenting Christoph H. Seibt and Bernward Wollenschläger, Zeitschriftfür Wirtschaftsrecht und Insolvenzpraxis, 833, 836 (2009).Google Scholar

15 In Germany, there exists a pre-merger notification requirement if there is a concentration as defined by the Act Against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB) and if the participating enterprises had a combined worldwide turnover of more than € 500 million in the last financial year, and one participating enterprise had a domestic turnover of more than € 25 million in the last financial year, and another participating enterprise reached a domestic turnover of more than € 5 million in the last financial year and if no de-minimis exemptions apply.Google Scholar

16 See, wording of Section 53(1): This [right to examine a transaction] shall not apply if…”.Google Scholar

17 In favour of a relative attribution: Christoph H. Seibt and Bernward Wollenschläger, Zeitschrift für Wirtschaftsrecht und Insolvenzpraxis, 833, 838 (2009); Thomas Voland, Europäische Zeitschriftf ür Wirtschaftsrecht, 519, 520 (2009); Georg-Pottmeyer in Hans-Michael Wolffgang and Olaf Simonsen, AWR, Section 52, para 26 with regard to the similarly structured Section 52 of the AWV. In favour of an absolute attribution: Katarina Kollmann, Auβenwirtschaftliche Praxis, 205, 206 (2009).Google Scholar

18 In favour: Oliver von Rosenberg, Juliane Hilf, and Martin Kleppe, Der Betrieb, 831, 833 (2009); Christoph H. Seibt and Bernward Wollenschläger, Zeitschriftfür Wirtschaftsrecht und Insolvenzpraxis, 833, 836 (2009); Georg-Pottmeyer in Hans-Michael Wolffgangand Olaf Simonsen, AWR, Section 52, para. 22; Friedrich in Ernst Hocke, Siegfried Berwald, Heinz D. Maurer, and Friedrich, AWR, Section 52, para 23 (the latter two with regard to the similarly structured Section 52 AWV); dissenting Thomas Voland, Europäische Zeitschriftfür Wirtschaftsrecht, 519, 520 (2009): only share deals.Google Scholar

19 Georg-Pottmeyer in Hans-Michael Wolffgang and Olaf Simonsen, AWR, Section 2, para. 22; Friedrich in Ernst Hocke, Siegfried Berwald, Heinz D. Maurer, and Friedrich, AWR, Section 52 para. 23 (both with regard to the similarly structured Section 52 AWV); dissenting Christoph H. Seibt and Bernward Wollenschläger, Zeitschriftfür Wirtschaftsrecht und Insolvenzpraxis, 833, 836 (2009).Google Scholar

20 Christoph H. Seibt and Bernward Wollenschläger, Zeitschrift für Wirtschaftsrecht und Insolvenzpraxis, 833, 836 (2009), with further examples; Georg-Pottmeyer in Hans-Michael Wolffgang/Olaf Simonsen, AWR, Section 52, para. 23 with regard to the similarly structured Sec. 52 AWV; Friedrich in Ernst Hocke, Siegfried Berwald, Heinz D. Maurer, and Friedrich, AWR, Section 52, para. 19: Also no right to examination by the BMWi if limited partnership shares are acquired.Google Scholar

21 See, supra, note 4, Question 16.Google Scholar

22 Klaus-Marinus and Hoenig, Börsenzeitung, 23 September 2009, 2, “Mehr Verwaltungsaufwand für Unternehmen und Ministerium”, giving an account of the BMWi's position in TDK/Epcos; dissenting: Rainer Traugott and Philipp Strümpell, Die Aktiengesellschaft, 186, 191 (2009); Harmut Krause, Betriebs-Berater, 1082, 1083 (2009); Rudiger Theiselmann, 10 German Law Journal No. 11, 1495, 1498 (2009).Google Scholar

23 In accordance with Section 52 of the AWV an examination is conducted, provided that the transaction results in the non-EU purchaser obtaining at least 25% of the voting rights in the company and thus potentially holding a blocking minority.Google Scholar

24 Klaus-Marinus and Hoenig, Börsenzeitung, 23 September 2009, 2, “Mehr Verwaltungsaufwand für Unternehmen und Ministerium”, giving an account of the BMWi's position in TDK/Epcos; dissenting: Christoph H. Seibt and Bernward Wollenschläger, Zeitschrift für Wirtschaftsrecht und Insolvenzpraxis, 833, 836 (2009).Google Scholar

25 Higher Regional Court of Düsseldorf, WuW/E DE-R, 647 ff. – OTZ; Rainer Bechtold, GWB, 5th ed. 2008, Section 37, para 46.Google Scholar

26 Explanatory Memorandum, BT-Drs. 16/10730, 2.Google Scholar

27 On a general point, see, Georg Ress and Jörg Ukrow in Eberhard Grabitz and Meinhard Hilf, EUV/EGV, Art. 58, para 33 et seq.; for the foreign investment control regime in particular, see Weller, ZIP, 857, 861 (2009).Google Scholar

28 According to the new numbering of the TFEU (former EC-Treaty) by the Treaty of Lisbon, which has entered into force on 1 December 2009.Google Scholar

29 Explanatory Memorandum, BT-Drs. 16/10730, 11.Google Scholar

30 See, supra, note 4, Question 2.Google Scholar

31 Case C-463/00, Spain v. Commission, 2003 E.C.R. I-4581, para. 71.Google Scholar

32 Id. Case C-174/04, Italy v. Commission, 2005 E.C.R. I-4933, para. 40.Google Scholar

33 Case C-174/04, Italy v. Commission, 2005 E.C.R. I-4933, para. 40.Google Scholar

34 Case C-483/99, France v. Commission, 2002 E.C.R. I-4781, para. 47; Case C-503/99, Belgium v. Commission, 2002 E.C.R. I-4809, para. 46; Case 72/83, Campus Oil Limited, 1984 E.C.R. 2727, para. 34; see also, Case C-398/98, Greece v. Commission, 2001 E.C.R. I-7915, para. 29 et seq; Case C-463/00, Spain v. Commission, 2003, E.C.R. I-4581, para. 71.Google Scholar

35 Explanatory Memorandum, BT-Drs. 16/10730, 11; Georg Ress and Jörg Ukrow in Eberhard Grabitz and Meinhard Hilf, EUV/EGV, Art. 58, para 34.Google Scholar

36 Case C-463/00, Spain v. Commission, 2003 E.C.R. I-4581, para. 70; Opinion C-112/05, VW-Gesetz, 2007 Advocate General Colomer, para. 53; available at: http://www.curia.europa.eu, last accessed 27 January 2010.Google Scholar

37 Federal Ministry of the Interior, Nationale Strategie zum Schutz Kritischer Infrastrukturen (KRITIS-Strategy) (2009), 3. Available at: http://www.bmi.bund.de/cae/servlet/contentblob/544770/publicationFile/27031/kritis.pdf, last accessed 27 January 2010.Google Scholar

38 See, https://www.bsi.bund.de/cln_164/ContentBSI/EN/topics/Criticalinfrastructures/Introduction/Definition/definitions.html, last accessed 27 January 2010.Google Scholar

39 In cases involving a public offer, the period begins with the publication of the decision to make the offer or with the publication of the fact that control of the company has been attained, see, Section 53(1) AWV.Google Scholar

40 BMWi, Runderlass Auβenwirtschaft No. 5/2009, Umfang der Meldepflicht gemäβ Sections 53 Abs. 2 der Auβenwirtschaftsverordnung, 21 April 2009. The documents to be submitted must contain the following particulars:Google Scholar

Should this not be formatted the same way as footnote 6?

  1. 1.

    1. The name and the registered seat of the acquirer and of the target business and if necessary of other companies or natural persons that hold 25% or more of the voting rights of these companies, the places of business, the names of the authorised representatives, a current extract from the commercial register or comparable documents, the purchase contract.

  2. 2.

    2. The type of business and a description of the products sold (goods and services) by the acquirer as well as by the target business.

  3. 3.

    3. The annual financial statements and management reports of the last three business years as well as the consolidated financial statements (including the shareholding in other companies) of the companies described in No.1, as far as the company is obliged to prepare such annual statements, prepares them voluntarily or is included in such.

  4. 4.

    4. In the case of an acquisition of shares the amount of the direct or indirect shareholding (voting rights) in the target business held at the time of reporting and the amount to be acquired.

  5. 5.

    5. An acquirer not resident in Germany has to appoint a person that is authorised to accept service in Germany.

  6. 6.

    6. The direct and indirect shareholdings in third undertakings held by the shareholders of the companies described in No.1 as far as the voting rights reach or exceed 25%.

  7. 7.

    7. Information about other shareholdings (in particular any interests in other companies) that reach or exceed 25% of the voting rights as well as the direct or indirect shareholdings that reach or exceed 25% of third companies in the acquirer or in the target business.

  8. 8.

    8. Name of the customers of the products sold by the target business and, if applicable, of its subcontractors as well as of the acquirer as far as he is directly active in the same markets.

  9. 9.

    9. The market shares of the acquirer and of the target business for the products sold, broken down into Germany, other EU member states and – as far as it is known – third countries. The information can be substituted – as the case may be – by documents submitted in the course of an antitrust examination procedure.

41 See, supra, note 4, Question 11.Google Scholar

42 Explanatory Memorandum, BT-Drs. 16/10730, 15.Google Scholar

43 Hans-Joachim Prieß and Bärbel Sachs, Frankfurter Allgemeine Zeitung, 7 October 2009, 23, “Noch kein einziges Verbot für ausländische Investoren.” Google Scholar