Germany moves law to block takeovers by foreign funds

21 August 2008

The German government set rolling a draft law that would enable it to block foreign investors in taking large stakes in German companies, if it envisages that the country's interests are endangered by such investments by sovereign wealth funds, with trillions of dollars worth of funds at their disposal.

The bill approved by Chancellor Angela Merkel's government will lead to a scrutiny of acquisitions of more than a 25-per cent stake in German firms by non-European Union firms.

Chancellor Merkel's government is said to be particulalry concerned about cash rich, foreign government-owned sovereign wealth funds from  Russia, the Middle East and China acquiring controlling stakes in critical sectors like banking, telecommunication and energy.

Earlier the German government had prevented Russia from enhancing its share in pan-European aerospace consortioum, EADS, the owner of Airbus Induistrie. EADS also makes defence and related products.

Economy ministry Michael Glos said in a statement, ''Any purchase that is deemed to pose a threat to public security or order, Berlin could prevent it from going through, according to the bill that must now be passed by parliament to become law."

The German government says that this new law is in line with the European Union law and countries such as the US and the UK had similar enactments.
Glos said yesterday that the proposed new controls were ''very restrained'', and reiterated that  Germany remained open for foreign investments. ''The majority of foreign investments will be unaffected.''