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Difficult Times in Investment Relations Between China and Germany: The Cases of Siltronic/GlobalWafers and COSCO/HHLA

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Asian Yearbook of International Economic Law 2023

Part of the book series: Asian Yearbook of International Economic Law ((AYIEL,volume 2023))

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Abstract

Global economic relations become more and more tense. In addition to the shift in power, which is particularly due to the economic rise of China, and the multiple crises, most recently the COVID-19 crisis, an increasing fragmentation of economic relations is becoming apparent, which is associated with a lack of consensus on the future of the world order and its basic principles. In this context, the EU and its Member States are now emphasising their strategic autonomy, which has already led to a number of reforms. One important example of the readjustment of the EU’s autonomous trade policy is the area of Investment Screening. In the new investment control policies of the EU and its Member States, a greater reluctance to foreign investment can now be observed overall. This is particularly noticeable in Germany, which has traditionally been more open to business. In Germany—as in some other Member States—investments particularly related to China have repeatedly caused heated discussions for various reasons. This article looks at the legal and political changes that have taken place in the area of investment control in Germany and the EU in recent years. Overall, they point to a difficult future for investment relations with China.

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Notes

  1. 1.

    China was Germany’s most important trading partner in 2021 for the 6th consecutive year: https://www.destatis.de/EN/Themes/Economy/Foreign-Trade/trading-partners.html (last accessed on 12 January 2023).

  2. 2.

    This term was introduced by the European Union in 2019. See European Commission and the High Representative of the Union for Foreign Affairs and Security Policy, Joint Communication to the European Parliament, the European Council and the Council, EU-China—A strategic outlook, JOIN(2019) 5 final, p. 1.

  3. 3.

    Borrell J, The Sinatra Doctrine: Building a United European Front, Institut Montaigne, Analyses, 9 September 2020, https://www.institutmontaigne.org/en/analysis/sinatra-doctrine-building-united-european-front (last accessed on 12 January 2023).

  4. 4.

    EEAS Press Team, China: Speech by High-Representative/Vice-President Josep Borrell at the EP debate on EU-China relations, 22 November 2022, https://www.eeas.europa.eu/eeas/china-speech-high-representativevice-president-josep-borrell-ep-debate-eu-china-relations_en (last accessed on 12 January 2023).

  5. 5.

    The new China strategy of the German government has not yet been published; however, a draft document has inter alia been leaked by the German publisher Spiegel in November 2022.

  6. 6.

    See for an English summary, e.g. von der Burchard H, Germany weighs harder line on China and its ‘massive human rights violations’, Politico, 23 November 2022, https://www.politico.eu/article/germany-mulls-harder-line-on-china-new-deal-with-taiwan/ (last accessed on 12 January 2023).

  7. 7.

    Apart from this, it should be pointed out that even if Germany ratifies the CAI, success is very uncertain, as demonstrated not least by the difficulties with the Comprehensive Economic and Trade Agreement between Canada and the EU (CETA). In November 2022, the Irish Supreme Court ruled that Ireland’s parliamentary efforts to ratify the EU-Canada trade deal are unconstitutional. See Pogatchnik S, Ireland’s top court rejects Canada-EU trade deal as unconstitutional, Politico, 11 November 2022, https://www.politico.eu/article/irelands-top-court-rejects-canada-eu-trade-deal-as-unconstitutional/ (last accessed on 12 January 2023).

  8. 8.

    For an overview on this development, see Damen M, EU strategic autonomy 2013–2023—From concept to capacity, EPRS Briefing, PE 733.589—July 2022.

  9. 9.

    Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, OJ L 79I, 21.3.2019, pp. 1–14.

  10. 10.

    Kretzschmar (2022), pp. 50 f.

  11. 11.

    European Commission, Cabinet Newsletter of Vice President of the European Commission Tajani, No. 33 of 11 February 2011, http://ec.europa.eu/archives/commission_2010-2014/tajani/about/newsletter/files/2011-02/cabnews-33-20110211_en.pdf (last accessed on 12 January 2023). See Bungenberg and Reinhold (2022), pp. 32 f.

  12. 12.

    European Parliament, Resolution of 23 May 2012 on EU and China: Unbalanced Trade? (2010/2301(INI)), P7_TA(2012)0218.

  13. 13.

    The first Member States’ initiative ‘Proposals for ensuring an improved level playing field in trade and investment’ was published in February 2017: https://www.bmwi.de/Redaktion/DE/Downloads/E/eckpunktepapier-proposals-for-ensuring-an-improved-level-playing-field-in-trade-and-investment.pdf?__blob=publicationFile&v=4 (last accessed on 12 January 2023). The second initiative ‘European investment policy: A common approach to investment control’ followed on 28 July 2017, https://g8fip1kplyr33r3krz5b97d1-wpengine.netdna-ssl.com/wp-content/uploads/2017/08/170728_Investment-screening_non-paper.pdf (last accessed on 12 January 2023).

  14. 14.

    See on the evolution of the EU Screening Regulation, e.g. Warchol (2020), pp. 56 ff.; Kretzschmar (2022), S. 52 f.; Bungenberg and Reinhold (2022), pp. 32 f.

  15. 15.

    See on this aspect, e.g. Hindelang and Moberg (2020), pp. 1435–1445; Bungenberg and Blandfort (2021), pp. 167–170; Korte (2020), pp. 441–463; Bungenberg and Reinhold (2022), pp. 34 ff.

  16. 16.

    See e.g. Hindelang and Moberg (2020), pp. 1435–1445; Bungenberg and Blandfort (2021), pp. 167–170; Korte (2020), pp. 441–463; Bugge (2020), pp. 467–476.

  17. 17.

    See on a comparison between U.S. and EU investment screening, e.g. Jacobs (2019), pp. 105–117.

  18. 18.

    On the following see already Bungenberg and Reinhold (2022), pp. 38 ff.

  19. 19.

    European Commission, Communication from the Commission Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of Regulation (EU) 2019/452 (FDI Screening Regulation), OJ C 99I, 26.3.2020, pp. 1–5; Communication from the Commission Guidance to the Member States concerning foreign direct investment from Russia and Belarus in view of the military aggression against Ukraine and the restrictive measures laid down in recent Council Regulations on sanctions (Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine (OJ L 229, 31.7.2014, p. 1) and its amendments and Council Regulation (EC) No 765/2006 of 18 May 2006 concerning restrictive measures concerning restrictive measures in view of the situation in Belarus (OJ L 134, 20.5.2006, p. 1) and its amendments.), OJ C 151I, 6.4.2022, pp. 1–12.

  20. 20.

    European Commission, Report from the Commission to the European Parliament and the Council, Second Annual Report on the screening of foreign direct investments into the Union, COM(2022) 433 final, pp. 7 ff.

  21. 21.

    Roth (2004), p. 431; Dehne (2022), pp. 206 f.

  22. 22.

    Willems (2008), p. 369; Dehne (2022), pp. 221 ff.

  23. 23.

    Kollman (2009), pp. 205 f.

  24. 24.

    Chazan G, German angst over Chinese M&A. FT Online, 9 August 2016, https://www.ft.com/content/e0897e24-598e-11e6-8d05-4eaa66292c32 (last accessed on 12 January 2023).

  25. 25.

    Siemens CEO says not interested in robot maker Kuka, https://www.businessinsider.com/r-siemens-ceo-says-not-interested-in-robot-maker-kuka-2016-6 (last accessed on 12 January 2023).

  26. 26.

    See e.g. Niestedt and Kunigk (2020), p. 2504; Barth and Käser (2021), p. 813.

  27. 27.

    See for an overview in English language, e.g. Röhling F and Salaschek U, The Foreign Investment Regulation Review: Germany, 21 October 2022, https://thelawreviews.co.uk/title/the-foreign-investment-regulation-review/germany (last accessed on 12 January 2023).

  28. 28.

    Federal Ministry for Economic Affairs and Climate Action, Investment Screening in Germany: Facts & Figures, 9 January 2023, p. 9.

  29. 29.

    Federal Ministry for Economic Affairs and Climate Action, Investment Screening in Germany: Facts & Figures, 9 January 2023, p. 11.

  30. 30.

    Burger L and Rinke A, GlobalWafers’ Siltronic deal fails as Germany misses deadline, Reuters, 1 February 2022, https://www.reuters.com/business/globalwafers-siltronic-deal-fails-german-govt-approval-misses-deadline-2022-01-31/ (last accessed on 12 January 2023).

  31. 31.

    See e.g. BMWK, Elmos chip factory cannot be sold to Chinese investor—cabinet blocks sale, https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2022/11/20221109-elmos-chip-factory-cannot-be-sold-to-chinese-investor-cabinet-blocks-sale.html (last accessed on 12 January 2023).

  32. 32.

    See e.g. Freshfields (2020), German foreign investment authority takes off the gloves, https://www.freshfields.us/49bba2/globalassets/imported/documents/6ebb78e3-812b-4ac0-8df4-4474d13ae7a5.pdf (last accessed on 12 January 2023); Schoening F et al. (2020), This time’s for real—German government prohibits acquisition of a tech company by a Chinese acquirer, https://www.engage.hoganlovells.com/knowledgeservices/news/this-times-for-real (last accessed on 12 January 2023).

  33. 33.

    See Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German).

  34. 34.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German), p. 3.

  35. 35.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German).

  36. 36.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German).

  37. 37.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German).

  38. 38.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German), p. 4.

  39. 39.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German).

  40. 40.

    Federal Cartel Office, Case Report of 11 March 2021, B8-25/21 (in German).

  41. 41.

    The following procedure is reproduced in: Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German).

  42. 42.

    Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German), paras. 31–35.

  43. 43.

    Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German), paras. 37–43.

  44. 44.

    Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German), paras. 40–41.

  45. 45.

    Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German), para. 40.

  46. 46.

    Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German), paras. 42–43.

  47. 47.

    Berlin Administrative Court, Decision of 27 January 2022, 4 L 111/22, paras. 3–12 (in German), para. 43.

  48. 48.

    Higher Administrative Court of Berlin-Brandenburg, Decision of 31 January 2022, OVG 1 S 10/22.

  49. 49.

    Higher Administrative Court of Berlin-Brandenburg, Decision of 31 January 2022, OVG 1 S 10/22, paras. 4–7.

  50. 50.

    Higher Administrative Court of Berlin-Brandenburg, Decision of 31 January 2022, OVG 1 S 10/22, paras. 8–14.

  51. 51.

    Mardell J, COSCO takes stake in Hamburg Port terminal, Merics, 30 September 2021, https://merics.org/de/tracker/cosco-takes-stake-hamburg-port-terminal (last accessed on 12 January 2023).

  52. 52.

    Mardell J, COSCO takes stake in Hamburg Port terminal, Merics, 30 September 2021, https://merics.org/de/tracker/cosco-takes-stake-hamburg-port-terminal (last accessed on 12 January 2023); Tatlow DK, China’s Stake in World Ports Sharpens Attention on Political Influence, Newsweek, 10 September 2022, https://www.newsweek.com/2022/10/14/chinas-stake-world-ports-sharpens-attention-political-influence-1749215.html (last accessed on 12 January 2023).

  53. 53.

    Tao A, Olaf Scholz’s China Gamble, The Diplomat, 21 December 2022, https://thediplomat.com/2022/12/olaf-scholzs-china-gamble/ (last accessed on 12 January 2023); Rinke A and Marsh S, German coalition divided over Chinese bid for Hamburg port terminal, Reuters, 14 September 2022, https://www.reuters.com/business/autos-transportation/german-coalition-divided-over-chinese-bid-hamburg-port-terminal-2022-09-13/ (last accessed on 12 January 2023).

  54. 54.

    Thierry Breton issues China warning ahead of Scholz’s Beijing visit, Euractiv, 1 November 2022, https://www.euractiv.com/section/global-europe/news/thierry-breton-issues-china-warning-ahead-of-scholzs-beijing-visit/ (last accessed on 12 January 2023).

  55. 55.

    See the statement of HHLA on 26 October 2022: Federal Government approves investment by CSPL in operating company HHLA Container Terminal Tollerort, https://hhla.de/en/media/news/detail-view/federal-government-approves-investment-by-cspl-in-operating-company-hhla-ctt (last accessed on 12 January 2023).

  56. 56.

    Germany agrees on compromise over China port bid, DW, 26 December 2022, https://www.dw.com/en/germany-agrees-on-compromise-over-china-port-bid/a-63547949 (last accessed on 12 January 2023).

  57. 57.

    German ministry seeks to block Chinese chip factory takeover, DW, 11 August 2022, https://www.dw.com/en/german-ministry-seeks-to-block-chinese-chip-factory-takeover/a-63681593 (last accessed on 12 January 2023).

  58. 58.

    Rinke A and Murray M, Germany blocks Chinese stake in two chipmakers over security concerns, Reuters, 10 November 2022, https://www.reuters.com/markets/deals/germany-block-chinese-takeover-semiconductor-firm-ers-electronic-handelsblatt-2022-11-09/ (last accessed on 12 January 2023).

  59. 59.

    OECD, Framework for Screening Foreign Direct Investment into the EU, Assessing effectiveness and efficiency, 2022.

  60. 60.

    OECD, Framework for Screening Foreign Direct Investment into the EU, Assessing effectiveness and efficiency, 2022, pp. 14 ff.

  61. 61.

    OECD, Framework for Screening Foreign Direct Investment into the EU, Assessing effectiveness and efficiency, 2022, pp. 23 ff.

  62. 62.

    OECD, Framework for Screening Foreign Direct Investment into the EU, Assessing effectiveness and efficiency, 2022, pp. 51 ff.

  63. 63.

    Bauerle Danzman and Kilcrease (2022).

  64. 64.

    Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items (recast), OJ L 206, 11.6.2021, p. 1–461.

  65. 65.

    For Germany, see https://www.investitionsgarantien.de/en (last accessed on 12 January 2023).

  66. 66.

    Germany to cap investment guarantees for China, The Business Times, 23 November 2022, https://www.businesstimes.com.sg/international/germany-cap-investment-guarantees-china (last accessed on 12 January 2023).

  67. 67.

    Federal Ministry for Economic Affairs and Climate Action, Investment Guarantees Annual Report 2021, May 2022.

  68. 68.

    Federal Ministry for Economic Affairs and Climate Action, Investment Guarantees Interim Report 2022, July 2022.

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Bungenberg, M., Reinhold, P. (2023). Difficult Times in Investment Relations Between China and Germany: The Cases of Siltronic/GlobalWafers and COSCO/HHLA. In: Bungenberg, M., Chi, M., Jusoh, S., Ranjan, P., Rustambekov, I. (eds) Asian Yearbook of International Economic Law 2023. Asian Yearbook of International Economic Law, vol 2023. Springer, Cham. https://doi.org/10.1007/16517_2023_18

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