On 2 December 2020, the German government prohibited the acquisition of German company IMST GmbH, Kamp-Lintfort (“IMST”) by a Chinese investor. This is the second high profile prohibition decision issued by the German government this year on the grounds of Foreign Direct Investment (“FDI”) rules. Read in conjunction with the upcoming legislative tightening of the existing Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, the German FDI law), expected to come into force during Q1 / 2021, and other measures like the ‘golden share’ taken in Curevac (a company heavily invested in Covid-19 research), the IMST decision demonstrates the mounting willingness by Germany to step in and protect what it perceives to be its national interests.IMST is a research-driven industrial engineering and design house specializing in radio technologies and microelectronics. It develops high performance microchips, especially in the range of microwave and radio frequency electronics, it is involved in international research projects in the field of radar technology, develops and manufactures space certified hardware, and has extensive experience in radio networks and location technologies. According to the press articles, the government was particularly concerned about IMST’s activities in 5G satellite and radar technology.

The potential acquirer was the Chinese undertaking Addsino Co Ltd, Beijing (“Addsino”), a manufacturer of radar electronic systems who also develops and produces military communication and electromagnetic protection devices.

Under the German FDI rules, the government can prohibit the acquisition of a German-based company by foreign investors if a proposed transaction is likely to affect public order or security. A “foreign” investor is a company (or natural person) that is not an EU or EFTA resident. In the present case, the direct acquisition would have been made through an investment vehicle set up by Addsino in the EU.

The use of an EU-based acquisition vehicle (new or pre-existing), however, does not change the conclusion that this acquisition was ultimately being made by a Chinese – and therefore a “foreign” – investor. The German FDI law covers “the direct and indirect acquisition” of 10% or more of the voting rights in German companies that are active in key-listed sensitive sectors, or alternatively, direct or indirect acquisitions of 25% or more of the voting rights in companies that are not active in one of these sensitive sectors but carry out activities of particular importance to public order or security.

German FDI proceedings are confidential and, consequently, no decision will be published. Following that, all the facts underlying the decision will not be made public. However, based on the press reports (referencing in turn to have seen governmental documents preparing the decision), the government provided in particular the following reasons why it considered the acquisition as likely to affect national security interests:

  • IMST developed a key component for the earth-observing TerraSAR-X satellite, the data of which the German Ministry of Defense had purchased. These data are used inter alia in reconnaissance and defense systems. The government is cited to have stated that “without a prohibition, a transfer of this know how to China would contribute to China’s arms build-up”.
  • The acquisition would endanger the sovereignty of the German State in the area of future mobile telecom systems including in 5G, a digital core technology.
  • In addition, IMST and its products are considered to have a role in ensuring that certain activities of the German police can be carried out securely. Under the control of a Chinese defense company, IMST would no longer have been regarded as a reliable partner.


Prohibition decisions on FDI grounds are still rare in the EU; typically, any concerns are dealt with by the investor accepting mitigating measures. In this case, either there were no satisfactory mitigating measures in the view of the German government, or Addsino was not prepared to accept such measures.

The decision shows that – despite existing geo-political challenges – the German government is willing to act and make full use of its strengthened FDI regime, including identifying some foreign investors as a threat to public order or security in Germany. It is also evident that the concerns identified by the government are not limited to the characteristics of the foreign investor; rather the fact that Germany might lose “its sovereignty in a digital core technology” – as such – appears to have been one of the decisive grounds for the prohibition decision.

Hence, the IMST decision also highlights the importance of the upcoming amendment of the German FDI law, which is slated to tighten the enforcement measures at the German government’s disposal, and is expected to build out further the definition of what is deemed to be “critical technologies” that warrant governmental intervention.

Photo of Peter Camesasca Peter Camesasca

Peter D. Camesasca is a partner in Covington’s Brussels and London offices, with 25 years of experience in all major aspects of EU competition law. Peter also co-chairs the firm’s Foreign Direct Investment Regulation initiative, and, has a particular focus on in-…

Peter D. Camesasca is a partner in Covington’s Brussels and London offices, with 25 years of experience in all major aspects of EU competition law. Peter also co-chairs the firm’s Foreign Direct Investment Regulation initiative, and, has a particular focus on in- and outbound aspects of the Asia/Europe interface.

Peter’s experience includes cases under Articles 101, 102 and 106 TFEU, national and multijurisdictional merger and joint venture notifications (including FDI assessments), investigations by multiple enforcement authorities and global antitrust litigation and monopolization issues (including IP cross-over issues). In addition, he advises and litigates on horizontal and vertical cooperation issues, prepares and executes various compliance and dawn raid programs and participates in the installation of in-house training programs, and heads a vibrant private enforcement practice.

Peter has acted before the European Commission, the European courts, the German Bundeskartellamt, the UK Office of Fair Trading and the Competition and Markets Authority, the Belgian Competition Council, and various national courts.