Until 2004, Germany had no special legislation impacting foreign direct investment beyond
general restrictions.
A national security screening mechanism was introduced in 2004, which
requires that investors from countries other than the member states of the European Union (EU)
and the European Free Trade Association (EFTA, i.e., Liechtenstein, Iceland, Norway and
Switzerland) notify the government of the acquisition of any business engaged in manufacturing
or developing war weapons or armaments, or producing cryptographic equipment, in cases where
the investor directly or indirectly owns 25 percent or more equity. In such cases, investors must
notify the Federal Ministry of Economics and Energy, which then has one month to raise
objections.
If none are raised within that time, the transaction is regarded as approved. Germany
expanded the scope of the law in 2005 to include tank and tracked-vehicle engines.
In the wake of broader discussions on the need for restrictions to foreign investment by
sovereign wealth funds, the German Foreign Investment Act was amended in 2009 to apply to a
German company of any size or sector in cases where a threat to national security or public order
is perceived.
The more generic character of this amendment has raised some uncertainty over
which transactions should be notified. To date, the government has not made use of it to impose
any restrictions. In 2013, the Capital Investment Code replaced the German Foreign Investment
Act.
EU Forecast
euf:ba18a:146/nws-01