A leaked draft of a standalone German Investment Screening Act (the “IPG”) has been circulating for a few days – offering a first concrete glimpse into the planned overhaul of Germany's FDI regime. The draft marks the starting point of a legislative process that is likely to be the subject of intense debate in the weeks and months ahead. We summarise the key takeaways.
Background
Germany's investment screening rules are currently scattered across the Foreign Trade and Payments Act (AWG) and the Foreign Trade and Payments Ordinance (AWV) – a framework that is fragmented and, in parts, inconsistent. The IPG is designed to consolidate these provisions into a single, self-contained statute and elevate them to parliamentary level. At the same time, the draft implements EU Regulation 2026/1386 (the “EU Screening Regulation”), which will impose binding minimum requirements on national investment screening regimes from 17 January 2028. Germany's regime goes beyond these EU minimum standards in several material respects.
Who Is Affected?
Which Investors Are Captured?
As before, screening in most sectors targets acquirers from third countries outside the EU. Only in the defence sector are all non-German investors captured. A notable change: investors from EFTA states – Switzerland, Norway, Liechtenstein and Iceland – will no longer be treated on a par with EU investors but will instead be classified as non-EU acquirers. This approach follows the EU Screening Regulation but could still change if the EU and EFTA reach an equivalence agreement.
The personal nexus is also being tightened: going forward, only natural persons holding exclusively German citizenship and having their domicile or habitual residence in Germany will qualify as “domestic” persons. Correspondingly, a person will only be considered “EU-resident” if they hold exclusively one or more EU citizenships and reside in the EU. Dual nationals with a third-country citizenship will fall outside the privileged category.
Which Transactions Are Captured?
The regime captures the full acquisition of a German company, the acquisition of shareholdings above certain thresholds, and the acquisition of material assets of a German company (asset deal) – including assets located in Germany that belong to a foreign company.
The draft now also expressly captures the atypical acquisition of influence without an acquisition of voting rights. Board seats in management or supervisory bodies, veto rights over strategic decisions, or special information rights may each, on their own, trigger a screening obligation if they confer a level of influence equivalent to a reviewable voting interest.
The anti-circumvention provision is also being broadened: it will be sufficient that a transaction structure objectively circumvents investment screening – a subjective intent to circumvent is no longer required.
Intra-group restructurings will be exempt – now for the first time including the defence sector – provided that the ultimate beneficial owner remains unchanged and no additional jurisdiction is introduced into the ownership chain. Greenfield investments remain outside the scope of the regime for the time being; asset acquisitions, however, may continue to be reviewed to a similar extent as under the current rules.
Thresholds at a Glance
The existing 20 % threshold is being abolished and replaced by a uniform 25 % threshold; the 40 % step-up threshold is also being removed. For listed companies in the 25 % sectors, a reduced initial screening threshold of 15 % and a new step-up threshold of 30 % will apply. As a result, the number of initial screening thresholds is reduced from three to two (10 % and 25 %).
| Business Sector | Percentage Threshold |
|---|---|
| Defence, armaments, IT security | 10 % |
| Critical infrastructure (KRITIS-related sectors) | 10 % |
| Other security-relevant sectors | 25 % |
| Cross-sectoral catch-all procedure | 25 % |
| Listed companies (25% sectors) | 15 % |
For subsequent increases in shareholdings, the thresholds of 25 %, 50 %, and 75 % remain relevant; a new threshold at 100 % of voting rights is added – reflecting that the move to sole ownership can create a new quality of control. For listed companies, the former 40 % step-up threshold is replaced by a 30 % threshold, aligned with the German Securities Acquisition and Takeover Act (WpÜG). A portfolio investment exemption – although permissible under the EU Screening Regulation – is not being introduced; however, the existing post-closing filing privilege for listed companies is retained.
New and Expanded Sectors
The particularly sensitive sectors subject to the 10 % threshold include – in addition to defence and armaments – operators of critical infrastructure (KRITIS), manufacturers of critical components and sector-specific software, providers of cloud computing services above the KRITIS thresholds, telematics infrastructure companies, media companies with significant reach and public influence, and service providers for government communications infrastructure.
Sectors subject to the 25 % threshold include, among others, artificial intelligence (in particular general-purpose AI models and those with systemic risk), semiconductor technologies across the entire value chain, quantum technologies, aerospace and aviation, autonomous vehicles and robotics, IT security products, network technology, critical and strategic raw materials, dual-use goods, electoral systems and voter databases, and – notably – the management of agricultural land exceeding 10,000 hectares.
Procedure and Timelines
The Federal Ministry for Economic Affairs and Energy (“BMWE“) remains the competent authority. Proceedings may be initiated on the basis of a notification, an application, or ex officio. Terminology is being harmonised: in all types of proceedings, the BMWE will in future issue a “clearance” (Genehmigung) – the previous distinction between “clearance” (Freigabe) and “certificate of non-objection” (Unbedenklichkeitsbescheinigung) is eliminated.
The procedure is divided into two phases:
- Phase 1: 45 calendar days from receipt of the complete filing (no extension possible).
- Phase 2: 120 calendar days as a baseline; an extension of up to 90 days is available in cases of particular complexity or significant review effort.
The review periods begin only once the BMWE has received the complete filing – no longer upon the BMWE becoming aware of the signing of the transaction. The Phase 2 period may also be suspended, in particular due to requests for additional information, questions arising from the EU cooperation mechanism, or negotiations on contractual mitigation measures. The call-in period for non-notified transactions is shortened from five to three years from signing.
For notifiable acquisitions, a standstill obligation continues to apply: the transaction is provisionally ineffective; voting rights may not be exercised, and certain company information may not be disclosed to the acquirer.
Possible Conditions and Sanctions
The BMWE may clear the acquisition, attach conditions to the clearance, or – as a last resort – prohibit the acquisition. If the BMWE fails to act within the applicable time limits, clearance is deemed to have been granted.
Possible conditions include requirements regarding board composition, restrictions on voting rights and access to information, supply and continuity obligations, cybersecurity requirements, and obligations concerning data storage and processing within the EU. Compliance may be monitored by an independent third-party trustee.
Intentional violations of the standstill obligation or of enforceable conditions or prohibition orders are punishable by imprisonment for up to five years or a fine. Negligent violations as well as failure to file or late filing are subject to administrative fines – up to EUR 1 million for negligent criminal offences and up to EUR 100,000 for other regulatory offences.
Transparency: Publication of Decisions
Prohibition orders will in future be published on the BMWE's website. The publication of conditions or public-law agreements is at the Ministry's discretion. There is no provision for publishing all notified transactions.
Press releases are intended to identify the relevant parties to the acquisition, the target company's sector, and the general subject matter of the measures imposed – without disclosing trade or business secrets.
The BMWE's stated objective is to ensure consistent and accurate public communication and to pre-empt inaccurate or misleading press reporting.
Open Issues in the Legislative Process
The draft marks the beginning of a longer legislative process, and the final version is expected to differ from the current text in certain respects. Among the topics likely to be the subject of further debate:
- Intra-EU investments in critical infrastructure: An extension of screening obligations to intra-EU investments in critical infrastructure is not included in the current draft but is being seriously discussed in intergovernmental consultations – despite significant doubts regarding compatibility with EU law.
- Greenfield investments: The inclusion of greenfield investments is not envisaged in the current draft; however, a final decision has not yet been taken.
- Sector catalogue still in flux: The sector catalogue has not yet been finalised. Expansions or reductions are expected as part of the ongoing intergovernmental alignment; the current draft largely tracks the changes introduced by the EU Screening Regulation.
What Does This Mean for Transaction Practice?
The IPG modernises the structure of Germany's investment screening regime and broadens its scope in security- and technology-sensitive areas – but the fundamental mechanics remain largely unchanged. For ongoing and planned transactions, the shareholding structure, the acquirer chain, potential asset deals, and the precise activities of the target company should be assessed for investment screening relevance at an early stage.
Key areas to watch:
- EFTA investors (in particular Swiss acquirers): Will in future be treated as non-EU acquirers – with significant practical implications for many existing M&A structures.
- Atypical influence rights: Special rights in articles of association or investor agreements must be carefully reviewed for potential screening obligations.
- Technology companies: The newly captured sectors (AI, semiconductors, quantum, aerospace, among others) are particularly relevant in practice.
- Timeline planning: The restructured review periods and potential suspensions due to information requests, the EU cooperation mechanism, or negotiations on contractual mitigation measures must be factored into transaction planning and the drafting of closing conditions.
We will continue to closely monitor the legislative process and report on further developments as they unfold.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
