Germany: BMWE publishes draft of new Investment Screening Act

What the planned new legal framework for foreign investment in Germany means

German investment control is set to undergo a fundamental overhaul. The drafts from the Federal Ministry for Economic Affairs and Energy (‘BMWE’) for a new Investment Screening Act (‘IPG’) and a new Investment Screening Ordinance (‘IPV’) have been undergoing inter-ministerial consultation since the end of September 2026.

The Act is intended to consolidate the investment screening provisions previously set out in the Foreign Trade Act ("AWG”) and the Foreign Trade Ordinance ("AWV”) into a standalone Act and to align the German legal framework with the new EU FDI Screening Regulation (Regulation (EU) 2016/1386).

The draft does not represent a complete departure from the existing system. However, it introduces a number of changes that may have significant practical implications for investors, companies and cross-border M&A transactions.

In particular,

• the scope of application is extended to include atypical acquisitions of influence, certain asset deals and other security-related categories;
• the thresholds for shareholdings and additional acquisitions are reorganised,
• the previous cross-sectoral framework is reorganised into three types of procedure with shorter and clearly structured review periods,
• the categories of notifiable events are brought into line with the new European requirements, and
• EFTA states will in future be classified as third countries.

In terms of transaction practice, this means that investment screening law will become an even more integral part of deal planning – particularly for transactions in technology, security and infrastructure-related sectors.

However, the draft is still going through the legislative process and may be subject to further amendments. The Act is expected to come into force in spring 2027.

I. BMWE presents draft for a new Investment Screening Act

With the draft IPG, the BMWE is proposing a separate legal basis for German investment control.

A key reason for the new legislation is the new EU FDI Screening Regulation. Germany must align its national legal framework with European requirements. Regulation (EU) 2026/1386 obliges Member States to establish a more harmonised framework for the screening of foreign direct investment and sets out binding minimum requirements for screening procedures, cooperation and legal protection. The IPG is intended to use this alignment as an opportunity to restructure German investment control law as a whole and to harmonise individual provisions.

The draft does not, however, envisage a complete overhaul of the system. Numerous mechanisms familiar from the existing legislation will be retained. At the same time, the investment thresholds, procedural time limits and certain areas of application will be revised.

For the sake of legal clarity and in light of the Federal Constitutional Court’s ‘materiality theory’, the provisions previously scattered across the AWG and the AWV are to be consolidated into a single, standalone Act. The sectors and case categories relevant to national security are further specified in the IPV.

II. An overview of the key changes

Below we provide an overview of the most important changes to investment control envisaged in the IPG.

1. New participation thresholds

One of the key changes concerns the shareholding thresholds. Acquisitions of shareholdings which, under the previous law, were not subject to investment screening due to the size of the shareholding may in future become relevant due to a change in their classification under the individual types of procedure and case groups.

The existing thresholds of 20% and 40% are to be abolished. The draft essentially provides for a screening threshold of 10% or 25%. The 10% threshold applies in the sector-specific procedure (weapons of war, defence equipment and certain IT security products) as well as to particularly sensitive categories, notably critical infrastructure, telecommunications, cloud and telematics services, and media companies. For other categories (AI, semiconductors, quantum technologies, space, autonomous systems, IT security, critical raw materials, dual-use goods and electoral systems) and for the cross-sectoral catch-all procedure, a threshold of 25% generally applies. For listed target companies, a reduced threshold of 15% applies.

In future, additional thresholds of 25%, 50%, 75% and 100% will apply to further acquisitions within the 10% threshold range. In the 25% threshold range, additional acquisitions up to 50%, 75% and 100% are covered. For listed companies, an additional acquisition threshold of 30% replaces the previous 40% threshold.

The specific trigger threshold will continue to depend on the relevant case category, the target company’s field of activity and the nature of the acquisition. A key new development is that an increase from 75% to 100% may also be subject to scrutiny, as this could result in the loss of minority rights and potential veto positions.

Which threshold applies in an individual case depends, in particular, on the nature of the acquisition and its classification under the relevant case category. In future, it will no longer be possible to rely solely on the planned level of shareholding. Instead, the target company, the acquisition structure, the voting rights structure and, where applicable, special control and influence rights must be considered together. This also applies even if the acquirer receives no voting rights or only a small number of them.

In future, an ‘atypical acquisition’ of influence may already exist through the assurance of seats or majorities on supervisory bodies or in management, through veto rights regarding strategic business or personnel decisions, or through special rights to information. Furthermore, voting rights held by a third party on behalf of the acquirer will be fully attributed. This applies to fund and co-investment structures. Agreements on the joint exercise of voting rights may also trigger such attribution.

2. Reorganisation of investment control procedures

The procedural structure is being reorganised.

The previous division into a sector-specific and a cross-sector procedure is being replaced by three procedures:

• the sector-specific procedure for acquisitions in the fields of weapons of war, defence equipment and certain IT security products,
• the case-group-specific procedure for acquisitions in other security-relevant sectors defined by national or EU law, and
• the cross-sector procedure as a catch-all procedure for other activities.

In future, the cross-sectoral assessment procedure is to be differentiated more clearly according to different case groups and participation thresholds. The general 25% threshold remains a key reference point; however, lower thresholds may also apply – particularly in the case of activities sensitive and listed companies.

The previously familiar concept of a ‘certificate of no objection’ is being abolished. In future, a positive decision in all three procedures will be uniformly referred to as an ‘authorisation’. At the same time, the presumption of authorisation remains in place: if the opening of review phase 2 does not take place within the relevant time limit, or if no restrictive decision is issued in review phase 2 within the prescribed time, the acquisition is generally deemed to have been authorised.

The draft IPG also provides for changes to the procedural time limits:

• Phase I: 45 calendar days with no possibility of extension;
• Phase II: 120 days as a general rule;
• Extension: possible by up to a further 90 days in cases involving a particularly high examination workload or a high degree of difficulty;
• A mutually agreed extension is now only possible in Phase II and only with the consent of the direct purchaser.

The time limits commence upon the BMWE’s receipt of the required review documents in full and in good condition. The completeness of the documents is therefore a decisive factor in determining when the time limits begin to run.

For complex transactions, however, the procedure may still take several months. It is therefore essential to assess the need for investment control at an early stage and to prepare a complete set of documents.

Another new development is that the BMWE may order provisional measures even before or during a review procedure. These include restrictions on the exercise of voting rights, restrictions on the disclosure of information, the appointment of a third party, or a provisional prohibition on the completion of the transaction.

3. Expansion and adaptation of the relevant categories of cases

The draft aligns the list of cross-sector notification thresholds with the new EU FDI Screening Regulation. Of particular significance in this regard are the areas of

• artificial intelligence,
• semiconductors,
• critical raw materials,
• electoral infrastructure, and
• dual-use goods as defined in Annex I to Regulation (EU) 2021/821.

The IPV also includes categories covering quantum technologies, certain autonomous or automated systems, robotics, wireless and wired data networks, space technology, smart meter gateways, strategic and critical raw materials, and certain IT security products.

Critical technologies and infrastructure are being incorporated more extensively into the scope of application. The draft IPG and IPV cover, in particular, companies that develop, manufacture or distribute dual-use goods, and extend the relevant areas to include, amongst other things, certain critical infrastructure and AI applications.

In the KRITIS sector, the focus will no longer be exclusively on legal operator status. In future, the scope will also include companies that exercise control over a critical facility.

For companies in the technology, industry, infrastructure and security sectors, this may broaden the range of transactions that are potentially subject to notification. This applies especially to companies which are not themselves traditional defence or security firms, but whose products, technologies or services are relevant to critical value chains.

Under the current draft, greenfield investments generally remain outside the scope of application. The scope continues to cover acquisitions of existing companies, shareholdings, separable parts of a business and significant assets. In the case of asset deals, this may also include a licence or assets of a foreign company located in Germany, provided these constitute a significant part of the company’s total assets.

The amendments reflect the growing importance of economic security and strategic technologies for European and German investment policy.

4. Shortened review period for unreported transactions

A further change of practical relevance concerns unreported transactions. The period within which the authorities may intervene ex officio is reduced from five to three years. The period generally runs from the conclusion of the contract under the law of obligations.

For companies and investors, this generally increases legal certainty once a transaction has been completed. Irrespective of this, a careful assessment of the notification requirement prior to signing remains of central importance.

At the same time, the scope of application is being extended in other respects. An acquisition may also be deemed to have taken place if the specific structure of a transaction objectively results in, or is intended to circumvent, an investment review. This covers not only arrangements explicitly designed to circumvent the rules, but also transaction structures that are objectively suitable for circumvention.

5. New rules for certain investors

The distinction between privileged and third-country investors is being redefined.

EFTA investors (Switzerland, Norway, Iceland, Liechtenstein) will no longer be treated in the same way as investors from EU Member States.

In the case of natural persons, the granting of resident status shall, in principle, require that the person is resident in Germany and holds exclusively German nationality.

In the case of companies, both the registered office and the place of management must in future be located in Germany or the EU. The specific qualifications of the investor and their ownership and control structure may therefore become significantly more important in determining the applicability of investment controls. The assessment must cover the entire chain of acquirers right up to the beneficial owner. This applies to fund, holding, management and family office structures, as well as dual nationals holding third-country nationality.

Ideally, these requirements should be considered when structuring a transaction. This applies to multi-tiered shareholding structures, private equity investments, joint ventures and acquisitions via holding companies.

An exception is provided for certain intra-group restructurings. In future, this is to be extended to all three types of procedure and to cover further scenarios in which the beneficial owner does not change and no previously non-existent legal entity enters the chain of acquirers.

6. Greater transparency regarding prohibition decisions

The draft provides for greater transparency regarding the outcomes of investment controls. Prohibition decisions are to be published. Certain conditions or other measures may also be published.

The BMWE is to be able to, or indeed required to, publish the issuance of prohibition orders on its website. Provision is made for the publication of certain outcomes of proceedings, as well as an annual, aggregated and anonymised report by the BMWE on acquisitions that have been scrutinised and the results of such scrutiny.

Orders and public-law contracts may also be published. Publication is to take place whilst safeguarding trade and business secrets and is to specify the parties involved, the sector of the target company and the general regulatory areas covered by the measures.

Investment control proceedings may become more visible to the public in future. Particularly in the case of sensitive transactions, it is therefore important to consider at an early stage which information must be disclosed to the authority and which information should be designated as confidential or as trade secrets.

However, there are no plans for the general publication of all notified transactions.

III. Implications for M&A practice and our advisory services

Investment control has now become an essential component of international transactions and can influence the transaction structure and timetable, particularly in the sectors of technology, AI, semiconductors, defence, energy, critical infrastructure and critical raw materials. It can determine whether a notification is required, which ownership structure is chosen, which provisions must be included in the purchase agreement, and what risks exist for the completion of the transaction.

With the planned IPG, this assessment is set to become even more important. The new three-tier structure of the procedures, the expanded categories of cases, the inclusion of atypical rights of influence and certain asset deals, as well as the inclusion of EFTA investors who were previously exempt, may mean that investment control issues will need to be assessed at an early stage in a greater number of cross-border transactions in future.

An early review helps to avoid regulatory delays and risks later in the transaction process. It also enables investment control to be coordinated with other regulatory approvals from the outset and allows for realistic planning of the signing-to-closing process.

We advise investors, companies and sellers on the structuring, due diligence and execution of transactions subject to investment control legislation. Our advisory approach begins as early as possible in the transaction process: we assess whether, and under what conditions, investment control applies; identify relevant characteristics relating to shareholdings, control and business activities; and, together with our clients, develop a robust clearance and procedural strategy.

Particularly against the backdrop of the draft Investment Control Act (IPG) and increasing European harmonisation, early-stage advice enables risks to be identified in good time, transactions to be structured in a legally compliant manner and approval procedures to be managed efficiently. This is all the more true given that breaches of prohibitions on implementation, enforceable orders or injunctions may continue to be subject to criminal penalties in future; for certain breaches, the draft provides for prison sentences of up to five years and, for further breaches of duty, fines of up to one million euros.

Please do not hesitate to contact us – we can assist you with the early assessment of the situation, the structuring of the transaction and, where necessary, with the preparation for and management of the regulatory review process.