Germany's Foreign Investment Screening System and Implications

Abstract

In recent years, the European Union and the United States are tightening regulations on foreign investment to protect their own industries and national security. Germany is also revising the law on investment screening, such as the scope of foreign investors screening and the limit of ownership of shares, from 2009 to now to protect its own industries and technologies from China s advanced investment strategy. China has designated a strategic economic area as part of its 2015 industrial policy plan, through which it is attempting to take over shares of German high-tech industries and security-sensitive companies to participate in management or to completely purchase such companies. Moreover, China s investment strategy includes not only the military industry, but also most of the industrial sectors that play a key role in the modern economy. Korea has ground rules for regulating foreign investment that can seriously affect national security through the revision of the Foreign Investment Promotion Act. However, despite the provisions of grounds for foreign investment, there are problems with the foreign investment screening system. Above all, the scope of the foreign investment screening system under the Foreign Investment Promotion Act of Korea is limited to national defense, military and confidential matters, so the scope is very narrow, and the new future technologies, health care, and advanced technologies are recently included in the scope of protection worldwide. Technology, etc. are excluded from regulation. This paper discusses the foreign investment screening system stipulated in the German Foreign Economic Law and the Foreign Economic Ordinance, and intends to present implications for it while comparing and examining the related systems stipulated in the Foreign Investment Promotion Act in Korea. It is meaningful in responding to international trends on the one hand and protecting domestic industries and enterprises on the other.