Q&A: foreign investment issues for project companies in Germany
Q&A: foreign investment issues for project companies in Germany Lexology
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Foreign Investment Issues
Investment Restrictions
- What restrictions, fees, and taxes exist on foreign investment in or ownership of a project and related companies?
Germany is open and welcoming towards foreign investments and, with few exceptions, places no restrictions on foreign investments. However, pursuant to the German Foreign Trade and Payments Ordinance, non-EU investors acquiring 25% or more of the voting rights in a German company must notify the Federal Ministry for Economic Affairs and Energy. If the company operates critical infrastructure or meets certain criteria, the threshold for notification is reduced to 10%.
- Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies?
The restrictions on foreign investment do not specifically address foreclosure on the project or related companies. However, the Federal Ministry for Economic Affairs and Energy has the authority to examine acquisitions that may endanger public policy or security.
- Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions?
Germany has 126 bilateral investment treaties in force, including with countries such as China, Qatar, Saudi Arabia, Singapore, Russia, and the United Arab Emirates. These treaties provide guarantees for investors, including fair treatment, non-discrimination, and protection from expropriation. Germany is also a party to the multilateral Energy Charter Treaty.
- Would such activities require registration with any government authority?
The acquisition of voting rights by non-EU investors in a German company must be notified to the Federal Ministry for Economic Affairs and Energy.
Insurance Restrictions
- What restrictions, fees, and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies?
There are no relevant restrictions on insurance policies over project assets offered by foreign insurance companies.
- May such policies be payable to foreign secured creditors?
Generally, insurance policies over project assets may be payable to foreign secured creditors.
Worker Restrictions
- What restrictions exist on bringing in foreign workers, technicians, or executives to work on a project?
As a member of the European Union, Germany respects the principle of free movement of labor within the EU. However, workers from outside the EU must apply for a work permit.
Equipment Restrictions
- What restrictions exist on the importation of project equipment?
There are no relevant restrictions on the importation of project equipment, except for tariffs that apply on goods imported from outside the European Union.
Nationalisation Laws
- What laws exist regarding the nationalisation or expropriation of project companies and assets?
The German Constitution recognizes and protects private property. Expropriation may only occur for the public good and with compensation. While nationalization is possible under the German Constitution, it has never occurred to date.
- Are any forms of investment specially protected from nationalisation or expropriation?
No form of investment is specially protected from nationalization or expropriation in Germany. There is no special law on the protection of foreign investments.
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 16: Peace, Justice, and Strong Institutions
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries
- SDG 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all
- SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Gross domestic product (GDP) growth rate
- Investment in infrastructure
- Existence of bilateral investment treaties and international treaties
- Number of foreign workers granted work permits
- Tariffs on imported project equipment
- Instances of nationalization or expropriation
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 8: Decent Work and Economic Growth | 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries | Gross domestic product (GDP) growth rate |
| SDG 9: Industry, Innovation, and Infrastructure | 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all | Investment in infrastructure |
| 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries | N/A | |
| SDG 16: Peace, Justice, and Strong Institutions | 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all | Existence of bilateral investment treaties and international treaties |
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Source: lexology.com
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