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German Foreign Direct Investment (FDI) Review in the Life Sciences Sector


published on 11 November 2020 | Reading time approx. 5 minutes

The German FDI Review aims to avoid security risks for the Federal Republic of Germany which may arise in individual cases as a result of the acquisition (including, e.g., capital increases, contributions, mergers) of companies based in Germany by foreign buyers and was subject to three legal changes in 2020 alone, two of them fundamental. The amendments essentially serve to implement the requirements of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (EU Screening Regulation). Such changes are discussed below only to the extent that they have an impact on transactions in the Life Sciences Sector. More information on the EU Screening Regulation which introduced for the first time an EU-wide cooperation mechanism effective since 11 October 2020, is available on roedl.de in German.

M&A activities as well as investments in the Life Science Sector fall within the scope of the cross-sectoral investment review according to para. 4 sect. 1 no. 4 und 4a, 5 sect. 2 of the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG] in conjunction with para. 55 to 59 of the German Foreign Trade and Payments Ordinance (Außenwirtschafts-verordnung, AWV] and should be planned against the background of a possible notification obligation (Meldepflicht) of the acquisition to the Federal Ministry of Economics and Energy (Bundesministerium für Wirtschaft und Energie, BMWi].

Brief overview of the Cross-Sectoral FDI Review in the Life Science Sector

In general, within the framework of Cross-Sector FDI Review, the BMWi is able to examine, irrespective of the sector, size, annual turnover or number of employees of the target company, whether an acquisition is likely to impair public order or security in the Federal Republic of Germany, another member state of the European Union or, with regard to projects or programs of Union interest within the meaning of Article 8 of the EU Screening Regulation, if a non-EU/non-EFTA acquirer, directly or indirectly acquiring a domestic company or directly or indirectly acquiring 25 per cent or more of the voting rights in a domestically domiciled company.

In addition to the review, the BMWi is able to restrict or prohibit such an acquisition. This forward-looking audit standard was introduced into German law on 17 July 2020 as part of the implementation of requirements stemming from the EU Screening Regulation by way of the First Act to Amend the Foreign Trade and Payments Act and other laws (1st Amendment AWG – Erstes Gesetz zur Änderung des Außenwirtschaftsgesetzes und anderer Gesetze, 1. AWGuaÄndG)]. At ordinance level, the changes will be implemented by the Sixteenth Regulation to Amend the Foreign Trade and Payments Regulation (16th Amendment AWV – Sechzehnte Verordnung zur Änderung der Außenwirtschaftsverordnung, 16. AWV-Novelle], which was adopted by the German Federal Cabinet on 7 October 2020. They are expected to be published in the German Federal Gazette shortly.

If the target company is a particularly security-relevant company in the catalogue of para. 55 sect. 1 sentence 2 AWV (e.g. operators of critical infrastructures), in the context of cross-sectoral investment control a notifi­cation obligation (Meldepflicht) for acquisitions of (directly or indirectly) 10 per cent or more of the voting rights by a non-EU/non-EFTA acquirer must be observed. The reporting obligation starts with the signing of the acquisition agreement.

Critical Infrastructures according to the BSI Act

Para. 55 sect. 1 sentence 2 AWV stipulates operators of critical infrastructures within the meaning of the Federal Office for Security and Information Technology (BSIG Act – Gesetz über das Bundesamt für Sicherheit und Informationstechnik, BSIG] as being particularly relevant to security. Critical infrastructures are defined in para. 2 sect. 10 no 1 of the BSI Act with reference to the Ordinance on the Determination of Critical In­frastructures under the BSI Act (BSI Kritis Ordinance – Verordnung zur Bestimmung Kritischer Infrastrukturen nach dem BSI-Gesetz, BSI-Kritisverordnung,BSI-KritisV) and include the Health and Food Sectors.

Para. 6 of said BSI-KritisV lists the following critical services for the Health Sector:   

  • inpatient medical care;
  • the supply of directly life-supporting medical equipment, which are consumer goods;
  • the supply of prescription medicines and blood and plasma concentrates for use in or on the human body;
  • laboratory diagnostics, which are further specified in Annex 5 to the BSI-KritisV.

Para. 4 of the BSI-KritisV stipulates for the Food Sector that the supply of food to the general public (food supply), being provided in the areas of food production and processing as well as food trade, is a critical service, which is further specified in Annex 3 to the BSI-KritisV.

Expansion to Include Critical Health Structures

Due to the Covid-19 pandemic and after a call by the EU Commission upon the Member States of the EU to be vigilant and use all tools available at Union and national level to avoid that the Covid-19 crisis leads to a loss of critical assets and technology and that each Member State`s FDI screening mechanisms shall take fully into account the risks to critical health infrastructures, the Fifteenth Amendment to the German Foreign Trade and Payments Ordinance (15th Amendment AWV – Fünfzehnte Verordnung zur Änderung der Außen­wirtschafts­verordnung, 15. AWV-Novelle], which focuses on the health sector, was fast-tracked and entered into force on 3 June 2020.

The extension of the notification obligation (Meldepflicht) to the health care fields pertain to pharmaceuticals, medical devices, protective equipment and in vitro diagnostics. The catalogue of companies with particular security relevance (critical infrastructure) includes

  • target companies that develop or manufacture personal protective equipment (PPE) or supply preliminary products or components for its development or manufacture;
  • target companies which develops, manufactures, places on the market or is the holder of a corresponding marketing authorisation for medicinal products within the meaning of Paragraph 2(1) of the German Medicines Law (Arzneimittelgesetz], including its starting materials and active substances, which are essential for ensuring the provision of health care to the population;
  • target companies that develop, manufacture or distribute medical devices intended for the diagnosis, prevention, monitoring, prediction, prognosis, treatment or alleviation of life-threatening and highly contagious infectious diseases or supply preliminary products or components for its development or manufacture;
  • target companies which develop, manufacture or distribute in vitro diagnostic medical devices designed to provide information on physiological or pathological processes or conditions or to define or monitor therapeutic measures in relation to life-threatening and highly contagious infectious diseases, or which supply precursors or components for its development or manufacture.

The acquisition of such target companies by a non-EU/non-EFTE buyer, as well as a share acquisitions of 10 per cent, or above, must under the amended AWV be notified immediately to the BMWi upon the signing of an acquisition agreement. The BMWi may then open an investigation and can prohibit the acquisition or make a clearance decision subject to conditions.

Critical Technologies

As a final step in the implementation of the requirements stemming from the EU Screening Regulation by the German legislator, the introduction of definitions of certain critical technologies is expected in 2021 by expanding the catalogue of particularly review-relevant companies to include manufacturers and developers of advanced and future technologies and by way of inclusion of such critical technologies (including biotechno­logy) in para. 55 sect. 1 sentence 2 AWV (Seventeenth Regulation to Amend the Foreign Trade and Payments Regulation (17th Amendment AWV –Siebzehnte Verordnung zur Änderung der Außenwirtschafts­verordnung, 17. AWV-Novelle]). According to the BMWi, affected business circles will be given the opportunity to comment in detail on the amendment regulation as early as possible.

Consummation Prohibition (Stand-Still Obligation)

On 17 July 2020, a merger-like prohibition of consummation (standstill obligation) in rem (Vollzugsverbot) of acquisitions subject to a notification requirement (Meldepflicht) was introduced. The legal transaction serving the execution of the acquisition must only become effective after approval by the BMWi. A breach of such consummation prohibition is of relevant under criminal law. The performance of acts contrary to the stand-still obligation may be sanctioned by imprisonment for up to five years or a monetary fine.


For acquisitions in the Life Science Sector, it is necessary to look closely in a forward-looking consideration in each case, to what extent the security and order of the Federal Republic of Germany, another Member State of the European Union or programs/projects of interest to the Union (e.g. Horizon 2020) may be adversely impaired. The Health Sector will record a corresponding increase of notifications due to the explicit extension of critical infrastructures by the 15th Amendment AWV and the introduction of the standstill obligation by the 1st Amendment AWG. Overall, it can be assumed that reviews by the BMWi will increase significantly. The extent to which conditions or prohibitions will increase cannot be estimated against the background of case-by-case reviews.


If the assessment of a planned transaction in an individual case raises doubts about the obligation to notify the BMWi, an application of non-objection (Antrag auf Unbedenklich-keitsbescheinigung) to be submitted to the BMWi remains available without change. If the BMWi does not open formal review proceedings within two months after receipt of such an application, the approval is deemed to be granted and the acquisition can proceed. Such an application may be made before an agreement is signed in order to obtain legal certainty for the acquisition as soon as possible.


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