Germany joins EU cooperation scheme for FDI screening

Out-Law News | 29 Oct 2020 | 1:41 pm | 1 min. read

Germany has amended its Foreign Trade and Payments Regulations to join the coordinated approach to screening foreign direct investments (FDI) by the EU member states.

EU member states have decided to cooperate more closely in the FDI screening process. Germany has amended its Foreign Trade and Payments Regulation. The amendment came into force today.

The implementation of the EU screening regulation was achieved through amendments to the Foreign Trade and Payments Act. Apart from the new cooperation mechanism, the EU screening regulation also provides for suggestions to a unified approach on FDI screening in the EU member states.

The purchase of shares in a company is subject to FDI screening, especially when the target company is part of the EU’s critical infrastructure. Foreign investors wishing to acquire EU-based companies come under more scrutiny too.

New screening criteria for FDI came into force in July 2020. Now, another amendment of the Foreign Trade and Payments Regulation has come into force, by which "the preparations for a new EU-wide cooperation mechanism in FDI screening are now completed," according to the German Federal Ministry of Economy and Energy (BMWi).

"The future cooperation mechanism between the member states is the second pillar of the new EU FDI framework ," said Dr Sandra Schuh, an expert in M&A transactions at Pinsent Masons, the law firm behind Out-Law. "Member states will be required to inform the European Commission and other member states of any ongoing FDI screening. Each member state may issue comments to the screening member state if it determines that a particular FDI screening in another member state is likely to affect its security or public order." The member state screening the FDI must give due consideration to the other member states' comments, Dr Schuh said.

The BMWi has established a national contact point within its authority that will coordinate the exchange with other EU member states and the EU Commission.

The new EU-wide cooperation mechanism shall provide for the protection of the public order and security in the EU and create a level playing field across Europe when examining FDI, the BMWi said.

According to the BMWi, a further reform of the German Foreign Trade Regulation is already in progress, by which manufacturers and developers of high and future technologies shall be included in the particularly audit-relevant case groups.