Germany has moved to protect its industrial assets from the financial power of sovereign wealth funds with Chancellor Angela Merkel’s cabinet approving a bill that would enable the government to bar non-EU investments greater than 25 per cent in German companies.

Giant state-controlled funds in Russia and the Gulf are the target of the German government’s plans for increased scrutiny over foreign investors. The bill was given the go-ahead a day after workers at Hapag-Lloyd, the shipping line, staged a protest on Tuesday over a possible takeover by Neptune Orient Lines - the Singapore rival which is owned by Temasek, the sovereign fund controlled by the state of Singapore.

The future of Hapag-Lloyd has been embroiled in controversy since March, when its owner, Tui, the German travel company, announced it intended to sell the container shipping firm. Neptune Orient and a consortium of Hamburg investors have been short-listed as potential buyers in a deal which Tui hopes will raise more than $6 billion.

The German government, however, sought to downplay the potential threat to foreign investors posed by the bill, which must be passed by the German parliament before it becomes law.

The bill stipulates that a ban would be imposed only if the foreign investor posed a threat to German “public order or security”. The amendment to the Foreign Economic Act, which already gives the government power to review deals relating to the arms industry, enlarges the scope of review into deals involving non-EU and non-EFTA investors into any branch of German industry. The Economy Ministry would be able to investigate deals up to three months following their announcement. The review would take up to two months following which the ministry would make a decision whether or not to veto an investment.

Michael Glos, the economy minister, said that Germany remained open to foreign investment. “This is a purely precautionary measure and will be used only in extreme cases,” he said.

The financial muscle of sovereign wealth funds, fuelled by petrodollars, has caused mounting alarm in Europe, notably the purchase by VEB, a state-controlled Russian bank, of a 5 per cent shareholding in EADS, the aerospace group which owns Airbus Industrie.

German business lobbyists expressed their opposition to the new law, including the powerful BDI industry association which said that 2 million Germans were employed by foreign investors. “The government’s proposed controls on investment are sending the wrong signal about Germany as a business location,” said Werner Schnappauf, the BDI’s managing director.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive