COVID 19 – Control Regime Increase on Foreign Direct Investments in Europe
Part II
Ahead of the Regulation (EU) 2019/452 dated March 19, 2019 regarding foreign direct investment (« FDI »), which will enter into force on 11 October 2020, and in the context of the COVID-19 pandemic, Germany decided in June to strengthen
- the German Foreign Trade and Payments Act (“AWG” :Außenwirtschaftsgesetz) : the proposal amending the FDI Screening rules which passed the German Federal Government on 8 April 2020, was adopted by German Parliament on 18 June 2020,
and
- the Foreign Trade Regulation (“AWV” : Außenwirtschaftsverordnung)
Ahead of the Regulation (EU) 2019/452 dated March 19, 2019 regarding foreign direct investment (« FDI »), which will enter into force on 11 October 2020, and in the context of the COVID-19 pandemic, Germany decided in June to strengthen
- the German Foreign Trade and Payments Act (“AWG” :Außenwirtschaftsgesetz) : the proposal amending the FDI Screening rules which passed the German Federal Government on 8 April 2020, was adopted by German Parliament on 18 June 2020,
and
- the Foreign Trade Regulation (“AWV” : Außenwirtschaftsverordnung)
Such move is part of the measures boosted by several European Union (« EU ») countries, since the break-out of COVID-19 in Europe during Q1 2020, to adapt the FDI screening on their domestic market.
On 3 June 2020, a 15th amendment to the AWV (which also goes by the name “Corona Amendment”) (which provides for specific rules implementing the AWG), came into force in Germany. The purpose here is
- to protect German national interests by increasing the screening process by the relevant German authorities (i.e. the Federal Ministry of Economy and Energy (« BMWi »)),
- in order to more effectively screen and prevent critical company acquisitions from third countries, should such acquisitions endanger German public order or national security (or the EU).
The Corona Amendment applies in particular to companies active in the health sector, such as e.g. companies that develop, manufacture personal protective equipment,medicinal products and vaccines, medical devices, and other medical products for the treatment of infectious disease.
Pursuant to the amendment to the German Foreign Trade and Payments Act adopted on 18 June 2020, it will now be sufficient that an investment is “likely to affect” security or public order. It is no longer required an “actual and sufficiently serious danger affecting a fundamental interest of society”. The focus will now not only be on the effects of an acquisition in Germany, but also on the effects on other EU Member States and on EU programs and projects.
Planned critical acquisitions of at least 10 % of the voting rights in German companies active in the listed sectors by investors from third countries, must be notified to the German BMWi on a mandatory basis. Third countries mean non-EU states, it being specified that acquirers from EFTA states (i. e. Iceland, Liechtenstein, Norway, and Switzerland) not being considered non-EU states for the purposes thereof.