Brexit and German Foreign Investment Control

As talks between the EU and the UK government are coming down to the wire and a Brexit trade deal hangs in the balance over issues such as fishing rights, financial support provided by the UK to its own firms and other aspects, the German Ministry of Economics (“MoE”), in charge of foreign investment control, now provides for some welcome guidance on the treatment of UK investors under German FI rules.

Until the end of 2020, UK investors benefit from EU equivalence treatment under the law governing the transitional period. Consequently, UK investors are exempt from German foreign investment control except for investment in companies active in the defence and IT security space.

Considering the situation in 2021, the MoE has now confirmed (after reaching agreement with the EU Commission) that for deals which are signed by 31 December 2020 (the latest) and which do not close in 2020, UK investors are still able to benefit from the EU equivalence treatment. However, for deals signing from 1 January 2021 onwards, the UK will (absent a further agreement between the EU and the UK) be treated as “third country investors”, meaning that investments in many German companies may become mandatory.