May 28, 2020 10.30-11.30 CEST/16.30-17.30 CST

Panelists

Kaiming Cai, Senior Partner, Dentons, & Deputy Director Expert Committee Trade and Economics, CCPIT

Dr. Helen Liang, Executive Board Member - Head of China Desk, Hauck & Aufhäuser

Dr. Julia Pfeil, Partner Public Policy and Regulation, Dentons

Niels Tomm, Co-CEO, Ceinex (Keynote)

Moderators

Robert Michels, Managing Partner, Dentons

Sascha Dettmar, Corporate Communications, CEINEX

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In terms of level playing field engagement in international cooperation, governments are seeking different measures. The German Foreign Trade and Payments Act—to be put in place this summer—is one of these policies. Who is affected by the decision? What does it mean in detail?

Learn more in the China Policy Update provided by Dentons and China Europe International Exchange (CEINEX).

What has happened?

On 09 April 2020, the German government introduced a draft bill in German Parliament, the Bundestag, to further tighten German controls on foreign direct investment. The draft bill was introduced earlier than planned, and it is expected that Parliament will pass the draft this summer. Once the draft has been adopted, the Government can then update respective regulations to make the new rules effective in practice.

The new German rules are designed, amongst others, to implement the new EU-wide framework for the screening of foreign direct investments in the EU. This new EU framework entered into force in April 2019 and becomes applicable as of October 2020. However, the new German rules will go beyond the EU framework and will allow the German government to restrict foreign direct investments in Germany to an even greater extent.

What does this mean?

Germany already maintains controls for investments in the German defense and IT security sector and for investments in companies active in sensitive industries. Investments in companies from all these sectors must be notified to the German government. If the government intends to review (and potentially restrict) an investment in a company active in a sensitive industry, under the current system the government must show that the investment constitutes a real threat or an actual danger to German national security.

This threshold for investments in companies active in sensitive industries will be lowered: Once the new system becomes effective, the German government only needs to show an “expected impairment” compared to currently a “genuine and sufficiently serious threat” to German national security if it wants to review and potentially restrict a transaction. In addition, the government will be able to control investments in German companies if these may impair the national security of another EU Member State or programs of European Union interest (e.g. EU-sponsored research initiatives).

This amendment will provide the German government with a larger margin of discretion for reviewing and interfering with foreign investments in Germany. Already under the current system there is a trend to apply the rules very broadly. While the new rules will make it easier yet for the government to pursue this policy, investments even in sensitive sectors can be successful if thoroughly prepared. All in all, we still expect to see more cooperation on the global scale and especially between China and Europe.  

In case of any further questions, please contact:

Mr. Robert Michels                             Mr. Sascha Dettmar

robert.michels@dentons.com           sascha.dettmar@ceinex.com

+49 69 450012388                             +49 69 247415966

Dentons LLP                                      China Europe International Exchange (CEINEX)

Frankfurt am Main, Germany

May 2020