On 4 April 2022, the German Federal Ministry of Economic Affairs and Climate Protection (Bundesministerium für Wirtschaft und Klimaschutz – “BMWK“) seized control over Gazprom Germania GmbH (“Gazprom Germany“) by implementing measures under the German FDI rules. The decision was executed by way of a publicly issued administrative act, based on grounds of imminent danger for public order and security.
The BMWK installed the German Federal Network Agency (Bundesnetzagentur – “Agency“) as a trustee of all voting rights from shares in Gazprom Germany until 30 September 2022. As a result, the voting rights attached to the shares in Gazprom Germany were transferred to the Agency. No shareholder of Gazprom Germany can therefore exercise any voting rights in Gazprom Germany. In particular, the Agency is entitled to dismiss and appoint members of the management and issue instructions to the management of Gazprom Germany. In addition, the authority to dispose of the assets of Gazprom Germany is subject to the approval of the Agency.
Gazprom Germany had previously acted as a holding company for Gazprom’s activities in Germany and other European countries, including in particular the operation of energy trading, gas transport and the operation of gas storage facilities. Such activities constitute critical infrastructures for purposes of the German FDI rules.
The sequence of events leading to the decision of the BMWK is the following:
- The BMWK became aware of the transfer of all shares of Gazprom Germany from a new shareholders’ list of Gazprom Germany filed with the German commercial register. Pursuant to such new list, as of 25 March 2022 the new sole shareholder of Gazprom Germany is a Russian company called Gazprom export business services LLC (“GPEBS“). While such company’s name indicates it may belong to Gazprom group, the legal and economic ownership of GPEBS remained unclear to the BMWK.
- Based on an excerpt from the Russian Commercial Register the BMWK learned that as of 31 March 2022 all voting rights in GPEBS were transferred to the Russian Joint Stock Company Palmary (“Palmary“). It also remained unclear to the BMWK who the legal and economic owners of Palmary are.
- In addition, Gazprom group announced that it has disposed of its stake in Gazprom Germany on 31 March 2022. None of the transactions were notified to the BMWK.
- Finally, on 1 April 2022 GPEBS adopted a shareholders’ resolution of Gazprom Germany in which, among other things, the decision was taken to liquidate Gazprom Germany and to instruct the management of Gazprom Germany to carry out the relevant steps.
Based on these circumstances, the BMWK concluded that the (indirect) transfers of voting rights in Gazprom Germany constitute acquisitions that are subject to a mandatory German FDI filing and that the parties involved infringed the German FDI rules.
Under the German FDI regime the direct or indirect acquisition by a non-EU/non-EFTA acquirer of at least 10% of voting rights in a German entity that operates critical infrastructure must be notified to the BMWK. Pending approval of the acquisition by the BMWK, the acquisition is provisionally invalid. Further, the acquirer is subject to certain gun-jumping provisions, and is in particular prohibited from exercising voting rights in the target entity.
In addition, the BMWK can apply further measures to prevent danger to the public order and security of Germany or of another Member State of the European Union. This includes the implementation of a trustee in relation to the voting rights of the relevant German target entity. To the extent publicly known, the BMWK has not yet taken such measures in connection with an acquisition that is subject to the German FDI rules.
The BMWK justified its decision to take such severe measures with the following:
- Gazprom Germany is a company which, as an operator of critical infrastructure, is of outstanding importance for the gas supply in Germany and other European countries. It was therefore necessary to appoint a trustee to continue Gazprom Germany’s operations and secure supply in Germany and other European countries.
- The acquirer has not complied with the notification requirements under the German FDI rules and breached the prohibition to exercise voting rights in Gazprom Germany by resolving on a liquidation of Gazprom Germany that would have resulted in a wind down of Gazprom Germany’s operations and legal existence.
- The acquirer demonstrated that it does not have the intention to comply with the German FDI rules, which constitutes a significant risk that the prohibition to exercise voting rights will continue to be disregarded.
- In view of these violations, the BMWK’s ability to conduct a proper foreign direct investment review is jeopardized and the public order and security is endangered by an unknown non-EU/non-EFTA acquirer trying to de facto consummate the acquisition.
Given that the BMWK took its decision on grounds of imminent danger to public order and security, there is no indication of there having been any formal coordination of the BMWK with the EU Commission and FDI agencies of other European Union Member States before implementing the measures. However, such coordination can be expected to take place during the further FDI review process of the BMWK in accordance with the provisions of the EU FDI Screening Regulation.
The key takeaways of this case can be summarized as follows:
- The BMWK is actively monitoring the German transaction market and is proactively looking for information available through public sources such as commercial registers, even beyond Germany.
- While the situation at hand may have somewhat been anticipated by the BMWK due to the ongoing conflict in Ukraine and recent associated measures taken in relation to Russia, parties to M&A transactions involving sensitive German industry sectors have to generally take into account that their transaction does not go unnoticed and can be taken up by the BMWK. This may also happen in transactions that are not subject to a notification obligation but nevertheless have a high profile.
- The BMWK is willing to apply severe measures to protect the public order and security of Germany and of other European Union Member States.
- The BMWK’s scrutiny in reviewing foreign direct investments by non-EU/non-EFTA acquirers in the German energy market will likely intensify. Due to Germany’s current vulnerability in relation to energy supply and with a view to Germany’s and the European Union’s envisaged energy transition, the BMWK can be expected to closely review foreign investments in this sector even if the investors are from jurisdictions that are not problematic at a first glance.
 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.