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  • Writer's pictureRoman Jüngling

Foreign Direct Investments in Germany

Foreign Direct Investments are defined in Germany as investments from abroad into German enterprises with the goal to influence the business of the enterprise significantly and for a longer period of time. A significant influence is assumed if the foreign investor holds 10%, in some cases 20%, or more of the shares or voting rights in the enterprise, usually a company. On the other hand, so-called portfolio investments are investments that do not meet these criteria as in this case the foreign investor does not influence the business of the German enterprise.


Germany with its international economy welcomes foreign investments as it deems foreign direct investments as crucial for its economic development. However, some foreign investments are regarded as dangerous. For these reason the Federal Ministry for Econimic Affairs and Climate Protection (Bundesministerium für Wirtschaft und Klimaschutz – BMWK) may examine some planed foreign direct investments, especially the direct or indirect purchase of shares of the German company by a foreign entity. Its power of audit and the investment audit procedure (Investmentprüfverfahren) are regulated in the Foreign Trade Act (Außenwirtschaftsgesetz -AWG) and the Foreign Trade Ordinance (Außenwirtschaftsverordnung – AWV). There are two different procedures, the Cross-sectoral Audit Procedure (sektorenübergreifendes Prüfverfahren) and the Sectoral-specific Audit Procedure (sektorenspezifische Prüfverfahren).


The Cross-sectoral Audit Procedure is applied if the investor is from outside the EU and EFTA, §§ 55 et. seq. AWV, § 4 Sec. 1 no. 4 and 4a, § 5 Sec. 2 AWG. According to § 55 Sec. 1 AWV, the Federal Ministry can assess whether there will be a likely effect on the public order or security of the Federal Republic of Germany, of another Member State of the European Union or in relation to projects or programmes of Union if a non-EU resident directly or indirectly acquires a domestic company or directly or indirectly acquires a stake within the meaning of Section 56 in a domestic company. § 55a Sec. 1 AWV contains a catalogue of circumstances that can lead to likely effect on the public order or security. Such investments have to be reported to the Federal Ministry if the threshold of 10% or 20%, depending on the specific position of the catalogue of § 55a Sec. 1 AWV, of the shares or voting rights are acquired by the foreign investor. Otherwise there is no reporting duty. However, if the threshold of 25% of the shares or voting rights is acquired by the foreign investor, a document of compliance (Unbedenklichkeitsbescheinigung) should be petitioned.


The Sectoral-specific Audit Procedure is applied regardless whether the investor is from the EU or EFTA or a third country, §§ 60 et. seq. AWV, § 4 Sec. 1 no. 1, § 5 Sec. 3 AWG. But, the Sectoral-specific Audit Procedure is only applied if the German target enterprise does business in the field of defense technology or military. In this case all investments have to be reported to the Federal Ministry if the threshold of 10% of the shares or voting rights is acquired by the foreign investor.


The Federal Ministry will start the Frist Audit Procedure within two months after receiving the report or petition. Within this period of time it should issue the opening ruling (Eröffnungsbescheid). Then the Second Audit Procedure starts that can last for four months after receiving all relevant documents by the Federal Ministry. It can be prolonged by three months and one additional month in specific cases. After this period of time the Federal Ministry should issue a final decision (Abschließende Entscheidung). If it fails to do so within this period of time, the acquisition is deemed to be approved.

About the Author:

Roman C. Jüngling was born in 1979 in Cieszyn (Poland) and has been living since 1986 in Germany. He attended the Sigmund-Schuckert-Secondary-School and the Polish Supplementary School in Nuremberg. He studied law at the Friedrich-Alexander-University in Erlangen, the Justus-Liebig-University in Gießen, the Jagiellonian-University in Krakow and the Catholic-University-of-America in Washington DC. He completed the legal clerkship at the Higher Regional Court in Frankfurt on the Main. Roman C. Jüngling passed the First and Second State Exam with distinction, respectively, in Hesse in 2004 and 2006. In 2008 he gained the master of laws (LL.M.) from the Catholic-University-of-America in US-American business law and in 2009 the doctor of laws from the Justus-Liebig-University on the basis of doctoral thesis about the Polish stock exchange and capital market law.


Roman C. Jüngling worked in the field of international business law as an intern, a law clerk and an attorney at law in international law firms in Germany, Poland and the USA, inter alia at Studnicki, Płeszka, Ćwiąkalski, Górski in Krakow, Gleiss Lutz in Frankfurt on the Main and Warsaw, Allen & Overy in Frankfurt on the Main, Gibson, Dunn & Crutcher in Washington DC and Baker & McKenzie in Berlin. Roman C. Jüngling was admitted as attorney at law in Frankfurt on the Main in 2007, in Berlin in 2008/2009 and between 2010 and 2023 in Nuremberg. Since 2023 he is admitted at the bar in Saxony. From 2016 until 2022 he had the title of a certified specialist in tax law (Fachanwalt für Steuerrecht).


Roman C. Jüngling is a native speaker of German and Polish, and he is proficient in legal English.

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