Cross-Sector Foreign Direct Investment (FDI) Review: Looking Back at 2022


published on 3 March 2023 | approx. reading time 4 minutes

Following several restrictions of the German legal framework for Foreign Direct Investment (FDI) in the past two years, FDI is now – alongside merger control – on the to-do list for transactions. In 2022, several transactions received media attention as a result of their failure, i.a. a partial or full prohibition. Due to a political paradigm shift at the end of 2022, further complexity of FDI review procedures is to be expected.

Following several restrictions of the German legal framework over the past two years, Foreign Direct Investment (FDI) is no longer a niche issue in a given transaction and, in addition to merger control, must be taken into account by foreign buyers when acquiring voting rights in German target companies as part of transaction planning for acquisitions, share acquisitions and internal restructurings.

Initial Situation: The German Legal Framework briefly outlined

The Federal Ministry of Economics and Climate Protection (Bundesministerium für Wirtschaft und Klimaschutz, short: BMWK) is the competent authority for investment review on the basis of the Foreign Trade and Payments Act (Außenwirtschaftsgesetz) and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, short AWV).

The cross-sector FDI review at issue here concerns all domestic target companies – irrespective of turnover, number of employees or other indicators – that do not fall under the sector-specific FDI review (armaments, etc.). In the case of an acquisition of 25 percent or more of the voting rights by an acquirer domiciled outside the EU/EFTA (i.e. also, since Brexit, acquirers from the United Kingdom), the BMWK has an ex officio right of review. Investments in critical infrastructure (threshold 10 percent) and critical technologies (threshold 20 percent) are subject to notification. Various factors are included in the FDI review, such as whether the acquired is close or controlled by a foreign government or whether the target has received subsidies within the framework of EU projects and programs. In the FDI review, not only the direct acquirer is considered, but also indirect acquirers with (as a rule) a shareholding of at least 25 percent or other controlling authority (e.g. in the case of fund structures).

Should the notification obligation apply, there is a prohibition on the closing of the transaction until it is approved, which is comparable to the prohibition under merger control law (but subject to penal law). The obligation to notify arises upon the signing of the purchase agreement. Responsible for the notification is the direct acquirer.

In many cases, it is advisable to obtain a certificate of non-objection (Unbedenklichkeitsbescheinigung) in order to obtain transaction security for cases in which the parties involved assume that transaction is not deemed sensitive. Without it there is a risk that the transaction may be reviewed ex officio within five years of the signing of the purchase agreement and decided differently. 

FDI Reviews in 2022

According to the BMWK, the majority (86 percent) of national FDI review procedures in 2022 were cross-sectoral. In total in 2022 the BMWK received 306 national procedures pursuant to the AWV. The same number of national procedures was filed in the previous year, 160 in 2020, 106 in 2019 and 78 in 2018. These numbers indicate the increasing importance of FDI reviews in recent years.

Transactions in the Public Eye in 2022

Although prohibitions of transactions in the area of cross-sector FDI are still rare, publicly disclosed failed, partially and fully prohibited transactions in 2022 suggest that FDI review procedures in the field of critical infrastructures and critical technologies are likely to be conducted even more carefully than before, which, combined with higher requirements, will lead to extended review procedures.

Siltronic AG

The acquisition of Siltronic AG by way of a public takeover bid by GlobalWafers (Taiwan) had failed at the beginning of 2022 as a result of the expiry of the deadline for the takeover bid, as no certificate of non-objection had been received timely, a prerequisite for the closing of the takeover bid. The BMWK pointed out that not all the necessary steps in the FDI review could be completed by the expiry of the deadline, in this case relating to the conditional antitrust approval by Chinese authorities.  

Global Wafers' subsequent attempt to have the transaction judicially cleared by way of an expedited application based on a fictitious clearance due to the BMWK's failure to act was rejected in two instances.

HHLA/Hamburger Hafen

On 26 October 2022, the Federal Cabinet, which is responsible for prohibition orders, had decided on a partial prohibition in the Port of Hamburg FDI review proceedings. This means that the Chinese buyer, the state-owned company Cosco, can only acquire a share below the blocking minority (25 percent) in HHLA Container Terminal Tollerort GmbH (Critical Infrastructure Transport/Port). Any further acquisition above this threshold was prohibited, as were special rights that could lead to an atypical acquisition of control. According to the BMWK press release, this “prevented a strategic investment in HHLA CTT and reduced the acquisition to a purely financial investment. The reason for the partial prohibition is the existence of a threat to public order and safety.” Nothing is currently known about a finalization of the transaction. [1]

Elmos Semiconductor SE

The acquisition of Elmos Semiconductor SE, which operates a chip factory in Dortmund, by a Chinese company was outright prohibited on 9 November 2022. The press release of the BMWK of the same day states that the prohibition was issued because the acquisition endangered the public order and security of Germany. Milder means, such as an approval of the acquisition with conditions, were not suitable to eliminate the identified dangers. Federal Minister of Economics and Climate Protection, Dr. Robert Habeck, is quoted in the press release as saying that close attention must be paid to company takeovers when important infrastructures are involved or when there is a risk of technology leaking to acquirers from non-EU countries. He stressed that it was important to protect Germany's and Europe's technological and economic sovereignty, especially in the important semiconductor industry. [2]

The peculiarity of this case is that the prohibition was preceded by a longer review and - until a surprising (final) decision on the political level regarding Chinese direct investments - the parties to the transaction had assumed that the acquisition would be approved. Elmos has announced its intention to have the prohibition reviewed by the courts.


Although the German government after the prohibition of the Elmos acquisition emphasized that Germany continues to be an open investment location [3], it can probably be assumed that acquisitions of voting rights above the threshold value (20 percent) by Chinese investors within the entire value chain in the semiconductor sector will not be approved. It remains to be seen whether the threshold will be lowered further. In view of the efforts at European and national level to secure supply chains in the semiconductor sector, it can also be assumed that the complexity and FDI review density of transactions with acquirers from other non-EU/EFTA countries (e.g. USA) will increase.

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