The cabinet of Chancellor Angela Merkel on Wednesday approved rules to make it easier to block the sale of strategically important companies to investors from outside the European Union. The new regulations allow the government to block takeovers if there is a risk of important know-how being lost abroad. The rules do not need parliamentary approval.

"We remain one of the most open economies in the world, but we also need to take fair competitive conditions into consideration," Economy Minister Brigitte Zypries said in a statement, adding: "We owe that to our companies. They often compete with countries whose economies are not as open as ours."

For the first time, the new rules also define a concrete "threat to public order" with regards to company acquisitions, for example, when critical infrastructure is involved. If necessary, operators of such infrastructure should also be better protected against the entry of investors from outside the European Union.  

What's more, the new regulations apply to domestic software companies that develop programs for electricity or telecommunications networks, power stations, water supply systems, banks, hospitals, airports or railway stations. Companies with access to data stored in the cloud are also to be subject to more stringent takeover rules.

With the new rules the government can now take four months to review takeover plans - twice as long as currently possible. In this time, information can be gathered from intelligence services. Investigators can also look to see if front companies have been set up within the EU for the purpose of a takeover.

A response to the Kuka deal

Last year, foreign investors bought more German companies than ever before. Above all, buyers from America, Europe and China have taken over a record number of 873 German companies. This has raised a concern about the loss of German expertise. The government's veto right is aimed mainly at Chinese investors.

China's takeover of European - and especially German - industrial companies has raised fears that Beijing will gain cheap access to key technologies. According to German media reports, the veto right is a response to the takeover of German robot manufacturer Kuka by Midea, a Chinese appliance manufacturer.

In December, the takeover of semiconductor machine maker Aixtron by a Chinese investor was stopped when the US government blocked the sale of Aixtron Inc., a California-based subsidiary of the German manufacturer, because of security concerns.

tr/uhe (dpa, Reuters)