2022 did not see as many legislative changes of the German foreign direct investment regime (“FDI Regime“) as in years before. However, several foreign direct investments with a Chinese nexus reviewed by the German FDI authority, the Federal Ministry of Economics and Climate Action (“BMWK“), attracted public attention in 2022:
- The proposed takeover of German wafer manufacturer Siltronic by Taiwanese GlobalWafers was abandoned because the BMWK did not grant FDI clearance before the long stop date of the takeover offer. Shortly before the long stop date, GlobalWafers agreed to commitments with the Chinese competition authority to obtain the Chinese merger control clearance. Such commitments would have required Siltronic to dispose of certain European operations and to continue supplying its products to Chinese customers at certain conditions. The BMWK argued that it was not able to assess these implications on its FDI review in time before the long stop date and could therefore not issue the FDI clearance. In a rare attempt, Global Wafers tried to FDI enforce clearance before court by way of interim measures. The court dismissed the motion. It, inter alia, argued that the BMWK has a wide margin of discretion in its assessment as to whether a transaction would likely affect Germany’s public order or security and that judicial control is restricted in this regard.
- The acquisition of German medical devices manufacturer Heyer Medical by the Chinese Aenomed Group was prohibited. As a result of the COVID-19 pandemic, transactions in the Germany healthcare sector have been a focal point of the FDI Regime since 2020. According to press reports, Aenomed seems to benefit from financial support from the Chinese government, that may allow it to price aggressively on the German market. Against this background, the BMWK seemed to have been concerned of potential Chinese political influence in a sector that is deemed key for Germany’s public order and security.
- The investment of China Ocean Shipping Company (“COSCO“) in a freight terminal of the Port of Hamburg was partially prohibited. Initially, COSCO envisaged to acquire a stake of 35% in the company operating the terminal. Finally, COSCO was allowed to only acquire a stake below 25% and is prohibited from being granted strategic veto rights and the right to appoint board members. The decision was preceded by controversial political discussions. The German government was divided. While almost all relevant federal ministries, including the BMWK, were opposed to the transaction and were in favor of a full prohibition, the German Chancellery wanted to fully approve COSCO’s 35% acquisition. Those opposed to COSCO’s investment argued that Germany must not increase its economic dependency from China, especially in relation to critical infrastructures. In particular, with a view to geo-political tensions regarding Taiwan and China’s stance towards Russia, warnings were raised that China could use its economic presence in Germany to influence Germany’s decisions in relation to China in the future. The partial prohibition can be deemed a political compromise within the German government.
- Shortly after the COSCO decision, two acquisitions by Chinese investors in the semi-conductor industry were fully prohibited. The acquisition of a German semi-conductor factory of Elmos Semiconductor by a subsidiary of Chinese Sai Microelectronics and the acquisition of ERS Electronic, a German semi-conductor technology company, by an unknown Chinese buyer were blocked. In relation to the attempted acquisition of Elmos Semiconductor the BMWK even issued a rare press release explaining that the prohibition was imposed because the semi-conductor sector is a key sector for Germany’s technologic sovereignty and the acquisition would have endangered Germany’s public order and security. Unlike in the COSCO decision, the German government seemed to be aligned on these prohibitions.
In particular the decision in relation to COSCO’s investment initiated a debate about tightening the FDI Regime once more in order to scrutinize more closely, and if required intervene with, Chinese foreign direct investments in key strategic sectors in Germany. However, so far no concrete plans to change the FDI Regime’s regulatory framework have emerged.
At the same time, the German government, led by the Ministry of Foreign Affairs, is currently working on a revised China strategy. While the strategy is still discussed internally within the German government, reports have emerged that the strategy will, inter alia, focus on decoupling Germany’s economy from China to some extent and to lessen Germany’s dependency from China in relation to critical supply and key technologies. Further, the new China policy is reported to entertain the idea of an outbound investment control to allow scrutinizing foreign investments by German and European companies in certain security-critical areas abroad. Also, the European Commission’s work program 2023 mentions that the European Commission will examine whether tools are necessary in respect of outbound strategic investments controls.
Therefore, even if the regulatory framework of the FDI Regime remains unchanged, it can be expected that Germany’s anticipated new China policy will have an impact on the BMWK’s decisions and result in strict scrutiny of foreign direct investments from or into China.
However, the decisions in relation to investments with a Chinese nexus in 2022 and the policy debates around it may not necessarily result in a stricter stance towards all foreign direct investments in Germany in general. The BMWK has underscored that Germany remains open for foreign direct investments. Based on experience in our own FDI advisory practice in 2022, the BMWK generally seems to be less concerned in case of investors from “allied” countries, such as the US, Canada and the UK. Even where such investors acquire businesses in rather sensitive industries, such as IT products or cyber security, or where the target has a significant number of government contracts, the BMWK’s reviews are rather swift and such investments do generally not seem to raise concerns.
In any case, German FDI decision making remains to be significantly influenced by political considerations of various stakeholders involved in the process. This still makes the outcome of the review procedures unpredictable.
 VG Berlin (4. Kammer), Beschluss vom 27.01.2022 – VG 4 L 111/22 (https://beck-online.beck.de/Dokument?vpath=bibdata%2Fents%2Fbeckrs%2F2022%2Fcont%2Fbeckrs.2022.997.htm&anchor=Y-200-GE-VGBERLIN-AZ-4L11122-D-20220127) (accessed on 9 January 2023)
 https://www.clearytradewatch.com/2022/05/germany-prohibits-acquisition-of-heyer-medical-by-chinese-investor/ (accessed on 9 January 2023)
 https://www.focus.de/finanzen/boerse/schwerwiegende-gefahren-habeck-stoppt-uebernahme-von-deutscher-beatmungs-firma-durch-china_id_90693248.html; https://www.faz.net/aktuell/wirtschaft/bund-stoppt-chinesische-uebernahme-von-beatmungsgeraete-hersteller-17989193.html (both accessed on 9 January 2023)
 https://www.spiegel.de/politik/deutschland/china-das-steht-im-vertraulichen-strategiepapier-der-bundesregierung-a-bab040f4-08eb-491d-97c4-82930b2c33c6; https://www.handelsblatt.com/politik/deutschland/deutsch-chinesische-beziehungen-es-wird-kein-weiter-so-geben-so-entsteht-die-neue-china-strategie/28730864.html (both accessed on 9 January 2023)
 https://www.politico.eu/article/europe-commission-mulls-tighter-control-over-how-companies-invest-overseas/ (accessed on 9 January 2023)
 https://commission.europa.eu/system/files/2022-10/com_2022_548_3_en.pdf; Müller-Ibold/Herrmann in EuZw 2022, 1085