The German Federal Ministry for Economic Affairs and Energy implemented further amendments to the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV) due to the COVID-19 pandemic to prevent the buyout of German companies active in the health care and infection protection sectors by investors from outside the EU (or EFTA). The amendment entered into force on 3 June 2020.
I. Changes under the fifteenth amendment to the AWV
The amendment broadens the scope of application of cross-sector reviews. In particular, the development and manufacture of the following products are covered by the cross-sectoral reviews:
- personal protective equipment, such as face masks;
- essential medicines such as vaccines (and including raw materials and active ingredients);
- medical products used for diagnosing, preventing, monitoring, predicting, forecasting, treating, or alleviating life-threatening and highly contagious infectious diseases; or
- in vitro diagnostics that are used to provide information on physiological or pathological processes or conditions, or for determining or monitoring therapeutic measures in connection with life-threatening and highly contagious infectious diseases.
Manufacturing facilities or technologies, as well as components or primary products used in the manufacture of these critical products, are not subject to the fifteenth amendment to the AWV.
The amendment authorises the Federal Ministry for Economic Affairs and Energy to review the planned acquisition by any purchaser from outside the EU (or EFTA) of 10 per cent or more of the voting rights in any domestic health care company active in the sectors mentioned above. Under the amendment, companies are required to notify the Federal Ministry for Economic Affairs and Energy of any such planned acquisition.
Economic Affairs and Energy Minister Altmaier emphasised:
“We need to know in good time about critical corporate acquisitions in the health sector by third countries so that we can review them. We certainly want to keep Europe open for investment, but we also must be able to have a closer look at acquisitions, if necessary. This applies to vaccines, drugs and medical protection equipment. This is how we can prevent medical expertise and production capacities that are essential for the healthcare of our population from being taken abroad. The current coronavirus crisis shows that this is necessary.”[1]
II. Proposed changes within the scope of the Foreign Trade and Payments Act
The amendments to the AWV are necessary due to the fact that the Federal Ministry for Economic Affairs and Energy decided to amend the Foreign Trade and Payments Act (Außenwirtschaftsgesetz – AWG) by gradually incorporating Regulation (EU) 2019/452, establishing a framework for screening of foreign direct investments into the European Union (EU Screening Regulation) into German law.
The draft bill to the AWG provides for a standstill obligation: each transaction requiring notification will be provisionally suspended for the duration of the screening. In addition, the draft bill provides for an extension of the scope of ministerial oversight, insofar as foreign investment control reviews will be triggered where there is a likelihood that a foreign investment will impair security or public order. Previously, restrictions related to foreign investments required an actual threat to public security or order.
The proposed amendments to the AWV are based on the EU Screening Regulation, which entered into force in 2019. It is the first time that rules relating to foreign investment control have been adopted at the European level to promote the exchange of information and cooperation between EU Member States in the field of foreign investment control. The proposed amendments are already an integral part of the EU Screening Regulation and were expected to be incorporated into German law at the end of this year.
Due to the COVID-19 pandemic, the Federal Ministry for Economic Affairs and Energy considered it necessary to accelerate the implementation of those parts of the European provisions relating to the health care sector, and in particular infection prevention and control, within the next few weeks. The Federal Ministry for Economic Affairs and Energy highlighted the fact that, due to the COVID-19 outbreak, it had become clear that the health care sector in Germany was highly sensitive and required explicit regulation.
III. Changes within the AWV that are not related to the COVID-19 pandemic
In addition, the amendments to the AWV also provide for new rules that are unrelated to the COVID-19 pandemic. In particular:
- companies that provide services necessary to ensure the continuity and functioning of state communication infrastructure are considered as security-critical infrastructure for the purposes of cross-sector reviews;
- asset deals are now also explicitly covered by the AWV; and
- when assessing public safety or order, the Federal Ministry for Economic Affairs and Energy shall take into account whether (i) the purchaser is directly or indirectly controlled by governments, state bodies or armed forces, (ii) the purchaser has been involved in activities that have a detrimental effect on Germany or any other EU Member State or (iii) the purchaser has been found in violation of the AWG, the German Military Weapons Control Act or offences which would lead to an exclusion from public procurement tenders under section 123 of the German Competition Act.
On 20 May 2020, the federal cabinet adopted the amendment to the AWV. The amendment entered into force upon its publication in the Federal Gazette on 3 June 2020. The draft bill to amend the AWG is currently subject to the legislative process.
[1] Minister Altmaier: “We need to know in good time about critical corporate acquisitions in the health sector so that we can review them”, press release, https://www.bmwi.de/Redaktion/EN/Pressemitteilungen/2020/20200428-altmaier-we-need-to-know-in-good-time-about-critical-corporate-acquisitions-in-the-health-sector-so-that-we-can-review-them.html (accessed on 2 June 2020).
