Skip to main content

Foreign investment monitor

Germany prohibits telecoms buyout as it aims to strengthen FDI screening powers

The German Ministry for Economic Affairs and Energy recently stepped in to stop Addsino – a subsidiary of Chinese state-owned defence company CASIC – acquiring technology communications company IMST GmbH over the deal’s potential to threaten public order and security.

In a rare prohibition, the ministry emphasized that IMST, which has received significant public funding in the past, has security-critical know-how in the field of satellite communication, radar and radio technology that is deemed vital to Germany’s technological sovereignty. The ministry said it considers IMST’s knowledge important to the development of critical infrastructure such as 5G and 6G. IMST has been an important partner of the German Aerospace Center and has supplied products and services to the German armed forces.

telecom workman

Addsino’s bid for telecoms company IMST was blocked by the German government

The decision is set against the backdrop of moves by the government to further tighten Germany’s foreign investment screening rules. In January, the ministry published a draft regulation which follows suggestions from the EU Screening Regulation and contains clarifications on a variety of further issues.

Among other things, the draft would extend the number of categories that trigger a mandatory filing from 11 to 27, with the additions relating mostly to critical technologies and critical inputs. In the defense sector, deals involving goods that are either export-controlled or based on secret IP rights would require a mandatory notification.

The draft also proposes broadening the scope of review to include the acquisition of voting rights above the current thresholds of 10 percent and 25 percent. Below these limits, acquisitions may in the future also be subject to foreign investment controls if the investor acquires other means of influence, for example through board seats, veto or information rights or where parallel investments by different state investors jointly exceed the relevant thresholds.

So, while the IMST case may be a rarity, the proposed new rules clearly indicate the German government’s desire to extend its jurisdiction to review FDI and apply strict scrutiny to cases that it considers may have an impact on public order and security.