The 17th Amendment Ordinance to the German Foreign Trade and Payments Ordinance (AWV)
The 17th Amendment Ordinance to the German Foreign Trade and Payments Ordinance (AWV), effective as of May 01, 2021, continues the long-standing trend towards more control rights for the German Federal Ministry for Economics and Energy (BMWi) with regard to investment control under foreign trade law. In addition to adapting to the requirements of the EU Screening Directive, the scope of application of the sector-specific and cross-sectoral review processes was extended and tightened. The AWV plays a role in particular in connection with company acquisitions by non-EU buyers.
With regard to the primarily defense- and military-related and sector-specific investment control, the respective cases of application were extended or newly defined respectively. Thus, inter alia, the development, production and modification of all (as opposed to only specific goods so far) goods in Part I Section A of the export list now triggers a sector-specific investment control. Furthermore, it was also clarified that even if a German company does currently not manufacture any of the goods listed in the new catalog of the sector-specific investment control or does currently not fulfill any of the cases of application listed there, a sector-specific investment control can still apply, provided that the company has provided such products/services in the past and still possesses the respective technology.
Also with regard to the cross-sectoral review process, there has been an extension of the case categories for the particularly relevant companies that are subject to the stricter cross-sectoral review. In terms of content, the acquisition of such a company is subject to the same restrictions as the acquisition of a company in the sector-specific procedure, i.e. in particular a notification obligation ap-plies and a sale requires always a prior approval by the BMWi. While there were previously 11 case categories for which such a stricter review process of the cross-sector procedure applied, there are now 27 of such case categories to be considered under the 17th Amendment Ordinance.
Under the cross-sectoral review process, a threshold of 20% of the voting rights in a company upon which investment control is relevant now applies to most case categories, in particular to all newly created case categories. For a total of 7 case categories, however, this threshold remains at 10% and thus leads to an even earlier application of cross-sectoral investment control. This 10% thresh-old continues to apply to all transactions under the sector-specific review process. Additional thresholds of 20%, 25%, 40%, 50% and/or 75% have now also been implemented for any subsequent additional acquisitions of voting rights by the same investor. If an investor increases its share in such a company in the future, e.g. from 25% to 45%, a new review process must be carried out. Finally, the AWV now also provides for the possibility that, in the event of an acquisition of shares in a corresponding company of less than the mentioned thresholds, a review process may nevertheless be relevant if, instead of by the acquisition of shares, corresponding control is exercised by the investor through other measures (e.g. through special veto rights or the assurance of additional seats in the management of the company).
Irrespective of the further procedural changes made in the context of the 17th Amendment Ordinance, many companies in Germany must now reassess whether they are subject to these new or extended cases of application of the cross-sectoral or sector-specific review process. For example, it may be the case that companies that do not (or no longer) have any defense-/military-related focus at all, or companies that only provide a minimal proportion of their products (next to other uses) also for security-related or defense-related uses, are now subject to an investment control process. In some cases, the manufacture of individual components is now also subject to such a more strict inspection, so that companies that previously did not fall within this area of application may now also be covered.
In each individual case, it must be assessed and checked in detail whether a corresponding case group applies to a company, and it must still be determined whether undesirable hardship cases must or can be removed from the review catalog in the context of further amendment ordinances to the AWV or through corresponding case law. Particularly with regard to any short-term transactions as a result of the Corona pandemic, these additional new cases of application could lead to undesirable and, above all, unplanned delays in investment processes, if not, in the worst case, to corresponding prohibitions of transactions.