Investment Screening Act: Germany resets its FDI regime

In October 2026, the Federal Ministry for Economic Affairs and Energy (BMWE) published ministerial drafts of a new Investment Screening Act (Investitionsprüfungsgesetz, IPG) and an accompanying Investment Screening Ordinance (Investitionsprüfungsverordnung, IPV). The IPG would bring together in a single statute the German foreign direct investment (FDI) screening rules that are currently spread across the Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG) and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, AWV).

The drafts are at an early legislative stage, and several passages remain open, including parts of the IPV sector catalogue and the date from which the new rules would apply. However, they already show the direction that German FDI screening is set to take.

The main changes in the proposed IPG are:

• Lower thresholds for listed companies: for the first time, separate thresholds would apply to listed targets. Screening would start at 15% (instead of 25%) in the Section 3 IPV case groups and the cross-sectoral procedure, while the 10% threshold would stay unchanged. As drafted, a 30% re-screening threshold would apply to listed targets in the 10% sectors.
• Wider scope: a new case group would cover the development, manufacture or distribution of all items listed in Annex I of the EU Dual-Use Regulation, and board seats, veto rights or information rights could trigger a review even without any acquisition of voting rights, where they confer influence comparable to a reviewable voting stake.
• EFTA investors no longer privileged: investors from Switzerland, Iceland, Liechtenstein and Norway would be screened in the same way as other non-EU investors.
• Nationality matters: only individuals who hold exclusively German (or exclusively EU) citizenship and live in Germany (or the EU) would qualify as domestic (or EU) investors. Dual nationals with a third-country passport would always count as foreign investors, and German–EU dual nationals would count as foreign (but not non-EU) investors.
• Faster, leaner procedure: the changes include a non-extendable 45-day Phase 1, a three-year (instead of five-year) window for ex officio reviews and a wider exemption for intra-group restructurings. Prohibitions in the case-group-specific and cross-sectoral procedures would no longer require a Cabinet decision, only the consent of the Federal Chancellery and four federal ministries.
• Stronger enforcement and transparency: interim measures, new fines of up to EUR 100,000 for filing breaches, publication of prohibitions and legal challenges heard at first instance by the Higher Administrative Court.

Germany rewrites its FDI rulebook

In October 2026, the BMWE published the ministerial drafts of the IPG and the IPV. The IPG would move the German investment screening rules, which have so far been split between the AWG and the AWV, into a single parliamentary statute. The IPV would list the security-relevant sectors that trigger a mandatory filing. The BMWE justifies the reform on the basis of a significantly worsened geopolitical security situation, in which economic means are increasingly used to pursue geostrategic aims. It also cites experience gained from screening practice and the 2023 evaluation of the current regime.

The IPG proposes substantive changes, including new screening triggers that bring more transactions into scope, alongside procedural changes designed to make the regime more predictable and streamlined.

The drafts also implement Regulation (EU) 2026/1386 (EU FDI Screening Regulation), which was adopted on 17 June 2026 and will apply from 17 January 2028 (see our client briefing). The EU FDI Screening Regulation requires every Member State to operate a national screening regime and sets minimum standards, including mandatory filings in certain sectors. As German law already goes further in most respects, the required changes are limited: the drafts add the EU-mandated case groups to the sector catalogue, end the privileged status of EFTA investors, align review periods with the EU FDI Screening Regulation and designate the BMWE as the national contact point for the EU cooperation mechanism.

The draft retains the basic logic of the current regime but reorganises it into three procedures:

• the sector-specific procedure for acquisitions by any non-German investor (including EU investors) of companies that develop, manufacture, modify or actually control military goods or defence technology covered by secret patents (including where they did so in the past and still have access to the technology), companies that make certain IT security products for classified information, and companies that are themselves defence-critical facilities;
• a new case-group-specific procedure for acquisitions by non-EU investors of companies in further security-relevant sectors listed in Sections 2 and 3 of the draft IPV, such as critical infrastructure (including sector-specific software and cloud services), media, AI, semiconductors and dual-use items; and
• the cross-sectoral procedure as a catch-all for acquisitions of at least 25% of the voting rights by non-EU investors in all other sectors, with no filing obligation but with call-in powers for the BMWE. The direct acquirer may still apply for approval to gain legal certainty before the three-year call-in window expires.

The first two procedures trigger a mandatory filing and a standstill obligation. A single approval would replace the current distinction between a clearance and a certificate of non-objection in all procedures. The BMWE may switch procedures if it appears during a review that another procedure applies.

In or out? FDI screening under the new proposed scope

The IPG proposes changes to the thresholds, triggers and investors covered by the FDI regime.

Screening thresholds: listed companies move into focus

For the first time, the IPG proposes separate thresholds for listed companies. Where the 25% entry threshold would otherwise apply, the threshold for acquisitions of stakes in listed targets would be lowered to 15%. The rationale is that low attendance at shareholder meetings often allows investors to obtain a de facto blocking minority with comparatively small shareholdings.

For unlisted targets, which make up the majority of transactions, the 10% threshold for the sector-specific procedure and the Section 2 IPV case groups, and the 25% threshold for the cross-sectoral procedure, would remain unchanged. For the remaining security-relevant sectors listed in Section 3 IPV (currently the 20% category), the IPG proposes raising the threshold to 25%. According to the explanatory memorandum, the evaluation of the regime showed that lowering the threshold to 20% in 2021 had no effect on restrictive measures, as such measures were only imposed in cases that the BMWE could have reviewed irrespective of the 20% threshold.

Additional acquisitions: full takeovers re-screened

As at present, an increase in voting rights in a German target can trigger a filing requirement where certain thresholds are crossed. However, the IPG proposes several changes. Moving from an existing shareholding of 75% of the voting rights to 100%, which falls outside the scope of the current regime, would trigger a filing requirement. The reasoning is that a full takeover may remove any veto rights of the remaining shareholders and make the investor’s influence absolute. The 40% re-screening threshold, on the other hand, would be abolished. For listed targets in the sectors subject to the 10% entry threshold, a 30% re-screening threshold, modelled on the takeover threshold in the Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG), would replace the 25% step.

Re-screening would therefore be triggered at 25% (or 30% for listed companies), 50%, 75% and 100% in the 10% sectors, and at 50%, 75% and 100% in the 25% sectors and in the cross-sectoral procedure. At present, depending on the sector, re-screening is triggered at 20%, 25%, 40%, 50% or 75%.

The rules on attributing voting rights would also be tightened. Voting rights that a third party holds for the account of the acquirer would be attributed to the acquirer in full, which captures trust and fund structures. Voting rights of parties acting in concert remain attributable. As at present, a rebuttable presumption of acting in concert applies where the acquirer and another shareholder come from the same third country and that country’s state bodies hold stakes in, or can otherwise influence, both of them.

Acquisitions: influence without voting rights

The concept of a reviewable acquisition would be defined centrally and extended in several respects:

• Atypical acquisition of influence: board or supervisory board seats, veto rights over strategic business or personnel decisions, or rights to sensitive information could trigger a review on their own, even without any acquisition of voting rights, where they confer influence comparable to a reviewable voting rights threshold. This is particularly relevant for structured minority investments, co-investments and governance rights in shareholder agreements and side letters.
• Asset deals: the acquisition of a separable business unit, or of all or a significant part of the assets of a German company, would be caught; according to the explanatory memorandum, this may include the grant of a licence. German-based assets of foreign companies would also be covered where they form a significant part of that company’s assets.
• Circumvention: modelled on competition law, the anti-circumvention rule would capture structures that objectively have the effect of avoiding screening, regardless of any intent to do so. The explanatory memorandum cites coordinated acquisitions that each stay below the thresholds as an example.
• Acquisitions without a purchase agreement: acquisitions that are not contractual, such as the compulsory redemption (Einziehung) of GmbH shares that increases the remaining shareholders’ stakes, would expressly be subject to the filing obligation. The obligation would arise when the act forming the legal basis of the acquisition takes place, such as the shareholder resolution.

Sectors: more areas classified as critical

The IPV would carry over the existing case groups, refine several of them and add the case groups that the EU FDI Screening Regulation requires all Member States to screen. The main changes are:

• Critical raw materials: would now expressly include recycling and processing, as well as stockpiling that goes well beyond a company’s own operational needs;
• AI: would cover companies that research or develop AI technology (i) used for general-purpose AI models, or AI systems based on them, that are suitable for space or defence applications; or (ii) used for general-purpose AI models with systemic risk under the EU AI Act, or systems based on them;
• Semiconductors: would cover research, development and manufacture across the value chain, from chip design and design-automation software to front-end and back-end manufacturing, equipment and materials;
• Quantum technologies: would cover research, development and manufacture of goods for quantum computing, communication and sensing;
• Electoral systems and voter databases: would be covered for the first time; and
• Narrower case groups: personal protective equipment would only cover protection against harmful biological agents, and pharmaceuticals would refer exhaustively to the list of supply-critical active substances.
• Dual-use items: The most far-reaching extension, required by the EU FDI Screening Regulation, concerns dual-use items. Developing, manufacturing or distributing any item listed in Annex I of the EU Dual-Use Regulation (Regulation (EU) 2021/821), not only certain goods covered by the current regime, would become a separate notifiable case group from 25% of the voting rights, or 15% for listed targets. The explanatory memorandum expects this to increase case numbers, and it is likely to bring many conventional industrial and technology companies into scope for the first time.
• Critical infrastructure: actual control over a critical facility under the KRITIS Umbrella Act (KRITIS-Dachgesetz) would suffice in future, rather than operator status alone.

Other case groups subject to the 25% threshold include high-grade earth observation systems, automated and autonomous vehicles and drones, certain robots, IT security products, aviation and space, additive manufacturing, data network equipment, certified smart meter gateways, companies employing staff in security-sensitive positions, goods covered by secret patents and agricultural land of more than 10,000 hectares.

The sector catalogue is not yet final. For many case groups, the explanatory memorandum states that further reasoning will follow once the ministries have agreed the wording, so the scope of individual sectors may still change. Some points reported before publication are already settled in the draft: cloud computing services whose infrastructure meets the KRITIS thresholds would fall into the 10% category, and the semiconductor case group would already cover research. Future changes could also come faster, as the BMWE alone could amend the sectors and thresholds by ministerial ordinance without the consent of the Bundesrat, subject to the Bundestag’s right to demand repeal within four months.

Who counts as a foreign investor: nationality and state influence

The IPG would make nationality, not only residence, decisive for who counts as a domestic or EU investor. Under the current rules, residence in Germany or the EU is sufficient for an individual to qualify as a domestic or EU investor. The IPG would additionally require the individual to hold exclusively German (or exclusively EU) citizenship. Dual nationals with a third-country passport would therefore always count as foreign or non-EU investors, even if they live in Germany or the EU. German–EU dual nationals living in Germany would count as foreign, but not non-EU, investors, so only the sector-specific procedure would apply to them. To justify this, the explanatory memorandum points to possible ties and civic duties towards the third country.

The nationality of individuals along the acquisition chain up to the ultimate beneficial owner (UBO) would therefore need to be checked closely. This affects founder, management and family office structures, as well as UBOs in fund and holding structures.

For legal entities, the test would continue to be based on their seat or place of management. Domestic branches and permanent establishments of foreign entities would count as legally independent.

In addition, the BMWE would assess whether the acquirer is subject to effective influence, rather than (as at present) control, by a third-country government, including other state bodies or armed forces, for example through its ownership structure or more than minor state funding. The same shift would apply to the presumption of acting in concert.

EFTA investors treated as foreign investors

Under the current rules, German FDI law treats investors from EFTA states (Switzerland, Iceland, Liechtenstein and Norway) in the same way as EU investors, so they fall outside the cross-sectoral procedure.

The IPG proposes to end this privilege because the EU FDI Screening Regulation treats every territory outside the EU as a third country. EFTA investors would therefore fall within the scope of the new regime in the same way as investors from any other non-EU country, in both the case-group-specific and the cross-sectoral procedures.

By contrast, the drafts do not extend the case-group-specific or cross-sectoral procedures to EU investors. Investors from other EU Member States would remain subject only to the sector-specific procedure.

Intra-group restructurings

The AWV currently contains only a narrow exemption for intra-group restructurings, limited to the cross-sectoral procedure and requiring all parties to be managed from the same third country. The IPG would extend the exemption to the sector-specific procedure. It would apply where the transaction takes place between companies wholly owned by the same parent and no new direct or indirect acquirer with its seat or place of management in another state joins the chain.

Bank and insurer resolutions

Acquisitions of German companies through resolution tools for banks, central counterparties or insurers would fall outside screening. The explanatory memorandum notes that such rescues must be decided within days and are already reviewed by the competent authorities.

No change for greenfield investments

Greenfield investments, i.e. the establishment of a new business in Germany by a foreign investor, remain outside screening. The reasoning is that greenfield investments lack the risks that come with acquiring an existing business, and that sector-specific legislation already regulates new businesses in critical areas.

What the BMWE will look at

As at present, the protected interests differ by procedure. In the sector-specific procedure, the BMWE examines whether an acquisition is likely to affect Germany’s essential security interests. In the other two procedures, it examines whether an acquisition is likely to affect the public order or security of Germany or of another EU Member State, or projects or programmes of Union interest listed in Annex II of the EU FDI Screening Regulation.

The IPG would also set out non-exhaustive assessment factors in the statute:

• Sector-related factors include the outflow of know-how and technology, a significant loss of production capacity that endangers public services or security of supply, and risks to economic or technological sovereignty. According to the explanatory memorandum, the BMWE would also consider whether, together with the transaction under review, too many German companies in the same sector would end up in the hands of companies from the same third country.
• Acquirer-related factors remain similar to the existing ones and include effective influence by a third-country government, past involvement in activities that harmed public order or security in Germany or another Member State, and a significant risk of involvement in serious offences or in breaches of foreign trade or war weapons law.
• The BMWE must also consider the factors in Article 19(2) of the EU FDI Screening Regulation. These include whether the foreign investor or any linked party is likely to pursue a third country’s policy objectives, boost its military capabilities, or support repression or serious violations of human rights or international humanitarian law, and whether it has a record of refused investments, non-compliance with screening decisions, harming security or public order, or illegal activities such as circumventing sanctions.

Procedural changes: faster decisions and fewer reviews

Shorter deadlines

Under the current rules, the BMWE has two months in Phase 1 to decide whether to open an in-depth review, and four months in Phase 2 to reach a decision. The BMWE can also review non-notified transactions on its own initiative for up to five years after signing.

In line with the EU FDI Screening Regulation, the IPG proposes the following review periods, now counted in calendar days:

• Phase 1: 45 days for the BMWE to approve the acquisition or open an in-depth review, with no possibility of extension;
• Phase 2: 120 days, which the BMWE may extend by up to 90 days where the case is particularly complex or difficult, or which may be extended with the direct acquirer’s consent; and
• Ex officio review: the BMWE would not be able to open Phase 2 after three years from signing, compared with five years at present.

The shorter Phase 1 comes with a catch: the clock would start later. Under the current rules, the two-month Phase 1 period starts as soon as the BMWE becomes aware of the signing. Under the IPG, each phase would start on the day after the BMWE receives the complete documents required for that phase, as specified in a general administrative act to be issued by the BMWE. Filings made via the online portal would only count as received once the BMWE has fully imported them into its IT system. Preparing a complete filing therefore becomes the decisive timing factor, and it remains to be seen whether the BMWE will open Phase 2 more often in response to the tighter Phase 1 period.

The Phase 2 period would be suspended while the BMWE awaits information it has requested, while questions from other Member States or the European Commission under the EU cooperation mechanism remain open, and while the parties negotiate a public-law agreement. If the BMWE does not act within the deadlines, the acquisition would be deemed approved.

The BMWE must confirm receipt immediately and, where possible, flag incomplete or damaged documents. It may request additional information, and the explanatory memorandum treats 15 days as the normal response deadline. The Phase 2 period would start again if an approval is withdrawn, revoked or amended, if a court lifts restrictions or a prohibition, or if a party unilaterally terminates a public-law agreement governing the imposed remedies. A deemed approval would then only arise when the new period expires.

Filing mechanics and standstill

The direct acquirer must make a filing in relation to a notifiable acquisition without undue delay after signing or, for public takeover offers, after publishing its decision to make an offer. Filings must be made electronically via the BMWE’s portal. Where a transaction also requires screening in other EU Member States, the acquirer must file in all of them on the same day and cross-refer to the other filings.

Until approval, notifiable transactions remain provisionally invalid. The acquirer may not exercise voting rights, or receive security-relevant company information. Reviewable transactions that do not require a filing would take effect but would be subject to a resolutive condition until the review periods expire. This would now also apply to acquisitions that are not based on a contract. Acquisitions of securities on a stock exchange may still be completed, provided the acquirer notifies them without delay and does not exercise the voting rights until approval.

Broader powers, transparency and sanctions

As soon as the BMWE learns of a signing or an imminent signing, it could impose interim measures, including restrictions on voting rights or information flows, the transfer of voting rights to a trustee at the acquirer’s cost and a prohibition on closing, including in the cross-sectoral procedure. It could issue information orders to third parties not involved in the transaction and discontinue proceedings that the acquirer does not pursue or that have become moot, without any deemed approval.

The IPG would give the BMWE a wide range of remedies and enforcement tools. A non-exhaustive list of remedies that may accompany an approval includes changes to boards or voting rights, conditions on access to sensitive technology or information, supply commitments, secure sourcing of critical components, cybersecurity protocols, storing and processing certain data within the EU, compliance reporting, a monitoring trustee at the parties’ cost and an obligation to report further acquisitions below the thresholds. Instead of issuing orders, the BMWE may conclude a public-law agreement. It could enforce remedies and prohibitions by restricting voting rights, ordering a sale or appointing a trustee to unwind a completed transaction, and it could request information and inspect business premises to monitor compliance. The BMWE could also share information with screening authorities outside the EU.

Orders may also target the parties’ affiliated companies, which would also owe information duties, including proof of citizenship. Orders and public-law agreements would run without a time limit, but the BMWE must review them periodically and the parties may ask for them to be lifted. Trustees must be competent, reliable and independent, and the acquirers would bear their costs jointly and severally.

Investors would no longer be able to rely on screening outcomes remaining confidential. The BMWE would publish prohibitions on its website and could publish orders and public-law agreements. According to the explanatory memorandum, its press releases would name the parties, the target’s sector and the general subject of any remedies, without disclosing business secrets. Access to screening files under the Freedom of Information Act would be expressly excluded, while the parties’ rights to inspect files remain unaffected.

The IPG would also tighten sanctions and change how parties challenge decisions:

• New administrative fines: failing to notify a notifiable acquisition without delay, failing to submit the required documents or to meet deadlines for requested information, and failing as a third party to answer an information order would become administrative offences for the first time, with fines of up to EUR 100,000;
• Negligent breaches: negligent breaches of the standstill obligations or of enforceable orders or prohibitions could be fined up to EUR 1 million;
• Criminal offences: intentional breaches would remain criminal offences, as under the current AWG, with minimum sentences of one or two years for commercial or gang-related breaches of orders or prohibitions. Items linked to an offence could be confiscated, and the BMWE could obtain information from other authorities, courts and prosecutors; and
• Legal challenges: challenges to screening decisions would go directly to the Higher Administrative Court at first instance, mirroring competition law, where appeals go directly to the Higher Regional Court of Düsseldorf. Actions against restrictions would continue to have no suspensive effect.

What this means for businesses

If lawmakers enact the IPG in its current form, investors and targets should prepare to adjust their transaction planning by:

• Rethinking investments in listed companies: checking whether planned acquisitions in listed German companies will cross the proposed lower 15% threshold, and structuring deals accordingly.
• Reviewing EFTA-based investors and structures: identifying deals involving Swiss, Norwegian, Icelandic or Liechtenstein investors, or acquisition vehicles based in those countries, that might require a German FDI filing once the IPG is in force.
• Planning ahead for full takeovers: building a possible separate screening step for moving from 75% to 100% into transaction timetables and documentation.
• Updating deal timetables and conditions: taking account of the new review periods, and of the fact that they only start once a complete filing is received, when setting long-stop dates and closing conditions.
• Securing certainty for non-notifiable deals: considering a voluntary application for approval in the cross-sectoral procedure, as these deals remain subject to a resolutive condition and call-in risk for three years.
• Mapping nationality and state influence: checking the citizenship and residence of individuals throughout the ownership chain, and any state shareholdings or funding, as part of early FDI analysis.
• Reviewing governance and information rights: assessing board seats, veto rights and information rights in minority investments, as these may trigger a review on their own.
• Tightening filing compliance: setting up processes to notify without delay after signing and to submit complete documents on time, as these failures would attract fines of up to EUR 100,000, while intentional breaches of the standstill remain criminal offences.

Timeline and next steps

The drafts are at an early stage of the legislative process, and the start date remains open. The government must complete inter-ministerial coordination and consultation before the Cabinet can adopt a government bill and introduce it into the Bundestag, and several IPV passages are still marked as not yet agreed. The IPG and the IPV would enter into force on the day after promulgation. The new rules would apply to agreements signed, or takeover offers announced, from a date in 2027 that the drafts leave open, while earlier transactions would remain subject to the AWG and the AWV. For acquisitions that do not rest on a contract, the date of the act forming their legal basis, such as a shareholder resolution, would be decisive.

Investors should start tracking the key changes now. Lawmakers may still amend the proposal during the parliamentary process, particularly on the sector scope and thresholds, but the EU FDI Screening Regulation will in any event apply from 17 January 2028. In particular, the lower thresholds for listed companies, the new dual-use case group and the inclusion of EFTA investors could materially affect deal structuring and timetables for transactions signing after the new rules apply.

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Authors​: Sergej Bräuer, Partner; Dimitra Karakioulaki, Associate; Sarah Schaible, Transaction Lawyer; Aamir Hajjout, Research Assistant