After months of anticipation, the Federal Ministry for Economic Affairs and Energy has circulated the first draft of a standalone German Investment Screening Act (Investitionsprüfungsgesetz, IPG). Our blog post provides an initial flavour of what the draft would change, what it leaves alone, and – perhaps the most interesting signal – where it says a firm “no, not here” to proposals that had been doing the rounds in Berlin.
The statutory hooks sit in a handful of sparse provisions in the German Foreign Trade Act (AWG); the operative substance, sectors, thresholds, procedural detail, has grown organically in Part 6 of its implementing ordinance (AWV). Deal lawyers are used to flipping between the two. Constitutional lawyers have never been very happy about it: the Federal Constitutional Court’s essentiality doctrine says that the heart of a measure restricting fundamental rights belongs in a formal Act of Parliament, not in secondary legislation.
The draft IPG addresses exactly that. It pulls the entire regime out of the AWG and the AWV and consolidates it in a single, purpose-built statute, with a leaner accompanying ordinance (the Investitionsprüfungsverordnung, or IPV) left to carry the sector catalogues, the one piece that needs to move faster than legislative cycles allow. The Ministry gives three reasons: honouring the essentiality doctrine, implementing the revised EU Screening Regulation (EU) 2026/1386 (which must be applied from 17 January 2028), and delivering the coalition agreement’s twin promise to speed up and simplify the regime, while continuing to block acquisitions “that run counter to our national interests”.
That framing matters. The IPG is not a crackdown. In several places it quietly makes life easier for inward investors, and in a couple of politically-charged areas, it deliberately draws a line in the sand.
01 Out of the AWG, and into its own skin…
The IPG is designed to be read as a standalone instrument. Part 1 covers scope and defined terms; Part 2 sets out the review power and the acquisition concept; Part 3 handles procedure, interim measures and the full menu of remedies and prohibitions; and the remaining Parts deal with offences and fines, the move to the Higher Administrative Court as the court of first and only instance, and transition.
Two architectural changes have real-world consequences. First, the current two-track system (a sector-specific procedure for defence and IT security on one side, a residual cross-sector procedure for everything else by a non-EU buyer on the other) is replaced by three tracks: sector-specific, a new case-group procedure for the full notifiable catalogue, and the cross-sector procedure as a sweep-up. In refreshingly plain terms, the Ministry concedes that the historic hybrid sub-category inside the current cross-sector procedure “did not convince on systematic or terminological grounds”. It is now broken out into its own, free-standing track.
Second, the current double track of outcomes (a full clearance in some cases, a certificate of no concerns in others) is consolidated into a single approval across all three procedures. Modest, but welcome: the old terminology was a reliable source of client confusion.
02 The quiet good news: greenfield, licensing, and group reorganisations…
Before we come to the tighter bits, it is worth touching on where the draft resists pressure to extend the regime. Three points are worth highlighting, because they will matter in the day-to-day of inbound investment.
Greenfield investments stay out of scope, and the reasoning is unusually explicit on why. The object of investment screening, the Ministry says, is the acquisition of an existing German company. In a genuine greenfield project, the typical acquisition-side risks (information flows, legacy IP, embedded personnel, access to critical infrastructure already in service) are simply not present. Where control over genuinely critical greenfield activity is needed (new critical infrastructure in particular), the Ministry points to sector-specific laws on emissions, energy and the new umbrella statute for critical infrastructure, which already do the job and can be tightened where appropriate. For non-domestic investors looking to build a plant, a data centre or a research facility in Germany, that is a strong, intentional signal: Germany will compete for your capital, not screen it.
Licensing agreements are not pulled into the regime as a trigger of their own. There had been discussion, picked up at working level during the preparatory work, of introducing a dedicated licensing trigger, especially for technology-rich licences out of German research institutes. The draft takes a measured line: a licence is caught only where it functions as an asset deal, i.e. where the licensee acquires what economically amounts to a material part of the licensor’s assets. Ordinary commercial licensing, the lifeblood of German tech transfer and inbound R&D, stays outside the regime. For corporate licensing teams and university technology-transfer offices, that is an important piece of comfort.
Group-internal reorganisations get a markedly wider carve-out. The current exemption only applies in the cross-sector procedure and only where all parties share the same third-country seat – a condition that practice has shown to be too narrow to be useful. The IPG extends the carve-out to all three procedures and relaxes it: it applies as long as no new jurisdiction enters the ownership chain between the ultimate parent and the German target. Routine re-domiciliations, intra-group clean-ups and pre-closing restructurings should become materially less painful.
And acquisitions pushed through the European resolution tools, BRRD, SRM Regulation, and the new Insurance Recovery and Resolution Directive, are carved out entirely. The reasoning is both practical (BaFin needs to act in days, not months) and conceptual (bank rescues serve financial-market stability, which is itself the public interest the FDI regime is designed to protect).
03 What tightens: who counts as a foreign investor, and when…
That said, the draft gives with one hand and takes with the other. In several places the rules are tightened, effectively widening the regime’s perimeter.
Nationality now trumps residence. The current definition of a German or EU person turns only on residence or habitual stay. The IPG adds a hard nationality requirement: a natural person only counts as German or EU-resident for FDI purposes if he or she holds exclusively German (or exclusively EU) citizenship. The Ministry’s rationale is that dual-nationals may remain subject to civic duties towards the third country whose passport they also hold. For dual-national founders, executives and HNW investors, this is a conceptual reset, and one worth putting on the diligence checklist of every deal.
EFTA investors (currently) lose their long-standing privilege. Switzerland, Norway, Iceland and Liechtenstein have been assimilated to EU Member States for FDI purposes since the regime began. Under Article 2(5) of the revised EU Screening Regulation, that cannot be kept: any non-EU territory is now a third country. Swiss and Norwegian strategic and financial investors, including some of the most active cross-border buyers of German Mittelstand, will need to re-plan accordingly. However, we understand that this is a position that may change during the remaining legislative process.
“Atypical” influence without voting rights becomes reviewable in its own right. The current atypical-control test only bites if special rights are acquired alongside voting rights. The IPG closes that loophole: board or supervisory seats, veto rights on strategic decisions, access to sensitive information – if, taken together or alone, they confer influence comparable to one of the voting-rights thresholds, they trigger review on their own. For structured minority investments and co-investment arrangements, this is probably the single most consequential tightening in the draft.
And the circumvention net is widened. Today’s rules only catch deals where the parties intended to evade screening. Modelled on the German and EU cartel-law prohibition on anti-competitive agreements (§ 1 GWB and Article 101(1) TFEU), the IPG extends the test to structures that merely bring about circumvention in their effect; subjective intent is no longer required. Expect this to feature in enforcement debates around multi-step acquisitions and consortium carve-outs.
04 Which sectors, and at what threshold…
The sector catalogue migrates from §§ 55a and 60 AWV into the new ordinance. The current German case groups come across almost unchanged, but are overlaid with the new EU case groups mandated under Article 4(15) of EU Reg. 2026/1386. The additions are substantive. A very detailed semiconductor cluster: chip design, EDA software, front-end fabrication, assembly / test / advanced packaging, equipment and specialty materials. AI goods tied to general-purpose and systemic-risk GPAI under the AI Act. Quantum technologies (computing, communications, sensing). Strategic and critical raw materials under the EU Critical Raw Materials Act. Large agricultural holdings above 10,000 hectares. And, critically, the entire Annex I of the EU Dual-Use Regulation. That last one is sweeping; it will pull back into the regime a great many classical industrials transactions that today sit comfortably outside the case-group catalogue.
On thresholds, the Ministry has done some quiet tidying-up: the historic 20% review threshold is scrapped, as practice showed it caught deals but never produced an intervention; the 10% threshold stays for defence, IT security and the critical-infrastructure catalogue; the 25% threshold stays for other sensitive sectors and for the residual cross-sector procedure. New: for listed targets in the “25% sectors”, the threshold is pulled down to 15%, because low AGM attendance can turn a 15–25% stake into a de facto blocking minority. The 40% add-on threshold, aimed at the same AGM-attendance phenomenon, is dropped, as the Ministry’s own data shows that 90% of review targets since 2021 have been private limited companies (GmbHs), for which the rule was simply irrelevant. In its place, a 30% add-on threshold applies only to listed targets, aligned with the mandatory-offer threshold in Germany’s takeover rules. And the staircase of add-on thresholds now runs all the way up to 100%: even the step from 75% to full control is reviewable, because it can extinguish the veto rights of remaining shareholders.
One subtler novelty is worth flagging. In judging whether a deal would prejudice public order or security, the Ministry is now mandated to consider whether a significant number of further German companies in the same sector are already in the hands of investors from the same third country: the “critical mass” or sector-concentration test. This is new in German review practice, especially for sectors seen as geopolitically sensitive, and we expect it to feature in future interventions.
05 A sharper clock, and a tidier end-game…
The procedural rewrite is where the Ministry has gone furthest in honouring its “faster and simpler” promise.
Phase 1 drops from two months to 45 calendar days – and the current option to extend by mutual consent goes with it. Phase 2 stays at 120 calendar days, but with a more flexible extension of up to 90 days (replacing the current fixed three-month extension that was only available in “particularly difficult” cases). The one-month defence-interest extension in the AWG, never used in years of practice, is dropped altogether.
The clock trigger has also moved. It no longer runs from the Ministry’s knowledge of signing (which, in press-driven cases, could cost the review team weeks before the file even arrived). It now starts the day after the complete filing has been uploaded to the review portal. For deal timing, this cuts both ways: targets gain early certainty once review opens, but acquirers lose the current “the clock runs anyway” dynamic.
The ex-officio call-in period is slashed from five years to three – matching the new EU minimum. Combined with the move to the Oberverwaltungsgericht as the court of first and only instance, acquirers should see substantially earlier closure on both the administrative and the judicial routes.
Who gets served has changed too. The Phase 2 opening decision will be served on the direct acquirer only, not on the German target – a sensible fix for hostile deals and for targets without a general counsel on speed-dial. A Phase 2 extension only needs the direct acquirer’s consent, not the seller’s – a particular relief where the seller is listed with a wide free float. And English becomes a permitted language for exchanges under the EU cooperation mechanism, formalising the pragmatic practice everyone was already following.
The end-game is tidier, too. Mitigation measures (governance changes, access controls for sensitive technology or data, supply guarantees, cyber-security protocols, EU data residency, monitoring trustees, below-threshold notification obligations) are now set out as an express menu, codifying what has been informal practice for years and aligning with Article 20(4) of EU Reg. 2026/1386. The sign-off path for a prohibition is streamlined too: full Cabinet approval is replaced by consent from the Chancellery and the foreign, interior, defence and finance ministries only. A side benefit, candidly acknowledged in the explanatory memorandum: prohibitions will no longer surface on the Cabinet agenda, and thus in the press, before the final decision is taken.
06 More teeth: interim measures, bigger fines, and one court…
The IPG sharpens the enforcement end of the regime as well.
A long-dormant power in the AWG becomes a direct statutory tool: BMWE will be able to issue interim measures during a review – suspending voting rights, blocking the flow of sensitive information to the acquirer, ordering the deposit of voting rights with an independent third party, or imposing a standstill until clearance. For the first time this includes the cross-sector procedure, where today the standstill only kicks in once Phase 2 has been formally opened.
Fines are raised. Negligent breaches of the standstill are capped at €1 million. A new administrative-fine tier captures failures to notify, incomplete or late filings, and failures to respond to the Ministry’s new power to compel information from third parties (customers, downstream users, competitors), all capped at €100,000. The Ministry will also, for the first time, publish prohibition decisions on its website and may publish mitigation orders and public-law contracts, so as to keep what it neatly calls “information sovereignty” against increasingly frequent, and sometimes distorted, media reports.
The litigation path moves up one floor. First and only instance moves from Berlin’s Administrative Court up to Berlin-Brandenburg’s Higher Administrative Court, in line with the pattern already used for major infrastructure matters and with the aim of shortening the path to legal certainty. Access to review files under the Federal Freedom of Information Act is explicitly excluded: a long-standing concern among practitioners that press-driven FOI applications could compromise highly sensitive deal data finally finds its way into the statute book.
07 The road ahead…
Despite its ambition, this is a very early draft. It still carries a number of open placeholders, a reliable sign of unfinished inter-ministerial coordination. Several substantive items (bank-resolution carve-outs, cloud-computing scope, and the exact perimeter of the dual-use trigger among them) are expressly flagged as subject to the outcome of that process.
Once the ministries have aligned, a formal industry consultation follows; the leading German industry, employer, startup and sector associations will all want their say, especially on the dual-use trigger and on the broadened atypical-influence test. Only then does the regular parliamentary process in the two chambers of the German Parliament begin. Changes to scope and thresholds are not only possible, they are likely.
On timing, a realistic entry-into-force window is the first half of 2027 – comfortably before the EU Regulation becomes directly applicable on 17 January 2028. The Ministry has deliberately left the “day one” open and keyed the transitional rules to the day of signing of the underlying contract (or, for public offers, the day on which the decision to launch is published), so acquirers can plan around the cut-off once it is set.
For deal teams, four quick takeaways emerge from this first draft. First, nationality now matters: inherited assumptions about who counts as a German or EU investor need to be re-tested, and the EFTA shortcut (currently) looks set to go. Second, atypical influence and circumvention have both been meaningfully broadened; standard minority structures that today sit outside the regime may well not stay there. Third, the sector catalogue absorbs the full EU minimum list, including the sweeping Annex I dual-use trigger, so many classical industrials deals that today sit comfortably outside the case-group catalogue should be re-screened. And fourth, there is a genuine open-door message as well: greenfield stays out, licensing stays largely out, intra-group reorganisations get a wider carve-out, and the end-game, timing, sign-off and litigation, becomes markedly tidier.
We will come back to each of these themes – the new atypical-influence test, the dual-use trigger, the 15% listed-company threshold, the “critical mass” factor and the broadened intra-group exemption – in dedicated follow-up posts over the coming weeks. Watch this space.
For further information, please contact:
Christoph Barth, Partner, Linklaters
christoph.barth@linklaters.com
