Germany's Planned Investment Screening Act

Germany's planned Investment Screening Act: the short answer

Germany plans to move its foreign direct investment (FDI) screening rules out of the Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG) and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, AWV) into a dedicated Investment Screening Act (Investitionsprüfungsgesetz, IPG), with the list of security-relevant sectors in a separate Investment Screening Ordinance (Investitionsprüfungsverordnung, IPV). As of November 2026 the investment screening act is a ministerial draft: the Federal Ministry for Economic Affairs and Energy (BMWE) opened the consultation of the federal states and associations on 15 October 2026, published the drafts on 22 October 2026 and invited comments until 12 November 2026.

The reform has two drivers. First, the ministry wants a clearer, faster and more user-friendly regime after the 2023 evaluation of the current rules. Second, the new EU Screening Regulation (EU) 2026/1386 requires every Member State to maintain a screening mechanism with common minimum standards from 17 January 2028. Until the investment screening act is adopted and in force, the AWG and AWV continue to apply in full, and nothing in this article changes current filing obligations.

Why Germany wants a separate statute

German investment screening has been tightened repeatedly since 2017, mostly by amending the AWV. The result is a set of provisions that the ministry itself describes as scattered, partly inconsistent and difficult to apply. According to the explanatory memorandum to the draft ordinance, the central rules should now be laid down in a parliamentary statute, reflecting the Federal Constitutional Court's doctrine that essential decisions belong to the legislator, while the detailed sector catalogues move to the IPV, which the ministry can adjust more easily.

The ministry also points to a changed geopolitical environment in which economic tools are increasingly used to pursue strategic goals. At the same time, the draft aims to reduce case numbers and procedural burdens so that Germany remains open to foreign capital. The explanatory memorandum notes that around 90 per cent of German targets examined since 2021 were GmbHs and only 7 per cent stock corporations.

Current law in brief

To understand the draft, it helps to recall how screening works today. The AWG and AWV provide two procedures. The sector-specific procedure (§§ 60 ff. AWV) covers acquisitions by any foreign investor of at least 10 per cent of the voting rights in companies active in military goods, certain IT security products and defence-related facilities. The cross-sectoral procedure (§§ 55 ff. AWV) covers acquisitions by non-EU investors. Within it, the 27 sectors listed in § 55a(1) AWV trigger a mandatory filing, with entry thresholds of 10 or 20 per cent depending on the sector, while acquisitions of 25 per cent or more in any other German company can be reviewed without a filing obligation.

Under § 14a AWG, the ministry has two months to open an in-depth review and then four months from receipt of the complete documents to prohibit the deal or impose conditions, extendable by three months in difficult cases and by a further month where defence interests are particularly affected. In non-notifiable cases, investors can apply for a certificate of non-objection to obtain legal certainty. The investment screening act would keep this architecture but rename, restructure and recalibrate it.

Key changes in the draft investment screening act

The following overview is based on the ministry's draft documents published on 22 October 2026. Details may change in the cabinet bill and in parliament.

Broader scope where control is gained without shares

The draft extends screening to security-relevant acquisitions in which an investor gains influence comparable to a voting-rights acquisition without acquiring any voting rights. It clarifies that an asset deal is caught if the assets form a substantial part of the target's assets, extends screening to assets in Germany of a foreign company and broadens the anti-circumvention rule so that structures which have the effect of avoiding screening are caught, not only those intended to do so. The ministry would also gain power to adopt interim measures to prevent faits accomplis.

Simplification and acceleration

The exemption for intra-group restructurings, today limited to cross-sectoral review, would apply to all procedure types and to further uncritical reorganisations where the ultimate beneficial owner does not change and no entity from a new jurisdiction joins the acquisition chain. The rarely used extension option in § 14a(4) sentence 2 AWG would be removed. A consensual extension would only be possible in phase 2 and would require only the direct acquirer's consent.

Sectors under the draft investment screening act

The draft IPV keeps the familiar structure of a sector-specific procedure for defence and IT security products and a sector list with mandatory filing. It splits the list into two groups. A 10 per cent entry threshold would apply to operators of critical facilities under the KRITIS umbrella legislation, manufacturers of critical components and sector-specific software, telecoms surveillance obligations, certain cloud providers, telematics infrastructure in healthcare, media companies with particular reach and services for government communication networks.

A 25 per cent threshold would apply to a longer list that includes protective equipment and critical medicines, medical devices for infectious diseases, high-grade earth observation, artificial intelligence linked to general-purpose models with defence or space relevance or systemic risk, automated driving and drones, specialised robotics, semiconductors, quantum technologies and strategic and critical raw materials. Several categories follow the minimum scope of the EU Regulation, including electoral systems. Bank rescues would be taken out of investment screening altogether.

Procedure, decisions and court review

Under the current law, phase 1 begins when the ministry learns of the signing, which can be through press reports, and the ministry has often agreed with the parties to extend the period to two months from receipt of the documents. The draft investment screening act would start the clock only with the complete filing, but shorten the period to 45 days. Phase 2 and its suspension rules would remain, with the ministry able to request further documents.

Prohibitions would no longer require a cabinet decision. Instead, the ministry would need the agreement of the Federal Chancellery and the Foreign, Interior, Defence and Finance Ministries in all procedure types. Legal challenges would go to a Higher Administrative Court (Oberverwaltungsgericht) at first instance, mirroring the first-instance jurisdiction of the Higher Regional Court in Düsseldorf in cartel matters. The ministry would also be allowed to publish aggregated information about its decisions.

Standstill and penalties remain central. Today, completing a notifiable deal before clearance is provisionally invalid under § 15(3) AWG, and exercising voting rights or sharing sensitive information during the review is a criminal offence under § 18(1b) AWG. The draft keeps the principle of a prohibition on completion before approval for notifiable acquisitions.

Interaction with the revised EU Screening Regulation

Regulation (EU) 2026/1386 applies from 17 January 2028 and repeals Regulation (EU) 2019/452. It requires every Member State to have a screening mechanism with a prior authorisation requirement for foreign investments in targets active in defined areas, including dual-use items, military goods, semiconductors, quantum, certain AI technologies, critical transport, energy and digital infrastructure, strategic raw materials, key financial market infrastructure and electoral systems. Investments made through an EU subsidiary of a foreign investor are covered. The ministry notes that German law is already stricter than the EU minimum in most respects and that the Regulation explicitly allows Member States to go further, for example by screening acquisitions below control.

The end of the special treatment of EFTA investors is a direct consequence of the Regulation. Swiss, Norwegian, Icelandic and Liechtenstein acquirers should therefore expect to fall within cross-sectoral review once the new rules apply.

What investors and targets should do now

• Keep applying current law. Filings, standstill and gun-jumping rules under the AWG and AWV apply until the investment screening act enters into force.
• Map exposure to the new sectors. Targets in semiconductors, quantum, AI, robotics, raw materials or automated driving should check whether they will become notifiable or move between thresholds.
• Review EFTA structures. Acquisition vehicles in Switzerland or Liechtenstein may lose the benefit of equal treatment with EU investors.
• Plan timetables. A 45-day phase 1 from a complete filing may be faster in uncritical cases, but only if the filing package is ready at signing.
• Follow the legislative process. Check the Bundestag documentation system for the cabinet bill and any changes.

Illustration: a hypothetical Swiss industrial group plans to acquire 30 per cent of a German robotics company that develops radiation-hardened handling systems. Under current law, an EFTA acquirer is treated like an EU investor in cross-sectoral review, so a filing may not be required. Under the draft investment screening act, the same acquirer would be a third-country investor, the robotics sector would be listed with a 25 per cent entry threshold, and the deal would require a filing and approval before closing. If the purchase agreement is signed close to the transition date, the parties need to know which regime applies on signing and should allocate the regulatory risk accordingly.

How TRW & Co helps with the investment screening act

We advise foreign investors, sellers and German targets on investment screening under current law and on how the planned investment screening act will affect their transactions. We assess whether a deal is notifiable, prepare filings and applications, manage communications with the ministry, negotiate mitigation measures and draft regulatory conditions and risk allocation in purchase agreements. For transactions signed in 2026 and 2027, we model timetables under both regimes. Our work connects with our foreign investment control and M&A practices. Read also our FDI filing checklist and our note on the revised EU FDI Screening Regulation. For a deal-specific assessment, contact us.