Multi-jurisdiction guide for screening foreign investments

Europe M-Z

1. Country: Netherlands

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

United States
United Kingdom
Germany
Luxembourg
France

3. Legal Framework in Force

Electricity Act, Gas Act, Dutch Telecommunications (Undesirable Control) Act (DTA), Act on security screening of investments, mergers and acquisitions (Act Vifo).

4. Last revision of the Legal Framework

Electricity Act – 1 October 2022

Gas Act - 1 October 2022

DTA – 5 March 2021

Act Vifo – 1 June 2023.

5. Contextualization of the Legal Framework (Historical or other)

Electricity & Gas Acts

Both the Electricity and Gas Act include a review option by the Bureau Toetsing Investeringen (BTI), a division of the Ministry of Economic Affairs, Agriculture and Innovation (the Minister) in case of proposed takeovers in the energy sector. Any change of control in an electricity production facility with a nominal electrical capacity of more than 250 MW as well as in a company managing such a production facility must be reported to the BTI by one of the parties involved. A similar provision is included in the Gas Act for a change of control in an LNG facility or an LNG company. The Minister can then, based on considerations of public safety, security of supply or security of delivery, prohibit the change in control, or attach regulations to it. The explanatory memoranda to the Acts shows that the review option by the Minister is included in the Acts to prevent undesired acquisitions.

DTA

The rationale behind the DTA is concern about the availability and confidentiality of telecommunications services. Specifically, the concern is that parties might acquire Dutch telecommunication companies with the intention of disabling, spying, bugging, or blackmailing telecoms networks or applications important to the Netherlands. The DTA gives the Minister the power to prevent such parties from acquiring Dutch telecom facilities.

Act Vifo

The Act Vifo aims to manage risks to national security arising from investments, mergers and acquisitions with respect to vital providers and companies that possess sensitive technology, if the transaction may pose a risk to national security.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

Electricity & Gas Act

Under the Electricity Act, any change of control in a Dutch production facility with a nominal electrical capacity of more than 250 MW, or in a Dutch company managing such a production facility, must be notified to the BTI by one of the parties involved. A similar provision is included in the Gas Act for a change of control in an LNG facility or an LNG company. Under both the Electricity and the Gas Act the notification needs to be made in writing and no later than four months prior to the date of the change of control. This deadline is necessary because if the BTI/Minister deems it necessary to take measures, they must be submitted to the European Commission for approval. It should be noted that the notification obligation applies irrespective of the identity/origin of the party acquiring control and therefore also applies if it concerns a Dutch or a EU/EEA party.

DTA

Chapter 14a DTA stipulates that if a party wishes to acquire “predominant control” over a Dutch “telecommunications party” which gives rise to “relevant influence” in the telecommunications sector, this must be notified to the BTI at least 8 weeks before the acquisition takes place. The nationality of the acquirer of predominant control is not relevant for the applicability of the notification obligation and therefore also applies if it concerns a Dutch or a EU/EEA party.

Act Vifo

Under the Act Vifo, the acquisition of control over a Dutch “vital supplier” or a provider of “sensitive technology”, as well as to the acquisition of “significant influence” (i.e. a shareholding exceeding 10%, 20%, 25% or 33%) over certain providers of “highly sensitive technology” needs to be notified to the Minister of Economic Affairs. Any intention to carry out an acquisition that is caught by the Act shall be reported by one of the transaction parties to the BTI before closing of the transaction. The BTI then has eight weeks to issue a decision. This period can be extended by up to six months, reduced by the time used for the earlier part of the investigation. The total extension can never exceed six months. Notifiable transactions may only be closed after having obtained approval. It should be noted that the notification obligation applies irrespective of the identity/origin of the party acquiring “control” or “significant influence” and therefore also applies if it concerns a Dutch or a EU/EEA party.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

Electricity & Gas Act

Based on Section 86f of the Electricity Act 1998 and Section 66e of the Gas Act, notification is only required in case of a change of control in an electricity generating facility with a capacity of more than 250 MW or in a company operating such a generating facility, or in LNG facilities or companies operating such an LNG facility. The definition of control is aligned with Article 26 of the Dutch Competition Act (“DCA”). Control is the ability to exercise decisive influence over an undertaking based on rights (i.e. shares), contracts or other means, separately or in combination, taking into account the factual and legal circumstances. Even in the case of a minority/portfolio shareholding, control may occur on a legal basis in situations where specific rights are attached to this shareholding. These may be preferential shares to which special rights are attached enabling the minority shareholder to determine the strategic commercial behaviour of the target company, such as the power to appoint more than half of the members of the supervisory board or the administrative board.

DTA

Chapter 14a DTA stipulates that for the purposes of the Act, “predominant control” exists in the event of:

the acquisition of > 30% of the voting rights;
the ability to appoint or dismiss more than half of the directors or supervisory directors; or
the acquisition of shares to which special rights under the articles of association are attached.

Thus, the concept of control under the DTA is not synchronous with that under the Dutch Competition Act; there may be an acquisition of “predominant control” within the meaning of the DTA without there being a concentration under the DCA.

Notification is only mandatory if it leads to “relevant influence” in the telecommunications sector. Chapter 14a DTA further specifies that this is the case if the telecommunications party over which control is acquired, and any other telecommunications parties in which the holder or acquirer or the group of which the holder or acquirer is a member holds or acquires control, alone or together:

is/are a provider of an internet access service or telephone service to more than 100,000 end users;
is/are a provider of an electronic communications network over which internet access services or telephone services are provided to more than 100,000 end users;
is/are a provider of an internet node to which more than 300 autonomous systems are connected;
is/are a provider of data centre services with a power capacity exceeding 50 MW;
is/are a provider of hosting services (Internet connectivity, IP addresses, servers, storage, backup, geographic distribution, caching) for more than 400,000 .nl domain names;
is/are a provider of a qualified trust service (electronic signatures, seals, time stamps, registered electronic delivery services and website authentication certificates);
is/are a provider of an electronic communications service or network, data centre, or trust service to the General Intelligence and Security Service, the Ministry of Defence, the Military Intelligence and Security Service, the National Coordinator for Counterterrorism and Security, or the National Police; or
is/are a provider of a combination of the above services, which do not reach the above thresholds, but through a calculation formula do exceed another threshold.

Act Vifo

Under the Act Vifo the acquisition of control over a Dutch “vital supplier” or a provider of “sensitive technology”, as well as to the acquisition of “significant influence” (i.e. a shareholding exceeding 10%, 20%, 25% or 33%) over certain providers of “highly sensitive technology” needs to be notified to the Minister of Economic Affairs.

“Vital” suppliers under the Vifo Act are:

Heating suppliers;
Nuclear power companies;
Certain companies engaged in exploration, transportation and/or storage of natural gas;
Ground handling service providers;
Schiphol Airport;
KLM;
The Port of Rotterdam;
Banks with a registered office in the Netherlands; and
Certain financial market infrastructure providers such as trading platforms.

The Act Vifo also applies when acquiring control over a Dutch provider of “sensitive technology”. A provider of sensitive technologies is a provider of:

Dual-use products. These are products suitable for both civilian and military purposes, such as certain software requiring an export authorisation under Regulation (EC) No 2021/821 controlling the export, transfer, brokering and transit of dual-use items; and/or
Military goods included in the EU Common Military List.

In addition, the Act Vifo applies when acquiring or increasing “significant influence” or control over companies operating in the field of highly sensitive technology. The (draft) Decree Scope of Application of Sensitive Technology (Draft Decree) introduced on 19 July 2022, designated certain technologies as highly sensitive. These are technologies in which very rapid innovation is occurring with potential effects on national security. They include: artificial intelligence, biotechnology, photonics, quantum technology, robotics and semiconductor technology.

8. Scope - sectors covered

Electricity & Gas Act – electricity and gas sector

DTA – telecom sector

Act Vifo – no specific sector. The Act Vifo applies to investment activities in companies providing certain designated critical activities (vital providers) or that possess or provide sensitive technology.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

Electricity & Gas Act

Pre-authorisation is required. The transaction must be notified a minimum of four months before the transaction’s envisaged closing date.
Covers both controlling investments and portfolio investments.
Mandatory filing.

DTA

There is no mandatory standstill period under the DTA. Provided the notification is made at least 8 weeks before closing, it is not prohibited to close before a decision has been taken. However, if the Minister judges that the acquisition may lead to a threat to the public interest, the Minister may, depending on whether the transaction has already taken place, impose a prohibition on holding or acquiring control in the telecommunications party.
Covers both controlling investments and portfolio investments.
Mandatory filing.

Act Vifo

Pre-authorisation is required. If a review decision is required, an application must be made. The BTI has eight weeks to issue a decision. This period can be extended by up to six months, reduced by the time used for the earlier part of the investigation. The total extension can never exceed six months in total.
Covers both controlling investments and portfolio investments (the acquisition of “significant influence” (i.e. a shareholding exceeding 10%, 20%, 25% or 33%)).
Mandatory filing.

10. Design – reciprocity?

The Energy Act, Gas Act, DTA and Act Vifo do not mention reciprocity.

11. Design – Procedures and Deadlines

Transactions that are within the scope of the Dutch FDI regulations must be notified to the BTI within the deadline specified in the applicable screening legislation:

Electricity Act and Gas Act: a minimum of four months before the transaction’s envisaged closing date;
DTA: a minimum of eight weeks before the transaction’s envisaged closing date;
Act Vifo: before the closing of the transaction.

An exception to the above applies to certain transactions within the scope of the DTA: an investor who for a previous transaction already notified the acquisition of “relevant influence” in the telecommunications sector, is no longer required under the DTA to notify further acquisitions of “predominant control” in subsequent transactions.

For notifications pursuant to the Electricity Act and the Gas Act, the Minister will decide before the end of the notification period whether the transaction may proceed. Similarly, under the DTA the Minister will in principle indicate within the notification period whether the acquisition or the holding of “predominant control” will be prohibited. However, if the Minister deems further investigation necessary, the period can be extended by a maximum of 6 months. For transactions that are subject to the Act Vifo, the Minister will decide within eight weeks after notification whether the transaction may proceed, or whether a further investigation is required. In the latter case, the further investigation will in principle be completed within eight weeks from the Minister’s decision (i.e. sixteen weeks after notification). However, this review period may, if the Minister considers this necessary, be extended with an additional term up to six months.

The Electricity Act, Gas Act and DTA do not provide for a mandatory standstill period. Provided the notification is made at least four months or eight weeks, respectively, before closing, it is not forbidden to close the transaction before the Minister has decided on the notification. If, however, the Minister considers that the acquisition may lead to a (potential) threat to public order or public safety, the Minister may prohibit the transaction and potentially order it to be unwound. In that sense closing before a decision is at the parties’ own risk. Conversely, the Act Vifo does include a mandatory standstill period and consequently transactions notified pursuant to the Act Vifo may not be closed before clearance is received.

The Act Vifo includes the possibility for the Minister to retroactively order notification of certain transactions within the scope of this act that were closed before its entry into force, but after 8 September 2020. Article 58 Act Vifo specifies that if the Minister considers that a qualifying transaction that was closed after this date could potentially pose a threat to national security, the parties involved can be requested to submit a notification. The Minister is authorized to call in previously closed transactions only during the first eight months after the entry into force of the Act Vifo.

12. Design – Transparency and Information requirements (Filing Forms?)

The Ministry of Economic Affairs / BTI has published notification forms for notifications pursuant to the Electricity Act, the Gas Act and the DTA and is expected to publish a form for notifications pursuant to the Act Vifo before its entry into force. There are certain variations between the respective forms, but generally they require the notifying parties to provide the following information:

Information relating to the parties;
Structure of the transaction;
Information relating to public interests (e.g. source of financing and whether the parties were convicted in the past for certain violations of the law);
Documentation (e.g. transaction documentation, annual accounts); and
EU information (e.g. will the transaction be notified in other EU countries or does the transaction impact EU projects).

In principle, all information included in a notification that is (justifiably) marked as confidential will remain confidential. Notifications are not published and neither are decisions allowing a transaction. Decisions prohibiting a transaction or imposing conditions will be published, but without confidential information. The Dutch public access to information act (Wet open overheid) provides for exceptions to protect the confidential nature of any confidential information included in notifications. These safeguards also apply if the Dutch government shares information with the European Commission or with other EU governments.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

The Gas Act and Electricity Act apply to acquisitions of “control”, whereas the DTA applies to acquisitions of “predominant control”. If the Minister decides that the transaction as notified poses a threat to national security or public interest, the acquirer is not allowed to gain “control” or “predominant control”. However, the acquisition of a non-controlling minority shareholding (without special statutory rights and without the right to appoint or dismiss more than half of the members of the management board or supervisory board) would still be possible after such decision.

The DTA further provides that if a prohibition on exercising “predominant control” is imposed, the pre-existing control rights of the party concerned are suspended. A subsequent acquisition of additional control rights is invalid, except in the case of acquisition via a stock exchange. The prohibition creates an obligation for the party concerned to reduce its control rights to below the thresholds set for “predominant control”.

The Act Vifo applies to the acquisition of “control” over a “vital supplier” or a provider of “sensitive technology”, as well as to the acquisition of “significant influence” (i.e. a shareholding exceeding 10%, 20%, 25% or 33%) over certain providers of “sensitive technology”. If such acquisition is considered a threat to national security, it may not be implemented. However, the acquisition of a non-controlling minority interest, or a shareholding below the thresholds for “significant influence”, cannot be prohibited pursuant to the Act Vifo. In relation to transactions that have already been completed (i.e. transactions called in pursuant to the retroactive application of the Act Vifo during the first eight months after its entry into force), the Minister may order the parties involved to unwind the transaction or, at least, the acquirer to reduce its shareholding to a level that does not confer “control” or that is below the threshold for “significant influence”.

In addition, the Act Vifo provides that the Minister may, instead of a decision prohibiting or blocking a transaction, provide a conditional clearance decision. In such case, the parties are allowed to proceed with the transaction, provided that the conditions imposed in the Minister’s decision are complied with. Conditions that can be imposed under the Act Vivo include the following:

Implementation of additional safeguards to maintain the secrecy of sensitive information possessed by the acquired undertaking;
Implementation of a security and integrity policy for the appointment of directors and key employees that will have access to sensitive information and processes;
Appointment of a security committee or security officer to control access to and security of sensitive information and processes;
Transferring the sensitive part of the acquired undertaking’s business to a separate legal entity incorporated in the Netherlands;
A prohibition for the acquired undertaking to sell certain products or provide certain services to specified customers or specified countries;
Setting up a separate Supervisory Board for a Dutch subsidiary of the acquired undertaking;
A prohibition for the transaction to include particular assets or activities of the acquired undertaking (i.e. such assets or activities to remain with the seller);
Laying down a maximum percentage of shares to be held by the acquirer (below the intended shareholding as notified);
Restriction on the exercise of voting rights or on public trading of shares;
An obligation to deposit certain technology, source codes, genetic codes or knowledge with the State or with a third party trustee, with permission for it to be used for non-commercial purposes in case of an imminent risk for vital processes or national security interests;
An obligation to notify the Minister before any intended termination or transfer abroad of business activities, and to accept either the imposition by the Minister of additional safety measures, or an offer from the Ministry to acquire the business activities for a fair market price;
An obligation to enter into a license agreement with a party established in the EU on fair, reasonable and non-discriminatory conditions with respect to knowledge protected by patents or other intellectual property rights, in order to keep such knowledge available for the Netherlands or the EU.

Pursuant to the Act Vifo, transactions that are concluded after the Minister has issued a prohibition decision are legally null and void. Other transactions that violate a Ministerial decision (e.g. transactions that closed before the Act’s entry into force that are caught by its retroactive effect) can be voided upon application to the civil courts.

A violation of the Act Vifo can be punished with a fine up to 10% of the (global) annual turnover of the undertaking responsible for the violation.

14. Interaction with other legal frameworks (ex: merger control)

The Act Vifo specifies that if a notifiable transaction has already been notified to the Dutch Competition Authority (Authority for Consumers and Markets or ACM) pursuant to Dutch merger control provisions, the notification may refer to information included in the ACM notification, so the same information does not need to be provided twice.

Other than this, the investment screening mechanisms of the Energy Act, Gas Act, DTA and Act Vifo do not interact with merger control legislation or other legal frameworks and do not mention reciprocity.

15. Design – Grounds for blocking, if applicable (such as “public security”, “vital interests”). Please indicate whether those grounds are based on WTO definitions or not. Also, please indicate what is the degree of discretion of the authority to apply the legal criteria in question.

The Minister can prohibit a transaction if they consider it a threat to national security or public order. These terms are not defined with reference to WTO definitions.

The Act Vifo provides that national security covers the maintenance of the democratic legal order and social stability, the safety and other significant interests of the State, including the continuity of vital processes, maintaining the integrity and controlling access to knowledge or information that is of critical or strategic interest to the Netherlands, and preventing undesired strategic dependency on foreign countries.

The explanatory memoranda to the Act Vifo and the DTA state that it is not objectively possible to determine exactly beforehand when there may be a threat to national security or public order. As such, Dutch investment screening legislation seems to provide the Minister with a fairly wide margin of discretion.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

The Minister's powers under investment screening legislation must be exercised in accordance with the principles of Dutch administrative law. In particular, the Minister's decisions prohibiting a transaction or imposing conditions must state clear reasons why the acquisition of “control”, “predominant control” or “significant influence” is considered a risk to national security or public order in the particular case at hand.

The Minister’s decisions pursuant to investment screening legislation are subject to administrative and judicial appeal. An administrative appeal can be lodged with the Minister within six weeks from the decision and essentially is a request to reconsider the decision in the light of the applicant’s interests. If the applicant still objects to the revised decision, a judicial appeal can be lodged with the competent administrative court. The court will review whether public order and national security are indeed endangered an whether the decision in question is appropriate (i.e. able to cure the situation) and proportional (i.e. the least restrictive way to deal with the issue at hand).

Public sources do not identify that any administrative or judicial appeals have, so far, been brought in the Netherlands with respect to investment screening decisions.

17. Publication in Official Gazette or other

N/A

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

As decisions taken pursuant to the Electricity Act, the Gas Act and the DTA are not published and the Act Vifo has not yet entered into force, no examples are available.

19. Stakeholders views on the Legal Framework

Both the introduction of investment screening in the DTA and the draft implementing decrees of the Act Vifo have been published on the internet for public consultation. As follows from the published reactions, several stakeholders expressed concerns that the proposals could be detrimental to investments in new technology and could have a negative effect on the Dutch economy. Certain modifications have been suggested, including drafting a “white list” of pre-approved investors or narrowing the scope of the Act Vifo by excluding transactions below a certain threshold value. In addition, the Council of State advised negatively on the retroactive application of the Act Vifo to transactions closed before its entry into force (see para. 11). According to public sources, the Dutch government has not incorporated these suggestions.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

Following the entry into force of Regulation (EU) 2019/452, the Dutch government adopted an act implementing the screening regulation of foreign direct investments (Uitvoeringswet screeningsverordening buitenlandse directe Investeringen) to give effect to the obligations under the Regulation. This act does not introduce any screening mechanisms, but rather appoints the competent ministries and agencies and provides them with the powers required under the Regulation.

The investment screening mechanisms implemented under the Electricity Act, the Gas Act, the DTA and the future Act Vifo take into account the Regulation and do not require amendments to comply with it.

21. Other relevant information

The Ministry of Economic Affairs / BTI has published general information with respect to investment screening mechanisms in force in the Netherlands on its website. The website has an FAQ section and contains links to applicable legislation and notification forms.

The BTI can be approached with questions on investment screening legislation in the Netherlands and is available for informal consultations on jurisdictional matters and the information to be included in notifications.

Contacts: Leon Korsten, Martijn van Wanroij and Maarten Groot

Last updated June 2023

1. Country: Norway

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

Sweden (20,40%)
US (10,33%)
Netherland (9,23%)
Luxemburg (8,84%)
Denmark (7,05%)¹

¹Source: Statistics Norway (2020).

3. Legal Framework in Force

The National Security Act (Security Act), LOV-2018-06-01-24, (Nw. Sikkerhetsloven).

Under the Security Act, Chapter 10, ownership control of certain Norwegian companies of national security interest is regulated. Certain Norwegian companies are subject to the law according to specific decisions by the Norwegian government, cf. Section 1-3 of the Security Act.

4. Last revision of the Legal Framework

The national security regime, including FDI, and regulations were subject to revision in 2016-18, accumulating in the current Security Act of 1 June 2018 that entered into force 1 January 2019. Currently (May 2023), there is an ongoing review of the Security Act, where the review and consultation process relates to i.a. the following proposed changes expected to be adopted by parliament in Q3 2023:²

Extension of the obligation to notify in case of transactions to also apply to the transferor and the acquired business.
Lowering the threshold for reporting obligations from one-third to a lowest cut-off point of 10 percent with subsequent cut-off points at one-third, 50 percent, two-thirds, and 100 percent.
Automatic implementation ban (stand-still) for acquisitions that are registered, until the acquisition has been examined and approved.
Criminal liability for non-compliance with the obligation to report and decisions pursuant to Sections 2-5 and 10-3 of the Security Act.
Obligation for the object owner to identify property of security importance and lack of opportunity for risk-reducing measures.

5. Contextualization of the Legal Framework (Historical or other)

The current Security Act encompasses all sectors.

Under the previous national security and screening regime, there was no holistic approach relating to FDI in Norway, and no specific, single piece of legislation that regulated FDI.

In addition to the Security Act, there are still in practice national restrictions in relation to concessions, that apply in addition and in parallel to the Security Act, i.a. in the following sectors:

acquisition of waterfalls, rights for power supply and mines;
acquisition of land, real estate and leases in the long term;
acquisition of cultivable land and forests;
acquisition of more than a qualified holding in a Norwegian financial institution; and
direct investments in exploration and petroleum operations that are licensed by the government.

Further, within financial services, investors that intend to acquire a qualified holding in a financial institution and/or part of a portfolio, must notify competent authorities and get a prior authorisation (or a no-objection) in advance before the acquisition can be implemented. A fit and proper test applies. The establishment and operation of Norwegian financial institutions require a regulatory license from the Norwegian Financial Supervisory Authority. Special regulations apply for European Economic Area (EEA) Member States.

Within fisheries and aquaculture – i.e., an area in principle outside the scope of the EEA Agreement – restrictions on ownership apply; the right to acquire a fishing vessel or share in a company which owns vessels is only granted to Norwegian citizens or bodies defined as a Norwegian citizen. There are also certain requirement entailing restrictions under relevant company and tax regulations. For instance, the general manager in a limited liability company or a public limited liability company, and at least half of the members of the board of directors, must be residents of Norway.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

The Norwegian Security Act screening regime applies to EU-based investors and non-EU investors alike. The Security Act grants Norwegian authorities far-reaching powers to screen and block FDIs in Norwegian companies. The Act sets out a broad definition of what “national security interest” includes, inter alia, national financial stability and autonomy.

The Security Act and screening regime is not confined to companies in specific sectors (although sectors such as media, communication, oil and gas and natural resources (such as mining) and energy in general would be deemed as such and have already been highlighted as physical assets which might be categorized as essential to national security). However, the Security Act, as a starting point, only applies to investments in target companies that have been brought within the scope of the law by way of an individual decision addressed to the company.

The Norwegian authorities will have the power to issue such individual decision in respect of any company that, according to Section 1-3 of the Security Act:

is processing classified information;
has access to information or information systems deemed essential to national security interests;
owns physical assets or infrastructure deemed essential to national security interests; or
is involved in activities deemed essential to national security interests.

The government ministries have been granted the power to take decisions that bring new companies within the scope of the Security Act. The company shall receive prior notice, but no minimum notice period has been set. The ministry does not need to consult any expert bodies prior making its decision.

The Security Act also entitles Norwegian authorities to review investments and transactions relating to companies that are engaged in activities of crucial importance for national security, regardless of the nationality of the investor.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

Under the Security Act, the Norwegian government may oppose an acquisition of a qualified part of a Norwegian company, which is made subject to the scope of the Security Act.

According to Section 10-1, approval from the government is necessary to acquire a qualified part of a company, which is subject to the Security Act. A qualified part of a company means, according to Section 10-1, obtaining or have the right to obtain one-third of the share capital or the interests or of the voting rights. In addition, approval from the government is necessary when the investor accomplishes significant influence within the company through the acquisition.

When assessing what is a “qualified part” shares or other equity interests that are owned or procured by parties that are regarded as “close associates” to the acquirer within the meaning of the Norwegian Securities Trading Act shall also be considered. The definition “close associate” i.e. encompasses underage children, the spouse or a person with whom the shareholder cohabits in a relationship akin to marriage and such person’s underage; an undertaking within the same group as the shareholder or where the shareholder or the shareholder’s close associate(s) exercise influence under the companies’ regulations in Norway.

Internal reorganisation would normally be out of scope, but may be encompassed by the Security Act, if they confer control of an entity outside the original group structure.

Further, if the acquisition turns out to be a not insignificant threat to national security interests, the government may intervene without prior decision against the company in question and may block the transaction or decide that the investment may only be implemented subject to conditions irrespective of the thresholds.

8. Scope - sectors covered

All sectors are covered, but in general some sectors are focused on, see Item 6 above.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

a) As of today, the approval of the acquisition may be obtained prior to or after closing. The filing or the review process currently does not have a suspensory effect on the closing of the transaction. However, as a negative decision may involve an order to reverse the transaction, it is generally advisable to obtain approval prior to closing. Referring to the expected changes mentioned above, it may be expected that this will change to a pre-authorisation requirement.

b) If the target company is subject to the screening regime, the regime applies to any investor that wishes to acquire a “qualified” stake. A stake is considered “qualified” if it results in the acquirer holding, directly or indirectly, at least 1/3 of the share capital, assets or voting rights. The same applies to options to acquire ownership of at least 1/3 of the share capital or assets. Additionally, a stake will be regarded as “qualified” if it enables the buyer to exercise significant influence over the company’s business.

c) An investment falling within the scope of the Act triggers a mandatory filing obligation.

10. Design – reciprocity?

N/A

11. Design – Procedures and Deadlines

There is no filing deadline under the Security Act. However, if a transaction is already closed and is subsequently refused approval, the transaction may have to be reversed.

The filing shall be submitted by the one who wants to acquire a qualified stake to the responsible authority for the sector in which the target company is active (i.e., the relevant sector ministry or the National Security Authority, Nw. Nasjonal Sikkerhetsmyndighet).

Within 60 working days after having received a notification regarding an acquisition, the responsible authority shall either (i) inform the acquirer that the acquisition is approved, or (ii) inform the acquirer that the decision will be made by the King in Council. However, this deadline may be extended, namely when the authority has requested further information from the acquirer within 50 working days from the notification being received, the 60 working days deadline is suspended, which will “stop the clock” until the required information is provided, cf. Section 10-2 of the Security Act.

12. Design – Transparency and Information requirements (Filing Forms?)

No formal requirements have been laid down for the contents of the filing. However, the acquirer must provide the following information:

The acquirer’s name, address, company register number, birth number or similar number.
The company register number of the company to which the acquisition relates.
The acquirer’s ownership share after the concerned acquisition is completed.
The ownership structure of the acquirer.
The names of the persons that are members of the acquirer’s Board of Directors.
The names of the persons that are members of the acquirer’s management.
Possible relations between the acquirer and other existing owners of the company to which the acquisition relates.
The acquirer’s ownership interests in other companies that are covered by the Security Act.
The acquirer's ownership interests in other businesses within the relevant sector.
The acquirer's annual turnover and annual accounts for the last five years, as far as this is available.
Other conditions that may be important for the assessment of whether the acquisition can be approved.

Please note that the individual decisions are not publicly available and only the company who has received a decision to be within the scope of the Security Act will know this.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

So far only one transaction has been blocked in Norway, cf. Item 18 below. However, according to Section 10-3 of the Security Act, the transaction may also be conditionally approved.

14. Interaction with other legal frameworks (ex: merger control)

Both foreign and domestic investments may be subject to review under the merger control rules of the Norwegian Competition Act.

The Norwegian Competition Act (Nw. Konkurranseloven) provides for mandatory prior notification of concentrations that exceed certain turnover thresholds and empowers the Competition Authority to order notification of concentrations below the thresholds and minority acquisitions on a case-by-case basis.

Additionally, the Norwegian Finance Undertakings Act (Nw. Finansforetaksloven) contains provisions and restrictions on ownership control, without distinguishing between foreign and domestic acquirors.

Please also see Item 5 above, with specific sectorial requirements e.g., concessions.

Under the Security Act, once it applies, the Government (formally the King in Council) may deny acquisitions which turn out to be a threat to national security interests, in a way which is not insignificant. According to the preparatory works, King in Council must consider the importance of continuity of supply, strategic production of goods and services of national importance and the protection of classified information.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

The ordinary courts would have jurisdiction. There is no procedure for administrative review available. The Government’s refusal to approve an acquisition can be brought before the ordinary courts pursuant to the general rules regarding review of administrative decisions. The court’s re-examination is limited to whether the authorities have committed procedural errors that may have affected the outcome of the decision, whether the refusal constitutes an abuse of authority and/or whether the refusal is based on an erroneous factual basis. If the court finds that such circumstances exist, the court shall invalidate the refusal. The authorities may, however, issue a new refusal after a new review of the case provided the grounds for invalidation are repaired in this new review.
An appeal against a refusal may be brought before the courts by either the acquirer or the seller of shares or other ownership interests, as both will have the necessary legal standing. In principle, the acquirer and/or the seller may also present a damage claim against the State for the loss incurred because of the acquisition not being implemented or being reversed because of an invalid administrative decision.

17. Publication in Official Gazette or other

See here.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

According to publicly available information to date, only one transaction has been blocked under the current Security Act, namely in March 2021. The Norwegian Government blocked a transaction based on concerns for national security, namely the sale of Bergen Engines, an engine manufacturing company owned by Rolls Royce, to TMH International. Bergen Engines manufactures engines for civil and military applications. Interestingly, in blocking the transaction, the government did not apply the new rules on ownership control, but relied on Section 2-5 of the Security Act, pursuant to which planned or ongoing activities which may represent a “not insignificant risk” to national security interests can be blocked.

Details of the strategic considerations made by the government in their assessment of the case is classified information, and not publicly available. However, statements made by the government shed light on what types of considerations the authorities might emphasise during foreign direct investment reviews:

The government held that TMH International was partly owned by individuals with ties to the Russian government and that Bergen Engines produced and applied technology which would strengthen Russia’s military capabilities.
The acquisition of Bergen Engines by TMH International would accordingly conflict with Norwegian security policy interests.
The government stressed that Russia has difficulties accessing such technology since sanctions were imposed in 2014. Consequently, allowing the sale of Bergen Engines to TMH International could indirectly provide intelligence to Russia in conflict with the intention of the current sanctions policy.
The sale of Bergen Engines to TMH International might have led to efforts to circumvent regulations on export to Russia.
The location of Bergen Engines at the entry to a major Norwegian port was held to be of strategic importance. Accordingly, the sale of the company to TMH International could potentially constitute a national security risk.

The Bergen Engines case demonstrates that strong national security and military strategy concerns may lead to the authorities blocking the implementation of a transaction without using the provisions of Chapter 10 contained in the Security Act.

19. Stakeholders views on the Legal Framework

According to the last hearing, most of the respondents to the public consultation proposal was generally positive to the suggested amendments to the Security Act. According to information on the website of the Norwegian Parliament, the Act with the amendments is pending the final approval but this is likely to occur early 2023.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

Norway continues to adjust its foreign direct investment legislation. The proposed changes in the Security Act may be seen as harmonising with similar legislation in the EU jurisdictions. Please note that Norwegian sanction rules are fully harmonised.

21. Other relevant information

There are currently no corresponding formal sanctions/administrative fines or criminal liability for failure to notify an acquisition that requires review in terms of ownership control under the Security Act (but please see the current review in Item 4 above).

Contacts: Line Voldstad, Kjetil Johansen and Katrine Lillerud

Last updated June 2023

1. Country: Poland

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

the Netherlands (approximately 20%)
Germany (approximately 17%)
Luxembourg (approximately 12.5%)
France (approximately 8.5%)¹

¹Narodowy Bank Polski (National Bank of Poland) (available only in Polish) – only four countries are mentioned in the report.

3. Legal Framework in Force

Act of 24 July 2015, on Control over Certain Investments (the Act);

Ordinance of the Council of Ministers of 25 December 2016, on documents attached to notifications of intention to acquire or achieve significant participation or acquisition of dominance in an entity subject to protection;

Ordinance of the Council of Ministers of 8 October 2020, on a contact point for the implementation and application of the Regulation establishing a framework for monitoring foreign direct investment in the Union;

Ordinance of the Council of Ministers of 16 December 2022, on the list of entities to be protected and the authority competent for screening mechanism;

4. Last revision of the Legal Framework

Act of 19 June 2020 – on Interest Subsidies for Bank Loans Granted to Businesses Affected by COVID‐19 and on Simplified Proceedings for the Approval of a Composition Agreement in Connection with COVID-19 – introducing to the Act new regime screening mechanism due to the COVID-19 pandemic in Poland (COVID-19 Rules);

Ordinance of the Council of Ministers of 16 December 2022 on the list of entities to be protected and the counter authorities competent for them – introducing an additional four companies to the list of companies covered by the existing general protection against the COVID-19 pandemic (Company Specific Rules).

5. Contextualization of the Legal Framework (Historical or other)

The purpose of the Act is to protect the interests of the Polish state and to control investments in strategic sectors of the Polish economy to protect public security and order.

Company Specific Rules

The Act was initially introduced in 2015. The Polish Council of Ministers identified certain threats, which could destabilize the Polish economy. It was decided that the Polish authorities should have appropriate instruments (including legal ones) to enable them to interfere and oppose proposed transactions when necessary. Every year the Council of Ministers publishes a list of protected entities from the sectors specified in the Act, taking into account factors such as real and serious threats to the fundamental interests of Society related to the activities of those entities (see more information in question 9 below). Currently, there are 15 companies protected by the Company Specific Rules.

Depending on the sector in which the protected entity is active, the Minister of State Assets, Minister of Defence or Minister competent for maritime affairs is responsible for FDI notifications based on the Company Specific Rules.

COVID-19 Rules

On 24 July 2020, an amendment to the Act entered into force, introducing a new screening mechanism affecting foreign investors (i.e., investors from countries other than EU, EEA or OECD members) that wish to invest in a Polish entity covered by special protection (the COVID-19 Rules).

The amendment was adopted as a result of the COVID-19 pandemic and Polish authorities’ concerns regarding the risk of takeover of Polish companies that are crucial for public order, safety or health. Initially it was assumed that these rules would be in force for two years, i.e. until 24 July, but because of the amendment this deadline has been extended to 24 July 2025. The purpose of the amendment is to prevent the international situation surrounding COVID-19 from distorting a market or distorting competition.

The amendment also implemented 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 European Union.

The Polish competition authority (the President of the Office of Competition and Consumer Protection UOKiK) is responsible for FDI notifications that are subject to the COVID-19 Rules.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

Company Specific Rules

The Act is applicable to all investors, regardless of the nature of their operations or country of registration – it also applies to Polish investors.

COVID-19 Rules

The screening mechanism applies only to foreign investors i.e., (i) a physical person who does not have citizenship of the EU, EEA or OECD (Member State), or (ii) a person other than a physical person that was not established/registered in one of the Member States for at least two years prior to the day before the notification.

The subsidiaries and branches of foreign investors will also be classified as foreign, even if they are registered in one of the Member States.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The screening mechanism applies to situations which may result in the acquisition of dominant control or significant participation in the protected entity. Moreover, the Act applies not only to direct (e.g., the acquisition of shares) but also indirect transactions (e.g., an acquisition via subsidiaries, including transactions subject to foreign law).

As the language of the Act is quite specific, it is advisable to assess the applicability of the FDI mechanism on a case-by-case basis.

Company Specific Rules

The Act concerns investments involving the acquisition:

of shares (or stock); rights and obligations of a partner authorized to manage or represent the protected company (or partnership), enterprise or an organized part thereof,
resulting in the acquisition or achievement of a significant participation in or the acquisition of a dominant position over a company that is subject to protection.

Within the meaning of the Act, "significant participation" means the ability to influence another entity's operations, in particular due to:

holding, within the last two years, at least 20% of the total number of votes in its governing body; or
having an interest in a partnership with a value of at least 20% of the total value of all contributions made thereto.

Moreover, the following factors may indicate that the entity is a dominant entity:

holding (directly or indirectly) the majority of votes in another entity's governing bodies (also if acting in concert);
being authorized to appoint or dismiss the majority of members of another entity's management or supervisory bodies;
where it has (directly or indirectly) more than half of the members of another entity's management board, registered proxies or managers;
holding at least 50% of another entity's share capital; or
otherwise being able to take decisions on another entity's operations.

Moreover, in the case of subsequent acquisitions, a notification obligation is triggered by reaching or exceeding (directly or indirectly) the following thresholds: 20%, 25%, 33% and 50% of the total number of votes at the protected company's general meeting or in its share capital.

COVID-19 Rules

Acquisition of:

a) “significant participation” in the protected entity is defined as the acquisition of 20% or 40% of the shares (separate thresholds) or of the total votes, capital or profits, or the lease of (i) an entire enterprise or (ii) part of an enterprise which is sufficiently separated;

b) a dominant position over a target entity (in particular within the meaning of the Company Specific Rules described above) is achieved by taking one of the following actions towards the protected entity: (i) the acquisition of shares or rights attached to shares or the subscription for shares, or (ii) the conclusion of an agreement providing for the management of that entity or the transfer of profits by that entity.

The acquisition or achievement of a significant participation or the acquisition of a dominant position may also occur indirectly, in particular via subsidiaries or any other entity with whom another entity has concluded an agreement providing for the delegation of voting or other rights over or in relation to the shares, stocks or other equity rights of the protected entity.

The acquisition, achievement of a significant participation or the acquisition of a dominant position also means cases in which an entity acquires or achieves a significant participation or the acquisition of a dominant position over a protected entity, or achieves or exceeds, respectively, 20% or 40% of the total number of votes in the protected entity, or a share in its profits, or a capital share in a partnership with respect to the value of all contributions made to that partnership, as a result of so-called subsequent acquisition (nabycie następcze). This could be a result of one the following:

the redemption of shares or stock of a protected entity or the acquisition of the protected entity's own shares or stock,
a division of the protected entity or its merger with another entity, or
an amendment to the articles of association or statutes of the protected entity regarding preferential rights to shares, participation in profits, or the establishment or modification or cancellation of the rights vested in particular partners, shareholders or participants of the entity

8. Scope - sectors covered

Company Specific Rules

Every year the Council of Ministers publishes a list of protected entities from the sectors specified in the Act (e.g., energy, chemical, telecommunications, transshipment in seaports, mining, military, etc). The factors taken into account when drawing up the list include: significant share in the market, scale of operations, and real and sufficiently serious threats to fundamental interests of society related to the activities of the entity to be protected. The Council of Ministers should also consider whether other less restrictive measures could be implemented.

There are currently 15 companies covered by protection on these bases, i.e.:

Centrum Rozwojowo‐Wdrożeniowe "Telesystem-Mesko,"
Emitel S.A.,
Gaspol S.A.
Grupa Azoty S.A.,
HAWE TELEKOM sp. z o.o. w restrukturyzacji,
KGHM Polska Miedź S.A.,
Orange Polska S.A.,
PKP Energetyka S.A.
Polkomtel sp. z o.o.,
Polski Koncern Naftowy ORLEN S.A.,
Rafineria Gdańska Sp. z o.o.
Stoen Operator Sp. z o.o.
Tauron Polska Energia S.A.,
Telekom sp. z o.o.
UNIMOT S.A.

COVID-19 Rules

The COVID-19 Rules define a protected entity as an entity that generated turnover exceeding EUR10 million in Poland in either of the two financial years preceding the submission of the notification, which meets one of the following conditions:

is a public company;
holds assets considered as critical infrastructure (e.g., communication and information systems, healthcare systems, energy supply systems);
develops software dedicated to specific sectors (e.g., energy, water supply, voice/data transmission or storage, finance/payments, insurance, healthcare, transport, food supply) or provides cloud computing services for them; or
conducts business activity in one of the specified sectors:

energy (e.g., production of energy, pipeline transport/storage of crude oil, motor fuel or diesel oil, underground storage of crude oil or natural gas);
heating (e.g., generation or transmission or distribution of heat);
chemical (production of chemicals, fertilizers and chemical products, regasification or liquefaction of natural gas, distribution of natural gas or electricity);
production of rhenium;
mining and processing of metal ores used for the production of explosives, weapons and ammunition, as well as products and technologies for military or police purposes; healthcare (e.g., manufacture of medical equipment, instruments and supplies, or manufacture of medicines and other pharmaceutical products);
military (e.g., manufacture and trade in explosives, weapons and ammunition, as well as products and technology for military or police purposes);
transshipment (e.g., transshipment in ports that are of fundamental importance to the national economy, transshipment of crude oil and its products in seaports, transshipment in inland ports);
telecommunications;
food production (processing of meat, milk, cereals and fruit and vegetables).

Considering the objectives of the screening mechanism introduced by the COVID-19 Rules, the Council of Ministers may (after consultation with UOKiK) introduce certain exemptions from the protection.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

Both type of Rules (i.e., Company Specific and COVID-19) provides for ex-ante screening mechanisms only.

The notification is mandatory and the investor has to notify its intention to execute a given transaction before taking any actions.

In some ambiguous cases, informal and formal preliminary consultations with the competent authority may be possible.

10. Design – reciprocity?

N/A

11. Design – Procedures and Deadlines

An entity that intends to acquire or achieve a significant participation or to acquire a dominant position is obliged to notify the relevant authority of such an intention. In the case of an indirect acquisition, the notification is submitted by the entity that entered into the transaction.

In the case of an indirect acquisition that took place because of an act carried out under the provisions of the law of a country other than Poland, the notification is submitted by the subsidiary through which the indirect acquisition was made.

In the case of acquisition or substantial participation, the relevant authority must be notified. The notification must be submitted by the entity that has acquired or achieved significant participation (directly or indirectly).

In the case of an indirect acquisition resulting from a transaction executed under laws other than in Poland, in particular a merger of companies whose registered offices are outside Poland, or an acquisition of shares in a company with a registered office outside Poland that is a parent entity of a protected company, the notification must be submitted by the company that has obtained the status of a parent entity of an entity holding at least 20% of the votes at the general meeting or of the share capital of (i) the protected company, (ii) its parent entity (or an entity having significant participation therein), or (iii) an entity having a legal title to the protected company’s enterprise (or a part thereof).

The Act also provides for one situation in which the notification is submitted by the protected entity, i.e., in the case of consequential acquisitions, such as due to a result of the cancellation of shares or share certificates in a company which is a protected entity. In that case, the notification must be made before holding a meeting of the governing body of the protected entity, before adopting a resolution of the shareholders or participants, or before any other act that would result in consequential acquisitions (or acquisitions of dominance or significant participation) over the protected entity.

Company Specific Rules

Depending on the sector in which the protected entity is active, the notification based on the Company Specific Rules should be submitted to one of the following: the Minister of State Assets, the Minister of Defence or the Minister competent for maritime affairs.

The Act does not set forth more specific rules of the proceedings, such as the procedures that would be applicable where a notification obligation arises. The Act covers all types of transactions, regardless of their purpose. Notification is mandatory and there are no exceptions of any kind (it concerns all investors, both national and foreign).

COVID-19 Rules

The FDI notifications based on COVID-19 Rules should be submitted to UOKiK. UOKiK has published special guidelines on this subject (Investment Control – procedural guidelines on submitting notifications to the President of UOKiK and conducting proceedings under the Investment Control Act – available only in Polish).

In general, notification must be made before:

concluding any agreement generating an obligation to acquire or executing any transaction leading to the acquisition of a dominant position over a protected company (or significant participation); or
announcing a tender offer to subscribe for shares in a protected company that is a public company whose shares are admitted to trading on a regulated market.

Where a significant participation or the acquisition of a dominant position is achieved through the conclusion of more than one agreement or other legal action, notification must be given prior to the conclusion of the last agreement, or any other legal action leading to the acquisition or achievement of a significant participation, or the acquisition of a dominant position over a company that is subject to protection.

In the case of an indirect acquisition resulting from a transaction executed under laws other than Polish, as referred to above, notifications must be made within seven days of the date on which the acquisition of a dominant position or a significant participation becomes effective or, if such a moment cannot be determined, within 30 days of the date of the transaction (or other action) leading to such an acquisition.

The timing for the required notifications is as follows:

For the Company Specific Rules: 90 days from receipt of the written notification (with two additional working
days for the delivery);
For the COVID-19 Rules:
- Phase I: 30 working days for preliminary screening proceedings from receipt of the written notification
- Phase II: 120 working days from the initiation of the phase II proceedings (with seven additional working days for the delivery).

Note: all the proceedings are subject to the “stop-the-clock” rule for an unlimited number of additional questions or requests from the competent authority. In the case of requiring additional information/documents, the notifying party will be given at least seven days for the submission of the reply.

12. Design – Transparency and Information requirements (Filing Forms?)

The Act indicates information that needs to be disclosed by the notifying party as well as documents (both official, e.g., articles of association, and private, e.g., a graphic organization chart of the capital group) that need to be submitted together with the notification. In contrast to the merger rules, neither the Act nor its implementing regulations provide for any form or any sample notification to be used by the notifying party.

The list of information and documents that should be provided in the notification is quite extensive. It includes:

the intended acquisition (e.g., participation in a protected entity, the source of financing of the purchase etc);
the investor and its capital group (business operations, members of its administrative and supervisory bodies, completed and pending proceedings);
the investor’s plans in connection with the transaction (e.g., long-term business plans, anticipated changes in the organization of the protected entity, the method of financing).

The notification and the accompanying documents must be drawn up in Polish – or in a foreign language together with an official translation into Polish made by a certified (sworn) translator or by a consul (e.g., documents translated from a rare language into a language known to the consul and then translated by the consul into Polish).

Official foreign documents should be legalized by a Polish consul before being translated (unless an international agreement to which Poland is a party provides otherwise).

In justified cases, where the applicable law does not require the provision of documents be attached to the notification, the notifying party or the person concerned may, instead of those documents, make a declaration to that effect containing the required information. At the same time, that person must also submit the documents which, in accordance with applicable law, constitute confirmation of those other documents, accompanied by an appropriate explanation.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Company Specific Rules

The competent minister may issue a decision blocking a given transaction (see question 15). On the other hand, if the notified transaction does not fall within the scope of the Act, the competent minister will issue a decision refusing to initiate proceedings.

Before issuing the decision on the merits of a case, the competent minister must consult the Consultative Committee appointed by the Prime Minister (consisting of other ministers and public authorities important from the perspective of public security). According to a recent ruling issued by the Supreme Administrative Court (case no. II GSK 594/18), recommendations given by the Consultative Committee are binding.

COVID-19 Rules

After conducting proceedings in Phase I, UOKiK may issue:

an ordinance refusing to initiate the proceedings, if the notified transaction does not fall within the scope of the Act;
a decision that the notified transaction does not fall within the scope of the Act and refuse to initiate the control proceedings and not oppose the proposed transaction, or
an ordinance initiating Phase II – if, (i) the notifying party did not provide the required documents/information or; (ii) it is necessary to conduct further investigations from the perspective of the public order or security.

After conducting an in-depth investigation of the proposed transaction in Phase II, UOKiK issues a decision on the merits of the proposed transaction (i.e., not opposing or blocking the proposed transaction (see question 15)).

Failure to submit a notification and refrain from taking any action covered by the notification until obtaining a positive clearance decision from the competent authority, or the expiry of the period within which the decision should have been issued, may result in certain civil and penal sanctions.

Company Specific Rules

Sanctions include:

Invalidity of all investments carried out without notification or after having received a refusal from the competent minister.
Penal sanctions including a fine of up to PLN100 million and/or imprisonment ranging from six months to five years with respect to natural persons acting in their own name, as well as representing a legal entity.
With respect to natural persons obliged by law or contract to manage the affairs of a subsidiary, who are aware of an acquisition made in breach of the notification obligation and who fail to notify the relevant authority, possible penal sanctions include a fine of up to PLN10 million and/or imprisonment ranging from six months to five years.

There is no specific timeline or statute of limitations for imposing the abovementioned sanctions. In certain circumstances set out in the Act, the competent minister may initiate proceedings ex officio.

COVID-19 Rules

The sanctions include:

Invalidity of all investments carried out without notification or after having received a refusal from UOKiK. In the case of an indirect acquisition carried out on the basis of foreign law, the sanction is the inability to exercise the rights attached to the shares of the protected entity.
UOKiK is entitled to bring an action to annul actions taken pursuant to the investor's exercise of rights acquired in violation of the Act.
Penal sanctions including a fine of up to PLN50 million and/or imprisonment ranging from six months to five years with respect to natural persons acting in their own name, as well as representing a legal entity.
With respect to natural persons obliged by law or contract to manage the affairs of a subsidiary, who are aware of an acquisition made in breach of the notification obligation and fail to notify the relevant authority, possible penal sanctions include a fine of up to PLN5 million and/or imprisonment ranging from six months to five years.

The time limit for imposing the abovementioned potential sanctions is five years from the investment.

During that time UOKiK may initiate proceedings ex officio.

14. Interaction with other legal frameworks (ex: merger control)

None. The Act provides for a separate procedure that does not depend on or affect any other legal framework, in particular merger control rules.

At the same time, in the case of notifications based on the COVID-19 Rules submitted to UOKiK, the authority announced that it will speed up the procedure (and potential clearance)..

Company Specific Rules

Blocking is justified for the purpose of:

• ensuring the fulfilment of obligations incumbent on Poland to safeguard its independence and the inviolability of its territories, ensuring freedom and human and civil rights, safety of its citizens and protection of the environment;
• preventing social or political actions or events impeding or precluding Poland from performing its obligations under the North Atlantic Treaty or its participation therein;
• preventing actions, or social or political events that may disturb Poland’s foreign relations; and
• ensuring security and public order in Poland, meeting the necessary needs of the population and protecting their life and health.

COVID-19 Rules

Blocking by UOKiK may be justified in the following situations:

there exists at least a potential threat to public order, public security, or public health in Poland; or
the acquisition or achievement of a substantial participation or the acquisition of a dominant position would adversely affect projects and programs of interest to the EU; or
it is not possible to establish whether the acquirer is from one of the Member States or should be classified as a foreign investor.

In both regimes, the competent authority would block the transaction if:

the notifying party did not supplement formal defects in the notification or documents or information attached to the notification within the prescribed time limit or the summoned entity did not submit the information or documents as requested by the competent authority, or
the notifying party did not provide additional written explanations within the time limit set by the competent authority.

If one of the above factors for blocking a transaction is met in both regimes, i.e., Company Specific and COVID‐19 Rules, but the transaction is an indirect acquisition executed under foreign law, instead of opposing the transaction, UOKiK or the competent minister will disallow the exercise of rights attached to the shares of the target entity (except for the right to sell the shares).

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

Company Specific Rules

In relation to an issued decision, the notifying party may request that the case be reconsidered by the competent minister that issued the decision (i.e., the Minister of State Assets, Minister of Defence or Minister competent for maritime affairs). The notifying party may also file an appeal with an administrative court.

If the administrative court revokes the competent minister’s decision, the 90-day time limit for the issuance of the decision starts to run again from the date on which the final judgment of the administrative court is delivered to the minister.

COVID-19 Rules

The notifying party may file an appeal with an administrative court within 30 days of receiving the decision.

If the administrative court revokes UOKiK’s decision issued in Phase II or Phase I, the 120-day time limit for the issuance of the decision starts to run again from the date on which the final judgment of the administrative court is delivered to UOKiK.

17. Publication in Official Gazette or other

The notifying party is not subject to any special publication obligations concerning FDI screening, apart from those resulting from general rules (e.g., publication in the National Court Register or MAR notification). The decisions in cases analyzed by UOKiK are published on its official website.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

There are examples of recent decisions issued by UOKiK based on recent amendments to the Act (COVID-19 Rules). In October 2020, decision No. DKK-179/2020 was issued in a case resolved via the simplified procedure. According to the decision, H&F Fund, whose registered office is in the Cayman Islands, took over a Polish company active in the financial sector — Centrum Rozliczeń Elektronicznych Polskie ePłatności.

Decision No. DKK- 248 /2021 concerned the acquisition of a significant participation in Makarony Polskie S.A. (a public company from the grocery sector) by Raya Holding For Financial Investments S.A.E. (Giza, Egypt) via its Polish subsidiary, i a company with its registered office in Warsaw (Madova sp. z o.o.).

In August 2022, decision No. DKK-201/2022 was issued in which UOKiK refused to initiate proceedings and did not oppose the proposed acquisition of indirect dominance by Saudi Arabian Oil Company (Dhahran, Kingdom of Saudi Arabia) via Aramco Overseas Company B.V. (Hague, the Netherlands) over LOTOS SPV 1 sp. z o.o. and LOTOS-Air BP Polska sp. z o.o. and a significant participation in Lotos Asfalt sp. z o.o. via Aramco Overseas Company B.V. (Hague, the Netherlands) in Lotos Asfalt sp. z o.o.

19. Stakeholders views on the Legal Framework

According to the common viewpoint, the Act is far from ideal, in particular due to the multiplicity of references and terminological inaccuracies, which partially result from the rapid pace of parliamentary work. The Act was prepared in less than five months. Moreover, restrictions and obligations resulting from the Act are very broad and burdensome, which may discourage or even prevent investors, both Polish and foreign, from executing relevant transactions.

COVID-19 Rules

The COVID-19 Rules were also implemented via a sped-up procedure. Luckily, one of the propositions made during public consultations was included, and therefore investors from OECD countries will not be regarded as foreign entities. The UOKiK has issued special guidelines, but they mainly repeat the contents of the Act and do not provide any additional know-how.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

The amendment to the Act introduced in 2020 implements EU Regulation 2019/452, and in particular establishes a contact point. This should enhance the cooperation between Polish authorities and the equivalent bodies from other European countries. As indicated in EU Regulation 2019/452, establishing contact points should support direct cooperation and the exchange of information between the contact points from different EU countries.

At the same time, full compliance of the provisions of the Act with EU legislation has raised concerns from the beginning. The powers given to authorities seem to be too broad and too discretionary when compared to the EU's principles of freedom of establishment and freedom of movement of capital – as well as the proportionality principle. Statutory prerequisites for both granting protection to a given entity, as well as blocking a transaction or prohibiting the exercise of voting rights from the acquired shares, are determined too vaguely – the assessment of whether they are met may be based on political or economic grounds, and not legal.

21. Other relevant information

Potential amendments and new UOKiK guidelines are possible in the coming years.

Contacts: Michał Orzechowski and Agnieszka Staszek

Last updated June 2023

1. Country: Portugal

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

Spain
The Netherlands
Luxembourg
France
UK

Source: Bank of Portugal¹

3.Legal Framework in Force²

Article 27.º-A of Law no. 11/90, of April 5 (“Framework Law on Privatizations”), as amended3 and Decree-Law no. 138/2014, September 15

4. Last revision of the Legal Framework

No changes since enactment of Decree-Law no. 138/2014

5. Contextualization of the Legal Framework (Historical or other)

Enacted following various changes made to the Privatizations’ legal framework, as a result of the commitments made by the Portuguese authorities to the international creditors⁴ in the context of the Economic and Financial Assistance Programme to the country (implemented from May 2011 onwards until Summer 2014).

More precisely, in the context of the program, the Portuguese authorities committed to withdraw any special powers of the state over the economy and abstain from adopting measures capable of restricting the free movement of capital, in parallel with committing to implement a series of privatizations (and the granting of exclusive concessions) in sectors such as energy, communications and airport infrastructure.

Notwithstanding, in September 2011 the Parliament introduced several amendments to the government’s proposal of law amending the Privatizations’ Legal Framework (Law No. 11/90) and introduced Article 27-A. This new provision granted the government a mandate to establish “an exceptional regime for safeguarding strategic assets in sectors fundamental to the national interest, in compliance with the EU legal framework.”

After long interactions with the international creditors surveilling the implementation of the Assistance Program, in November 2013 the government⁵ submitted to the Parliament a proposal for legislative authorization of the new legal regime in question (accompanied by the draft implementing decree-law).

The proposal was approved by a majority and subsequently published as Law No. 9/2014, of February 24. On 31 July 2014 the Portuguese Council of Ministers approved the new legal regime (implementing decree-law), which was published on 15 September 2014.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

Only applicable to acquisitions or influence by legal or natural persons from outside the EEA territory.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

Includes both indirect and direct acquisitions of control.

The concept of control is defined by reference to Law No. 19/2012, of May 8 (Portuguese Competition Act), also including de facto control.

The legislation is not clear on whether acquisition of joint control should also be subject to the screening mechanism. However, given that the legal regime expressly refers to the merger control regime, in our view it comprises acquisitions of both sole and joint control.

8. Scope - sectors covered

Covers the Energy, Transports and Communications sectors as concerns their strategic infrastructures and assets, as well as the provision of essential services.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

a) pre-authorisation vs. ex-post screening of FDI? Other?

b) Covers solely controlling investments or also portfolio investments?

c) Mandatory or voluntary nature?

Is an ex -post screening mechanism concerning specifically acquisitions of control (see point 7 above).

More precisely, the member of the government responsible for the relevant sector may, for means of a reasoned decision, initiate a procedure for the evaluation of operations. In such an event, purchasers must send all relevant information and documents related to the operation to the member of the government responsible for the sector in which the strategic asset in question integrates, after which the Council of Ministers, on proposal of that member of the government, has 60 days to exercise its opposition power, otherwise a tacit decision of non-opposition shall be formed.

Allows for voluntary prior evaluation requested by the acquiring entity(ies). More precisely, the latter can also previously request the analysis of whether an operation is compatible with the national legislation by presenting a request with all the relevant information to the member of the government responsible by the sector at stake. Possible outcomes:

the government may then issue a confirmation that it will not oppose the acquisition as described in the request, within 30 days; or
presumption of confirmation that the government will not oppose the operation in case the government does not decide to open a formal evaluation procedure after the referred 30 days.

10. Design – reciprocity?

Decree Law No. 138/2014 expressly states its compliance with the international rules and obligations binding on the Portuguese state and which stem from international conventions, acts, agreements and decisions of the World Trade Organization (WTO).

11. Design – Procedures and Deadlines

Concerning the ex post proceeding, within 30 days from:

the conclusion of a legal transaction relating to a transaction which directly or indirectly results in the acquisition of direct or indirect control, by a person or persons from third countries to the EU and the EEA on strategic assets, irrespective of their legal form; or
the date on which such business become generally known, whichever is the latest event, the member of the government responsible for the area in which the strategic asset in question is integrated may initiate an evaluation procedure by means of a reasoned decision, in order to assess the risk of such a transaction for the defence and national security of the country or the security of the country’s supply of essential services for the national interest.

If such evaluation is initiated, the acquirer must submit to the responsible member of the government all relevant information and documents regarding the transaction.

Upon proposal from the member of the government responsible for the area in which the strategic asset in question is integrated, the Council of Ministers will have a period of 60 days to oppose the transaction. The absence of a decision is equivalent to a non-opposition decision.

Please note that the government may request, at any moment, any administrative entity to provide information or any actions which the same deems necessary for exercising the competencies provided in the decree-law.

The administrative entities adopt all the measures deemed necessary to cooperate in an efficient manner with the member of government responsible for the area where the asset in question belongs to, within the competencies provided by the decree-law, notably through the exchange of information and by undertaking any inquiries, inspections and verifications, when such actions are requested in a duly grounded manner.

12. Design – Transparency and Information requirements (Filing Forms?)

Both as concerns the ex post screening mechanism and the voluntary prior evaluation, it is established that the competent member of the government may set out, by ministerial order, which information and documents must be submitted.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

If there is a screening (either voluntary or ex post) of the transaction, the decisional outcomes are either opposition or non-opposition (even tacitly) to the same transaction.

If there is an opposition decision, all acts and legal transactions relating to the transaction are deemed null and void, including those relating to the economic exploitation or the exercise of rights over the asset or the entities that control it.

14. Interaction with other legal frameworks (ex: merger control)

The Competition Act (Law No. 19/2012, of May 8, as amended) provides for mandatory merger control of concentrations triggering the turnover or market share thresholds provided therein. The Competition Authority has the exclusive competence to scrutinize mergers under the referred Act (Without prejudice to what is provided for in Articles 4 and 9 of the EU Merger Regulation).

Thus, a given transaction may be subject to Portuguese merger control and the screening of the investment under Decree-Law No. 138/2014 – in separate proceedings.

Decree-Law No. 138/2014 provides that it shall be applied without prejudice to the powers exercised by the awarding authorities in existing concession contracts and to the powers of regulatory authorities or any other public authorities over strategic assets under the scope of the Decree Decree-law. Notwithstanding, there is still no public information on any precedent that would provide relevant guidance in clarifying how this articulation of competencies shall be undertaken.

The grounds for blocking are "the real and serious threat to the defence and national security of the country or the security of the country’s supply of essential services for the national interest."

Specific criteria are set forth to what "should be considered in the assessment of the real and serious character of such threat," as follows:

the physical security and integrity of the strategic assets;
the availability and operationality of the strategic assets, as well as their capacity for punctual fulfilment of the obligations, in particular of the public service, that are incumbent upon the persons who control them, under the terms of the law;
the continuity, regularity and quality of the services of general interest provided by the persons who control the strategic assets; and
the preservation of confidentiality, imposed by law or public contract, of the data and information obtained in the exercise of its activity by the people who control the strategic assets and of the technological assets necessary for the management of the strategic assets.

Moreover, the decree-law refers to situations which are susceptible of posing a threat to the defence and national safety or the safeguard of supply of the country as concerns the provision of fundamental services for national interest. These operations are the ones resulting directly or indirectly from the acquisition of direct or indirect control by a person or persons from third countries (outside the EU) when:

there are serious indications, based on objective elements, of the existence of links between the person which is acquiring control and third countries which do not recognize or respect the fundamental principles of a democratic state, which represent a risk for the international community as a result of the nature of their alliances or which maintain links to criminal or terrorist organizations or persons linked to such organizations, taking into account the official positions of the EU on these matters, if applicable;
the acquirer:

in the past has used its position of control over other assets to create serious difficulties to the regular provision of public services essential to the country in which the same were situated or neighbouring countries;
does not guarantee the main allocation of the assets, as well as its reversal at the end of the corresponding concessions, if they exist, notably taking into account the absence of contractual provisions adequate for such a result; and
the operations at stake result in the change of destiny of the strategic assets, when they threaten the permanent availability and operationality of the assets for the timely compliance of the public service obligations, in the light of the applicable provisions.

As concerns WTO rules, please see above answer to point 10.

As concerns the degree of discretion of the government, besides the circumstance that the criteria for assessing the operations are exhaustive and expressly provided for in the decree-law, the decision must be justified in line with the same criteria and "respecting the applicable rules and principles, in particular the principle of proportionality."

See point 16 below for judicial appeals.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

An opposition decision is open to challenge under the Code of Procedure in the Administrative Courts.

Judicial appeal must take place within three months from the notification of the decision to the person acquiring control.

The standard of judicial review is the criteria provided by the applicable Decree-Law.

17. Publication in Official Gazette or other

No publication is provided for.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

In 2018, the launch by China Three Gorges of a general and mandatory tender offer for the acquisition of shares representing the share capital of EDP Renováveis, S.A., a Portuguese Energy Company was subject to the application of the procedure established in Decree-Law No. 138/2014⁶.

19. Stakeholders views on the Legal Framework

Criticism concerning the legal framework is mostly of a political nature and focused on the timing of enactment of the legal framework. More precisely, before its enactment the Portuguese government undertook the privatization of undertakings active in sectors considered strategic by many, such as energy, airport infrastructure and communications in the context of the Economic and Financial Assistance Programme. Several of the acquirers were from outside the EU.

On 20 September 2014 several parliamentarians from the opposition parties decided to initiate parliamentary proceedings to amend said decree-law, so as to extend its scope but did not present a proposal. Consequently, such proposal ceased its effects in late October 2015.

Until now, the 2014 legal framework remains unchanged.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

In the past, the European Commission acting as counterpart to the Portuguese authorities in the implementation of the measures assumed by the latter in the context the Economic and Financial Assistance Programme, has publicly acknowledged that the Portuguese SFI Regime was compliant with EU rules.

Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of FDI into the Union does not expressly require the national legal frameworks to be amended. Notwithstanding, it may be an incentive for an evaluation of the adequateness of the current legal framework if the political environment changes.

The First Annual Report on the screening of FDI into the Union⁷ indicated that Portugal had initiated a consultative or legislative process expected to result in the amendments to the existing one. And the two following annual reports⁸ indicated that a national FDI screening mechanism was in place. It is expected that the national regime will be amended following the new version of the EU Regulation.

21. Other relevant information

N/A

¹BP stat
²This refers only to national legal framework. In the context of merger control proceedings before the European Commission in the light of article 21 (4) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EU Merger Regulation), the Portuguese authorities “may take appropriate measures to protect legitimate interests other than those taken into consideration by this Regulation and compatible with the general principles and other provision of EU law.” (more details under the EU chapter)
³Amended by Law No. 50/2011, of September 13
⁴The international creditors are the European Commission, the European Central Bank and the International Monetary Fund. See for instance the references to the discussions on this legal framework with the Commission in the latter’s 4th to and later on the 11th Review Reports on the Economic Adjustment Program for Portugal, available here (for the 4th and 6th Review) and here (for the 11th Review).
⁵Coalition formed by the Social Democrat Party and the Christian Democrat Party.
⁶This information was obtained from the website of the Portuguese Securities Market Commission in the context of the referred announcement and the reference to the conditions precedent and regulatory approvals
⁷Report from the Commission to the European Parliament and The Council – First Annual Report on the screening of foreign direct investments into the Union, {SWD(2021) 334 final}, 23.11.2021, COM(2021) 714 final.
⁸Report from the Commission to the European Parliament and the Council – Second Annual Report on the screening of foreign direct investments into the Union, {SWD(2022) 219 final}, 1.9.2022, COM(2022) 433 final and Report from the Commission to the European Parliament and the Council – Third Annual Report on the screening of foreign direct investments into the Union, {SWD(2023) 329 final}, 19.10.2023, COM(2023) 590 final.

Contacts: Miguel Pereira and Carla Marcelino

Last updated January 2024

1. Country: Romania

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

The five biggest FDI countries are:

The Netherlands (22.1%)
Germany (12.5%)
Austria (12.2%)
Italy (7.5%)
Cyprus (6.2%).

The percentages were calculated based on the country of residence of the direct shareholder of at least 10% of the share capital of Romanian companies, according to a report prepared by the National Romanian Bank in 2022.

3. Legal Framework in Force

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 (EU FDI Regulation);
Competition Law 21/1996;
Emergency Government Ordinance 46/2022 implementing the EU FDI Regulation, published on 18 April 2022 (FDI EGO), as approved and amended by Law 164/2023, published on 7 June 2023 (FDI Law);
Regulation on the organization and functioning of the Commission for the Examination of Foreign Direct Investments (FDI Commission), published on 28 October 2022;
Supreme National Defence Council Decision 73 of 2012 on the application of article 46(9) of the Competition Law.

4. Last revision of the Legal Framework

The legal framework was last amended in 2023.

5. Contextualization of the Legal Framework (Historical or other)

Foreign Investment Law 35/1991, the first law that liberalized foreign investments in Romania, contained some form of screening for all foreign investments. Foreign investors were required to make a request with the Romanian Agency for Development, which had 30 days to analyze the creditworthiness of the investor, the field, the way in which the investment was to be made, as well as the amount of capital invested. The 1991 Foreign Investment Law specifically required that foreign investments not affect national security and defence interests. Further, foreign investments were not permitted to harm public order, public health or ethics. The law was repealed in 1997.

Until the amendment of the Competition Law in 2011 through Government Emergency Ordinance 75/2010, there was no real form of screening of foreign investments. GEO 75/2010 has introduced a mechanism for the screening of investments, which may present a threat to national security. The procedure was further detailed by the Competition Council Merger Control Regulation and by the Supreme National Defence Council Decision 73 of 2012 on the application of article 46(9) of the Competition Law.

The FDI EGO implementing the EU FDI Regulation was officially published on April 18, 2022 and it puts forward a new approval mechanism as well as additional obligations, conditions and sanctions for foreign investors looking to invest in Romania.

The FDI EGO was approved and further amended by the FDI Law, published on 7 June 2023. One of the main changes brough by the FDI Law consists in expanding the scope of the filing obligation to "EU investors" (EU citizens, EU-based companies including trustees and EU-based companies controlled by EU citizens and/or EU legal entities that either made an investment or intend to make an investment in Romania).

6. Scope - Screening Mechanism - origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

Foreign investors intending to implement “foreign direct investments” or “new investments” are required to submit a request for authorization of the proposed investment to the FDI Commission, provided that such investments satisfy the following two criteria:

the investment has as its object any of the fields of activity provided for in the Decision no. 73/2012 of the Supreme Council for National Defence as being strategic for the national security; and
the amount of the investment exceeds the threshold of EUR2,000,000. However, the FDI Commission may also ex officio assess FDIs which do not exceed the EUR2,000,000 threshold, if, through their nature or potential effects, and by reference to the criteria included in article 4 of EU FDI Regulation, such FDIs may impact security or public order, or pose risks related to security or public order.

Following the enactment of the FDI Law, the filing obligation was extended to EU investors. However, there is no general consensus in the market on whether EU investors need to notify only "foreign direct investments" or whether the obligation extends to "new investments" as well.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The FDI EGO provides for two alternative types of investments, which qualify as “foreign direct investments”:

A "foreign direct investments"

an investment of any nature performed by the foreign investor, (i) for the purpose of establishing or maintaining a long-lasting and direct relationship between the foreign investor and the target, to which funds are made available or are going to be made available for the purpose of performing an economic activity in Romania, and (ii) which allows the foreign investor to exert control over the management of the company; or
a change in the ownership structure of a foreign investor – legal entity, if such change in respect of the legal entity makes possible the exercise of control, directly or indirectly, by: (a) a natural person who is not a citizen of an EU Member State; (b) a legal entity whose headquarters are not located in an EU Member State; or (iii) another legal entity, without legal personality, organized in accordance with the laws of a non-EU Member State.

B "new investments" defined as an initial investment in tangible and intangible assets located in the same territory, connected to, (a) the commencement of the activity of a new legal entity, (b) the expansion of the capacity of an existing legal entity, (c) the diversification of production of a legal entity through products that have not been previously manufactured, or (d) a fundamental change of the general production process of an existing legal entity. Incorporating a new legal entity represents the creation of a new establishment for carrying out the activity for which the financing is requested, independent from a technological perspective of other existing business units. Expansion of the existing legal entity’s capacity represents the expansion of the production capacity within the current establishment due to the existence of an unfulfilled demand. Diversification of an existing legal entity’s production represents the obtaining of products or services that have not been previously manufactured in the respective business unit.

The screening does not apply to portfolio investments (defined as the acquisition of securities on organized and regulated capital markets that do not allow direct participation in the management of the company).

The screening applies to controlling investments as well as "new investments", as detailed above.

8. Scope - sectors covered

The full list of sectors covered is set out in the Supreme National Defense Council's Decision No. 73 of 2012, available at csat.presidency.ro/files/documente/Hotararea_CSAT_73_(2012).pdf and refers to:

the security of the citizen and of the communities;
border security;
energy security;
transport security;
security of supply systems with vital resources;
security of critical infrastructure;
security of information systems and communications systems;
security of financial, fiscal, banking and insurance activity;
security of the production and circulation of armament, ammunition, explosives, toxic substances;
industrial security;
protection against disasters;
protection of agriculture and the environment;
the protection of the privatization operations of state-owned enterprises or of their management.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

pre-authorisation vs. ex-post screening of FDI? Other?

Covers solely controlling investments or also portfolio investments?

Mandatory or voluntary nature?

Screening Mechanism design:

pre-authorisation: investments which meet the notification conditions (as detailed at point 6 above) may not be implemented before being authorized; only controlling investments are reviewed. The screening does not apply to portfolio investments;
mandatory nature: the filing of an FDI authorization request (in the required format imposed by the applicable regulation) is mandatory in case of investments which meet the conditions under point 6 above.

10. Design - reciprocity?

N/A

11. Design - Procedures and Deadlines

A. Who will have to notify?

Any individuals or entities that intend to make an investment meeting the filing requirements indicated above in Romania will have to submit an FDI filing (bilingual – English and Romanian language, in the format prescribed by the applicable regulation).

B. Process

While FDI filings will be submitted to the Romanian Competition Council, the actual screening of the investment will be performed by the dedicated FDI Commission (in Romanian "Comisia pentru examinarea investițiilor străine directe").

The FDI Commission carries out the assessment of the foreign direct investment. However, considering the specifics and complexity of an authorisation request or its impact on security or public order, as well as on projects and programs of interest for the European Union, the FDI Commission may decide that the consultation of the Supreme National Defence Council is required.

The FDI Commission will propose to: (a) clear the FDI (followed formally by a decision issued by the Competition Council to this effect), or (b) decide that there is a potential risk and will issue, (i) a conditional clearance, or (ii) a prohibition (in both cases followed formally by a decision issued by the Government).

C. Timing

The timeline (which is relevant, as a standstill obligation is in place until the FDI is authorized) is as follows:

within 7 days since the notification is filed, the FDI Commission will confirm whether the notification is deemed complete or whether there is any other necessary information;
within 60 days since the notification is deemed complete, the FDI Commission must issue an endorsement deciding whether the FDI is authorized/conditionally authorized/rejected from authorization;
within 5 days since the issuance of the endorsement (if the endorsement refers to an unconditional authorization), the FDI Commission communicates such endorsement to the Romanian Competition Council;
within 30 days since the receipt of the endorsement, the Romanian Competition Council issues the authorization decision;
within 45 days since the issuance of the authorization decision, this is communicated by the Romanian Competition Council to the foreign investor.

As the FDI Commission has relatively recently been established, the legal deadlines are likely to be exceeded and there is no tacit authorization triggered if the deadlines are exceeded.

If the FDI Commission determines, based on the criteria provided by Article 4 of the EU FDI Regulation, that the investment may affect the public security and order of Romania, the FDI Commission will initiate a detailed assessment procedure and consult with the Supreme National Defence Council. The latter will issue a mandatory resolution within 90 days of the request.

D. Standstill obligation and fines

It is very important to note that investors are prohibited from implementing any part of the investment, if that investment is subject to FDI approval, until such approval is obtained. Failure to obtain the FDI approval and implementation of an investment with lack thereof may subject the investor to a fine of up to 10% of the annual turnover achieved in the year prior to the sanctioning. In addition, the FDI Commission may recommend that the Romanian Government issue a decision to unwind the investment.

12. Design - Transparency and Information requirements (Filing Forms?)

There are special transparency rules for investments in media companies. These include companies: (i) with audio-visual licences, or (ii) that issue publications with an average of at least 5,000 printed copies/day in the last calendar year, or (iii) that have a web portal with a minimum of 10,000 views/month. Such investments will be subject to a public consultation process lasting 30 calendar days.

13. Design - Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

At the end of the examination procedure, the FDI Commission shall issue an endorsement deciding, as the case may be:

the authorisation of the FDI, where it is of the opinion that the FDI will not affect the security or public order of Romania and it will noy affect projects or programs of interest for the European Union;
the conditional authorisation of the FDI, where it is of the opinion that the FDI can be implemented with the observance of behavioural or structural commitments by the foreign investor. In this situation, the FDI can be implemented and can operate in accordance with the provisions and conditions specified in the conditional authorisation decision;
the rejection of FDI authorisation (or the annulment, in case of an FDI which has been implemented without filing a request for authorisation), where it is of the opinion that the FDI will affect the security or public order of Romania or may affect projects or programs of interest for the European Union.

Under the recently adopted FDI Law, the FDI Screening Commission is granted the competence to cancel a foreign direct investment in case of national security concerns, based on a procedure to be adopted by way of Government Decision.

14. Interaction with other legal frameworks (ex: merger control)

Foreign direct investments are broadly defined under the FDI EGO. Apart from changes in control in the ownership structure of a company, FDI can also consist of an investment of any kind made by a foreign investor for the purpose of establishing or maintaining long-lasting and direct links between the investor and an undertaking and/or a separate unit of an undertaking, via funds made available for carrying out an economic activity in Romania, and which allow the foreign investor to exercise control over the management of the business.

If an FDI represents, at the same time, an economic concentration falling under the provisions of Competition Law no. 21/1996, the foreign investor must file both an FDI authorisation request, as well as a merger notification. In such case, the merger clearance procedure shall be finalised depending on the decision regarding the FDI authorisation request.

15. Design - Grounds for blocking, if applicable (such as "public security", "vital interests"). Please indicate whether those grounds are based on WTO definitions or not. Also, please indicate what is the degree of discretion of the authority to apply the legal criteria in question.

At the end of the examination procedure, the FDI Commission may refuse to authorize the FDI (or issue an annulment, in the case of an FDI which has been implemented without filing a request for authorisation) if it considers that the FDI affects the security or public order of Romania or may affect projects or programs of interest for the European Union.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

The Competition Council’s decision regarding requests for the authorization of foreign investments are communicated to the investor, within no more than 45 days after adoption.

The decisions may be appealed to the Bucharest Court of Appeal within 30 days of receipt of communication. The decision of the Bucharest Court of Appeal may be further appealed at the High Court of Cassation and Justice within 30 days since communication.

17. Publication in Official Gazette or other

The decisions are not confidential and are published on the Competition Council website.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last five years.

Since the legislation presented in this chapter was adopted in 2022, there are few examples of application of the new regime – 2 FDI authorization decisions were published on the Competition Council website in sectors such as security of critical infrastructure (the target provided IT services) and energy security (the targets were developing wind farms).

19. Stakeholders views on the Legal Framework

The practitioners' view is that the number of FDI filings is expected to significantly increase under the newly adopted legislation.

The Competition Council also appears to have adopted a cautious approach in considering a broad range of potential investments as falling under the FDI legislation.

20. Interplay with the EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

The FDI Ordinance was adopted in order to establish a framework for the screening of foreign direct investments in line with the EU FDI Regulation.

21. Other relevant information

As tackled under 6 above, there is no general consensus on the extent of the obligation to notify purely intra-EU (including domestic) transactions. Among others, it is not clear if internal restructurings would be caught under the filling obligation in case of such transactions.

Another aspect requiring further clarifications is the determination of the investment value for the purpose of assessing whether the EUR2,000,000 threshold has been reached. This subject will hopefully be addressed by way of secondary legislation to be adopted by the Competition Council.

We are continuously monitoring the legislation in the field and will provide an update once new legislation is enacted.

Contacts: Alina Lacatus and Livia Zamfiropol

Last updated July 2023

1. Country: Slovak Republic

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

Currently not applicable. Please note that the Ministry of Economy of the Slovak Republic (MoE) will publish annual summary information concerning the application of the FDI Act (as defined below) on its website by the end of June. This includes information on the geographic origin of foreign investments, the sectors to which these foreign investments have been directed and the total value of these foreign investments.

The FDI Act (as defined below) entered into force as of 1 March 2023, meaning the MoE will publish the summary information for the first time, by the end of June 2024 for the calendar year 2023.

3. Legal Framework in Force

Act No. 497/2022 Coll. on Screening of Foreign Investments, as amended (FDI Act)
Act No. 45/2011 Coll. on Critical Infrastructure, as amended (Critical Infrastructure Act)

In addition, the following secondary legislation to the FDI Act was adopted (and entered into force as of 1 March 2023 as well):

Regulation of the Government of the Slovak Republic No. 61/2023 Coll., that includes the list of critical foreign investments (Government Regulation),
Decree of the MoE No. 64/2023 Coll., that includes the respective forms (Decree of the MoE).

4. Last revision of the Legal Framework

The FDI Act entered into force as of 1 March 2023 and the respective secondary legislation to the FDI Act also entered into force as of 1 March 2023 (the FDI Act does not apply to transactions closed prior to 1 March 2023).

The FDI Act also amended the Critical Infrastructure Act (the amendment also entered into force as of 1 March 2023).

5. Contextualization of the Legal Framework (Historical or other)

Prior to March 1, 2023, only a limited and sector-specific screening regime existed under the Critical Infrastructure Act. As of March 1, 2023, this regime was (almost completely) replaced by the general screening regime under the FDI Act.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

The FDI Act applies to foreign investors. A foreign investor is generally defined as a non-EU citizen or a non-EU entity.

However, an EU-citizen can also be considered a foreign investor, such as, for example, cases where the financing of a foreign investment is secured via sources provided by a public authority of a third country or entity with an ownership interest of a third country.

Further, an EU-seated entity may also qualify as a foreign investor: (i) if it is controlled by a non-EU citizen or non-EU entity, by a public authority of a third country or entity with an ownership interest of a third country, (ii) if its ultimate beneficial owner (UBO) is a non-EU citizen or non-EU entity, public authority of a third country or entity with an ownership interest of a third country, or (iii) the financing of a foreign investment is secured via sources provided by a public authority of a third country or entity with an ownership interest of a third country.

The full definition of a foreign investor is included in Section 4 of the FDI Act.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The FDI Act applies to investments planned or implemented by a foreign investor that will enable the foreign investor to directly or indirectly:

acquire the target's business or its part (i.e., asset deal);
carry out effective participation in the target (i.e., share deal), meaning at least 25 % shares of registered capital or voting rights of the target (10 % in case of critical foreign investments);
increase the effective participation in the target, meaning an increase in the already acquired effective participation to at least 50 % (in case of critical foreign investments, an increase in the already acquired effective participation to at least 20 % and always when reaching at least 33 % or 50 %);
acquire control over the target by other means (e.g., by controlling the composition of corporate bodies);
acquire ownership right to or right to use or dispose of the substantial assets of the target (this applies only to critical foreign investments).

For the purposes of determining the effective participation or its increase, the shares of persons or entities controlling and controlled by the foreign investor shall be also considered.

The full definition (including exemptions) of a foreign investment is included in Section 2 and 3 of the FDI Act.

8. Scope - sectors covered

Generally, the FDI Act does not distinguish between sectors.

However, critical foreign investments are treated differently compared to other foreign investments. Critical foreign investments are foreign investments in connection with which, due to the importance of the target or its activity from the point of view of maintaining the basic functions of the state, there is an increased risk of a negative impact on the security or public order of the Slovak Republic.

As already mentioned, the full list of critical foreign investments is included in the Government Regulation. Based on the Government Regulation, a critical foreign investment includes a foreign investment, where the target:

is a manufacturer of a specifically designed product,
is a manufacturer of a defence industry product or is engaged in research, development or innovation of a defence industry product,
manufactures dual-use items or is engaged in research, development or innovation of dual-use items,
is engaged in the production, research, development or innovation of biotechnology in the health sector,
is an operator of an element of critical infrastructure,
is an operator of an essential service,
is a provider of a digital service in cloud computing,
is engaged in the production, research, development or innovation of national information encryption devices or components essential for their security function, where such products are subject to certification by the National Security Authority, or is a holder of such products,
is a holder of an authorisation under a separate regulation, if the authorisation has not been granted for local programming broadcast or for broadcast and operation of a community medium,
is a provider of a content-sharing platform with an annual turnover exceeding two million euros,
is a publisher of a periodic publication which is not a community periodical, if it communicates news to the general public,
is an operator of a news web portal, which is not a community periodical,
is a news agency.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

In case of critical foreign investments, foreign investors must file a request for screening with the MoE in advance of implementation. Critical foreign investment cannot be implemented prior to the issuance of a decision permitting the foreign investment or conditionally permitting the foreign investment.

In the case of foreign investments that are not critical foreign investments, foreign investors have the right to file a request for screening with the MoE in advance, however, this is not required. Foreign investments other than critical foreign investments can be implemented without a decision authorising the foreign investment or conditionally authorising the foreign investment.

However, the MoE can also initiate proceeding ex officio. This can occur for example where it can be reasonably assumed that the risk of negative impact from the foreign investment already existed at the time of its implementation, or where there are justified comments from another EU Member State or the opinion of the European Commission on foreign investment (for example, in case of foreign investments other than critical foreign investments, where the foreign investor decides not to file a request for screening and therefore implements the foreign investment without the respective decision of the MoE, the MoE may initiate proceedings ex officio in relation to such a foreign investment). In general, the MoE can initiate proceeding ex officio within two years as of implementation of the foreign investment at the latest.

With respect to investments covered by the FDI Act, please see questions No. 6 to 8 above.

10. Design – reciprocity?

N/A.

11. Design – Procedures and Deadlines

Pre-screening stage

The pre-screening procedure applies in case a request for screening of a foreign investment other than a critical foreign investment is filed. In this stage, the MoE assesses the risk of negative impact of the foreign investment.

The MoE shall inform, without delay, the target, the consulting authorities, police and intelligence services that the request has been filed. The consulting authorities shall provide the MoE with their standpoint within 30 days of being notified by the MoE. Information delivered by the police or intelligence services within 35 days of being notified shall also be considered within the assessment of the risk of negative impact of the foreign investment.

In the event the MoE identifies a risk of negative impact of the foreign investment, the MoE will commence the screening stage and notify the foreign investor and target. In case the risk was not identified, the MoE shall, without delay, send a confirmation to the foreign investor and target. In case the MoE does not send to the foreign investor notification on commencement of the screening stage within 45 days as of delivery of the request for screening, it is assumed that a risk of negative impact of the foreign investment was not identified (in such case, the MoE shall send, without delay, confirmation of such to the foreign investor and target).

Screening stage

The screening stage applies in the event that:

a request for screening of a critical foreign investment is filed,
risk of negative impact of the foreign investment was identified within the pre-screening stage,
there is an ex officio proceeding.

The MoE shall notify the foreign investor and target on commencement of the screening stage. In case of ex officio proceeding, the MoE will also ask the foreign investor to file a foreign investment screening form within 30 days. Without delay, after commencement of the screening stage, the MoE shall notify consulting authorities, police, intelligence services and Ministry of Finance of the Slovak Republic (MoF).

The consulting authorities shall provide the MoE with their standpoint within 40 days of being notified by the MoE (this period can be extended by a maximum of 20 days).

The MoF shall provide the MoE with its standpoint in relation to obligations of the Slovak Republic from international treaties on investment support. In case the MoF does not provide its standpoint within 40 days as of being notified, it is assumed that there is no impact on obligations of the Slovak Republic following from the international treaties on investment support.

Police and intelligence services shall provide information to the MoE within 40 days as of being notified by the MoE.

Subsequently, the MoE shall prepare a draft standpoint indicating that:

the foreign investment does not have a negative impact,
the foreign investment has a negative impact that can be eliminated by way of mitigation measures, or
the foreign investment has a negative impact.

The draft standpoint shall be sent to the foreign investor and target. The foreign investor and target may comment on the draft standpoint within 15 days. Subsequently, the respective standpoint is finalized.

The MoE shall decide within 10 days as of the end of the consultation process (for more details, please see question No. 13).

12. Design – Transparency and Information requirements (Filing Forms?)

The Decree of the MoE, among other things, includes the following forms:

request for screening of a foreign investment,
foreign investment screening form (to be filed in case of ex officio proceeding).

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Authorization of the foreign investment

The MoE shall issue a decision within 10 days of the end of the consultation process.

Conditional authorization of the foreign investment

The MoE shall issue a decision within 10 days of the end of the consultation process. The decision shall, in this case, include mitigation measures, obligations of the foreign investor to comply with the mitigation measures and the period for adoption of the mitigation measures.

The MoE can also determine that an independent third party (administrator) must be appointed to assist the MoE with supervising compliance with the conditional authorising decision.

Prohibition of the foreign investment

Within 10 days of the end of the consultation process, the MoE shall submit to the Government of the Slovak Republic (Government) standpoints that indicate that a foreign investment has a negative impact.

Where the Government agrees, the MoE shall issue a decision on the prohibition of the foreign investment within 10 days as of the Government´s agreement.

In the case of a foreign investment that was already implemented, the decision to prohibit the investment also requires the foreign investor to comply with certain obligations (e.g., the obligation to reverse the implemented foreign investment or the restriction or prohibition of performance of rights acquired on the basis of the implemented foreign investment).

Where the Government does not agree with the standpoint, it is assumed that the foreign investment does not have a negative impact and the MoE issued a decision authorizing the investment (the MoE shall notify the foreign investor and the target in this respect).

Where the MoE does not issue an authorising decision or a conditional authorising decision, or does not submit to the Government a standpoint on negative impact of the foreign investment within 130 days of the commencement of the screening stage, it is assumed that the foreign investment does not have negative impact and the MoE issued a decision authorizing the investment (the MoE shall notify the foreign investor and the target in this respect).

Authorizing decisions, conditional authorizing decisions and prohibitions may be appealed by the foreign investor or target within 15 days. The appeal is decided by the Minister of Economy of the Slovak Republic based on the proposal of a special commission.

14. Interaction with other legal frameworks (ex: merger control)

As already mentioned above, prior to 1 March 2023, only a limited and sector specific screening regime under the Critical Infrastructure Act applied. As of 1 March 2023, this regime was (almost completely) replaced by the general screening regime under the FDI Act.

However, based on the amended Critical Infrastructure Act (amendment carried out by virtue of the FDI Act that also entered into force as of 1 March 2023), certain investments can still be screened. This applies only to the critical infrastructure sectors Energy and Industry.

The transactions covered are: transfer of a critical infrastructure element, transfer of business or its part (i.e., asset deals) or share deal (specifically a change in the persons with direct or indirect participation on the critical infrastructure element operator exceeding 10 %).

Following the above, certain transactions carried out by EU investors can also be screened.

Regarding the screening process, the Critical Infrastructure Act only requires filing of a notification in advance. In all other aspects, it refers to the FDI Act. Under the FDI Act, in case of application of the Critical Infrastructure Act, only an ex officio proceeding (screening process) initiated by the MoE is possible. With respect to an ex officio proceeding under the FDI Act, please see questions No. 9, 11 and 12 above.

Negative impact of a foreign investment occurs where the foreign investment threatens or disrupts the security or public order of the Slovak Republic, or the security or public order of the European Union. In assessing the negative impact of a foreign investment, the respective factors specified in Section 10 of the FDI Act shall be considered (Section 10 of the FDI Act refers also to Article 4 of the 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 (FDI EU Regulation)).

The risk of a negative impact of a foreign investment occurs where there is a reasonable expectation that the foreign investment may threaten or disrupt the security or public order of the Slovak Republic or the security or public order of the European Union. In assessing the risk of a negative impact of a foreign investment, the respective factors specified in Section 10 of the FDI Act shall be considered.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

An administrative action for review of the decision on permission, conditional permission or prohibition of a foreign investment may be filed by the foreign investor and the target to the Supreme Administrative Court of the Slovak Republic within 30 days from the date of delivery of the respective decision.

17. Publication in Official Gazette or other

N/A.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A (the FDI Act entered into force as of 1 March 2023).

As already mentioned above, the MoE will publish on its website by the end of June each year, summary information on application of the FDI Act. The summary information will include information about the number of requests for screening, number of requests for screening of critical foreign investments, number of proceedings initiated ex officio, number of authorising decisions, conditional authorising decisions and prohibitions of a foreign investment or geographical origin of foreign investments, the sectors to which these foreign investments have been directed and the total value of these foreign investments.

The summary information on application of the FDI Act will be published for the first time by the end of June 2024 for the calendar year 2023.

19. Stakeholders views on the Legal Framework

In general, adoption of a new general FDI screening regime is perceived positively (it is yet to be seen what the views on its practical application will be).

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

The FDI Act complies with the FDI EU Regulation.

In Sections 54 and 55, the FDI Act regulates cooperation with other EU Member States and European Commission with respect to the foreign direct investments under the FDI EU Regulation.

21. Other relevant information

In case of a planned foreign investment, the foreign investor is obliged to file with the MoE the report on the implementation of the foreign investment within 60 days from the date of implementation.

Where there is an authorizing decision or conditional authorizing decision, the foreign investor is obliged to file with the MoE a monitoring report every year for three years as of the date of implementation of the foreign investment (by the end of June of the respective year, at the latest).

The forms of the report on implementation and monitoring report are included in the secondary legislation (specifically in the Decree of the MoE).

Further, the foreign investor must be registered in the special Slovak Register of Public Sector Partners and disclose its UBOs in this register within 3 months. The start of this period differs depending on whether a planned foreign investment or already implemented foreign investment was subject of the proceeding. The foreign investor must be registered for at least 3 years.

Contacts: Michaela Stessl and Andrej Liska

Last updated June 2023

1. Country: Spain

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

USA (27.7%)
United Kingdom (17.8%)
Germany (14%)
France (10%)
Australia (4%)
Netherlands (3%)
Italy (2.9%)
Canada (2.2%)
Austria (2%).¹

¹As published periodically by the Spanish Ministry of Industry, Trade and Tourism. Estimates based on the "immediate country" concept (i.e., the country from where the investment directly enters in Spain, which may not always be the true origin of the investment).

3. Legal Framework in Force

Law 19/2003, of 4 July, on the legal regime of capital movements and economic transactions abroad and on certain measures to prevent money laundering.

Royal Decree 571/2023, on foreign investments.

As a result of the Coronavirus outbreak, the war in Ukraine, the reconstruction of La Palma Island, and other situations of vulnerability over the last few years, the Spanish Government adopted additional legislation which includes amendments of the general Spanish FDI regime: Royal Decree 8/2020, Royal Decree 11/2020, Royal Decree 34/2020, and Royal Decree 20/2022.

4. Last revision of the Legal Framework

September 2023.

5. Contextualization of the Legal Framework (Historical or other)

Spain has traditionally honored the EU principle of freedom of capital movements and economic transactions and Spain is consequently a very friendly country for foreign investment.

Law 19/2003 was enacted to control a limited proportion of investments that could affect national defense, public security or public health. But the Coronavirus crisis, the economic and social consequences of the war in Ukraine, the reconstruction of La Palma (Canary Islands) and other situations of vulnerability have fostered several regulatory updates of the FDI regime.²

²Foreign investments coming from tax havens will generally have to be declared before the investment is made and may sometimes require a second declaration once the investment is completed. But this is based on other principles and out of scope from this publication.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

An FDI review is only triggered when two items are present: the first is participating in a “foreign investment” and the second is meeting the required relevance thresholds (see question 7).

The Spanish FDI control mechanism focuses on non-EU/EFTA residents’ investments into Spain but, despite that general rule, some foreign investments undertaken by EU/EFTA residents can also be subject to FDI control (see EU/EFTA investment´s thresholds in question 7).

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

To qualify as a foreign investment into Spain, the investments have to result in:

the investor acquiring at least 10% of a Spanish company, or
the investor gaining control of a Spanish company (applying the usual antitrust concept of control).

This implies that portfolio investments could be caught even if they do not amount to a controlling investment. However, internal restructurings and increases of stake by investors already holding at least 10% in the Spanish company are not subject to FDI control as long as such transactions do not trigger changes in control over the company.

Even though a foreign investment into Spain may exist, a filing is only triggered when the relevance thresholds are met. These have two separate triggers:

Certain personal circumstances of the investor:
- Direct or indirect government control over the foreign investor.
- Strategic investments carried out by the foreign investor that required FDI filings in other EU Member States.
- Sanctions in relation to AML, tax, environmental or data protection infringements imposed to the foreign investor.
The impact of the investment in strategic sectors (see question 8).

Foreign direct investments in Spain undertaken by EU/EFTA residents are subject to authorization temporarily (until December 2024) if the investment is targeted to listed companies in Spain or the investment value is over EUR500,000,000.

8. Scope - sectors covered

Foreign direct investments that could have an impact on strategic sectors affecting public order, public security or public health in Spain are subject to FDI control. Strategic sectors include:

Essential strategic infrastructure.
Essential technology and dual-use technology including software and technology (e.g., telecommunications, artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage or quantum, nuclear and biotechnologies).
Key technologies for industrial leadership including advanced materials and nanotechnology, photonics, microelectronics and nanoelectronics, life science technologies, advanced manufacturing and transformation systems, artificial intelligence, digital security, and connectivity.
Technologies developed under programmes and projects of particular interest to Spain including those which imply EU or state funding.
Supply of essential inputs of strategic sectors which are indispensable for the provision of essential services relating to the maintenance of basic social functions, health, safety, social and economic well-being of citizens (energy, water, telecommunications, financial and insurance, health, transport, food supply).
Companies with direct access to sensitive information (specifically personal data).

Certain sectors have specific regulation:

Gambling.
Television.
Radio.
Air transportation.
Manufacture, distribution and trade in weapons and explosives for civil use.
Minerals and raw materials with a strategic interest.
Private security.
Activities in connection with National Defence.
Banking, financial and insurance sectors.

Spanish legislation foresees certain exemptions, applicable essentially to energy investments, small investments (below EUR5 million), transitional/short term investments (only if the investor does not have the ability to influence the strategic decisions of the acquired company) or to certain investments in real estate assets.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

Although the general rule is that foreign investments in Spain are liberalized, but require compulsory declarations after completion, the updates introduced in 2020 in relation to the FDI control mechanisms require mandatory pre-authorisation for those investments which meet the relevant thresholds.

Transactions will be unenforceable until approval and thus foreign investors will not be able to exercise economic or political rights on the Spanish target company. Fines may reach the amount of the investment’s value.

10. Design – reciprocity?

Reciprocal Investment Promotion and Protection Agreements are regulated by bilateral treaties that contain measures and clauses designed to protect investments made by investors of each State Party in the territory of the other State Party.

11. Design – Procedures and Deadlines

Foreign direct investments subject to pre-authorization must be filed before closing of the transaction. The legal deadline for authorization is 3 months. The authorized investments must be carried out within the period specified in the authorization or, in any case, within six months.

After the completion of the investment, a mandatory declaration of the foreign investment in Spain must be submitted to the Ministry of Industry, Trade and Tourism through the Investments Registry. When the transaction has been intervened by a Spanish notary, the notary shall send to the Registry information on the transaction.

12. Design – Transparency and Information requirements (Filing Forms?)

If the foreign direct investment is subject to pre-authorisation in Spain because it hits the stipulated thresholds explained throughout this Guide, it requires a mandatory FDI filing prior to the closing of the transaction (as specified in question 11). Filing must be completed by submitting the Screening Procedure of Foreign Direct Investments form, which can be found in the investment control section of the Ministry´s website (Ministerio de Industria, Comercio y Turismo – Control de inversiones).

The FDI filing form consists of a scrutiny requesting information on:

The investor's characteristics (activity, shareholding structure, government control, strategic investments made),
The acquired business in Spain (sector of activity),
The details of the transaction (investor´s rights and control over the target),
The investor's business plan for the acquired business.

Note that when two or more foreign investments take place within a period of two years between the same purchaser and seller, these shall be considered as a single investment carried out on the date of the last investment.

The concurrence of co-investors (from an FDI standpoint) in the transaction requires a joint FDI filing if the pooled investment hits the stipulated thresholds explained in question.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Range of decisional outcomes:

Approvals of unconditional authorizations.
Denials of authorizations.
Approvals of authorizations subject to conditions imposed by the resolution organism or commitments submitted by the investor and accepted by the resolution organism.
Withdrawals attributable to resignation of the investor or for considering that the operation is not subject to the FDI pre-authorization regime.

14. Interaction with other legal frameworks (ex: merger control)

In general, FDI does not exonerate the parties from meeting other legislative requirements, such as obtaining clearance for their investments from competition authorities (merger control), approvals from stock market regulators or review from other bodies (e.g., money laundering).

While FDI control regime is focused on the monitoring of certain foreign investments in Spain that affect or may affect security, public order or public health, merger control regime scrutinizes transactions which may cause anti-competitive effects in a given market.

With the amendments introduced in 2020, in relation to the definition of control from the investor over the acquired Spanish company, the concept of foreign direct investment been aligned with the Spanish competition and merger control rules.

Public order definition varies depending on the country but in Spain it generally refers to observing the country’s laws and not breaching the fundamental values of the legal system (i.e. the alteration of any situation that allows the peaceful exercise of rights and the fulfillment of obligations, ensuring peaceful coexistence) and the Spanish authority has a relatively wide margin for appreciation, although its decisions can be judicially challenged.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

Very serious infringements can be appealed before the Spanish Supreme Court, within two months of notification of the decision.

Serious infringements and minor infringements can be directly appealed to the Spanish High Court within two months of notification of the decision.

Denied FDI authorizations can be appealed before the Spanish High Court (if the Directorate-General for International Trade and Investment has decided on the denial of the FDI) or the Spanish Supreme Court (if the Council of Ministers has decided on the denial of the FDI) within two months.

17. Publication in Official Gazette or other

FDI resolutions are published on the Council of Ministers References of the Official Government website.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

The general opinion is that the Spanish framework is aligned with other EU countries, although it could still be updated to reflect financial innovation and the way in which foreign investment transactions are structured in order to reduce unnecessary administrative burdens and to liberalise transactions for which seeking authorisation does not seem justified.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

The transitory regime approved by the Spanish Government in response to the Coronavirus crisis and which implies the suspension of the liberalization of certain investments coming from the EU and EFTA, may imply a contradiction with European principles of free movement of capitals. This is why, for the moment, this suspension is only planned until December 2024.

21. Other relevant information

N/A

Contact: Joaquín Hervada

Last updated October 2023

1. Country: Sweden

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

The five biggest FDI countries of origin in Sweden are:*

The Netherlands
Norway
Luxembourg
Ireland
France

*According to data from Statistics Sweden for 2022.

3. Legal Framework in Force

The Swedish FDI Act to review foreign direct investments (Sw: Utländska direktinvesteringar) entered into force on 1 December 2023. The introduction of the FDI Act means that Sweden now has a screening system for foreign direct investments to protect Sweden from antagonistic attacks that could pose a risk to Sweden’s security interests. Investments in businesses engaged in protected activities must be notified to the Swedish screening authority, the Inspectorate of Strategic Products (Sw: Inspektionen för strategiska produkter, "ISP").

4. Last revision of the Legal Framework

The FDI Act entered into force on 1 December 2023.

5. Contextualization of the Legal Framework (Historical or other)

Foreign direct investments can pose risks for activities of importance for Sweden’s national security, as well as for activities that are important for assuring essential societal functions in Sweden. There has previously only been limited possibilities to regulate and prohibit foreign direct investments that could entail risks to Sweden’s national security interests.

6. Scope - Screening Mechanism – origin of FDI
(review of intra- or extra-EU FDI)
Are there any loopholes?

The purpose of the FDI Act is to screen buyouts and strategic acquisitions of undertakings active in Sweden, whose activities or technology are essential for Sweden's national security or public order. The screening authority, ISP, assess the risk based on the target's activities in Sweden and the investor's characteristics in relation to national security and public order. When assessing an investment, the screening authority considers e.g., (i) whether the investor has previously been involved in activities that have or could have adversely affected Sweden’s national security, public order or public security, and (ii) if there are other circumstances surrounding the investor that could pose a risk to Sweden’s national security, public order or public security. The FDI Act aims to prevent circumvention, which has resulted in intra-group reorganisations and transactions with only Swedish and EU-based investors being subject to the notification requirements.

7. Scope - screening thresholds
Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The notification obligation is triggered, inter alia, when an investor acquires influence in a business engaged in protected activities that exceeds 10%, 20%, 30%, 50%, 65% or 90% of the votes. The notification obligation can also be triggered by asset acquisitions or when the investor is given the right to appoint e.g. a board member. There are no turnover or deal value thresholds.

The act also covers greenfield investments (e.g. the incorporation or acquisition of a shelf company) that will, but does not at the moment, carry out protected activities.

The act also covers purely internal transactions, i.e. when the ultimate owner of the entity that carries out protected activities remains the same.

8. Scope - sectors covered

The FDI Act covers all sectors engaged in the following:

essential services, e.g. activities, services or infrastructure that maintains or ensures societal functions necessary for the basic needs, values or security of society;
security-sensitive activities as defined in the Swedish Protective Security Act (2018:585);
activities related to critical raw materials, e.g. investments in companies that prospect for, extract, enrich, or sell critical raw materials, metals or minerals that are strategically important to Sweden;
processing large amounts of sensitive personal data or location data;
manufacturing, developing, researching or supplying military equipment or providing technical support for military equipment;
manufacturing, developing, researching into or supply of, or technical assistance for, dual-use products; and
emerging technologies and other strategic protected technologies.

9. Design of FDI Screening Mechanism
Please indicate notably the following:
(a) pre-authorisation vs. ex-post screening of FDI? Other?
(b) Covers solely controlling investments or also portfolio investments?
(c) Mandatory or voluntary nature?

(a) According to the FDI Act, clearance is necessary before an investment in a company engaged in protected activities in Sweden can be closed. The screening authority can also initiate an ex officio screening of an investment.

(b) The FDI Act covers direct and indirect investments which exceeds the thresholds, even if there is no change of control. The law aims to prevent circumvention and has a broad scope, e.g. it covers purely intra-group reorganisations, greenfield investments, and investments by Swedish and EU-based investors.

10. Design – reciprocity?

There are no express reciprocity provisions in Sweden.

11. Design – Procedures and Deadlines

The screening process is a two-stage procedure in the FDI Act. In the first stage, within 25 working days of a complete notification, the screening authority must decide either to take no further action on the notification or to initiate an investigation. In the case of a decision to investigate the investment, the authority must make a final decision within three months. Where there are special grounds, the deadline may be extended up to six months.

12. Design – Transparency and Information requirements (Filing Forms?)

The investor is responsible for notifying an investment to the screening authority before it is completed. The filing form is provided by the ISP and can be completed in either Swedish or English. The notification form also includes appendices such as organisational charts and details of ownership which must be completed.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

If an investment has been made and the conditions for a prohibition are met under the FDI Act, the screening authority may impose a prohibition. However, this does not apply to legal transactions that comprise an investment made in a regulated market within the meaning of Chapter 1 Section 4b of the Securities Market Act (2007:528), an equivalent market outside the EEA, or a multilateral trading facility. In such cases, the screening authority may instead require the investor to sell what has been acquired.

14. Interaction with other legal frameworks (ex: merger control)

The FDI Act is applied in parallel with the existing Protective Security Act (2018:585) and the Swedish Competition Act (2008:579). An investment can be subject to parallel notification requirements under several Swedish and European regimes.

In the FDI Act, the screening authority may, if necessary with regards to Sweden's national security, public order or public security, prohibit an investment before it is implemented.

16. Judicial Review
Please specify timeline, competent courts and standard of judicial review.

In the FDI Act, final decisions may be appealed to the Swedish Government. Decisions concerning issues such as sanctions may be appealed to the Administrative Court in Stockholm.

17. Publication in Official Gazette or other

N/A

18. Relevant Examples of application
If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

N/A

20. Interplay with the future EU Regulation
Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

N/A

21. Other relevant information

N/A

Contacts: Erik Brändt Öfverholm and Linnea Wernheim

Last updated March 2024

1. Country: Ukraine

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

According to the National Bank of Ukraine (for 2021):

Cyprus (21.33%)
Netherlands (21.07%)
Germany (10.62%)
Switzerland (10.25%)
United Kingdom (5.69%)

3. Legal Framework in Force

Law of Ukraine "On Investment Activity" dated September 18, 1991
Law of Ukraine "On the Regime of Foreign Investment" dated March 19, 1996
Commercial Code of Ukraine dated January 16, 2003
Law of Ukraine "On State Support of Investment Projects with Significant Investments into Ukraine" dated December 17, 2020

4. Last revision of the Legal Framework

Law of Ukraine "On Investment Activity" last revised on October 10, 2022
Law of Ukraine "On the Regime of Foreign Investment" last revised on August 17, 2022
Law of Ukraine "On State Support of Investment Projects with Significant Investments into Ukraine" adopted on December 17, 2020

5. Contextualization of the Legal Framework (Historical or other)

Before June 25, 2016, it was mandatory to register FDI with the Ukrainian government regardless of the FDI amount and sector. Registration was intended for information purposes and the only ground to reject FDI registration was noncompliance with the registration procedure. From June 25, 2016, all FDIs are equally entitled to the privileges and guarantees provided for by the Law of Ukraine "On the Regime of Foreign Investment", for example protection against changes in legislation, protection against nationalization and guarantee of repatriation of profit.

From late 2019, the Ministry of Economy has been developing versions of the draft law that would introduce FDI control mechanisms in Ukraine. On February 3, 2021 the draft law "On Performance of Foreign Investments Into Enterprises of Strategic Importance to the National Security of Ukraine" was submitted to the Ukrainian parliament. The draft law required potential foreign investors operating in one of 38 strategic sectors to undergo an assessment and obtain permission for their investment from the state authorities. On 7 September 2021, the draft law was withdrawn from consideration.

The Law of Ukraine "On State Support of Investment Projects with Significant Investments into Ukraine" entered into force on February 13, 2021. The legislation grants foreign and domestic “significant” investments certain privileges, such as tax exemptions.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

N/A

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

N/A

8. Scope - sectors covered

N/A

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

N/A

10. Design – reciprocity?

N/A

11. Design – Procedures and Deadlines

N/A

12. Design – Transparency and Information requirements (Filing Forms?)

N/A

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

N/A

14. Interaction with other legal frameworks (ex: merger control)

Under the Law of Ukraine "On Protection of Economic Competition", the following actions are considered mergers and require merger clearance:

The merger of two or more companies into one company or the takeover of one or more companies to another company;
The acquisition of direct or indirect control by one or more companies over another company or companies as determined by a law;
Incorporation of a company (joint venture) by two or more companies;
Direct or indirect acquisition of shares by one company (either by ownership or management) in another company, resulting in achieving or exceeding 25% or 50% voting rights in the highest governing body of both companies.

The definition of a merger subject to control in Ukraine generally corresponds with the definition in the EU Merger Regulation. If a transaction classifies as a merger or "concentration" according to the EU Merger Regulation, it is therefore likely to also be treated as a merger in Ukraine.

Merger control applies if the transaction exceeds the following thresholds:

At least two parties to concentration are active in Ukraine; and

The combined worldwide turnover or value of assets of all parties exceeds EUR 30 million; and
The turnover or value of assets in Ukraine of each of at least two parties exceeds EUR 4 million.

Target or a founder has operations in Ukraine; and

The target in an acquisition, seller of assets or one of the joint venture founders have turnover or value of assets in Ukraine exceeding EUR 8 million; and
The turnover of at least one other party exceeds EUR 150 million worldwide.

15. Design – Grounds for blocking, if applicable (such as "public security", "vital interests"). Please indicate whether those grounds are based on WTO definitions or not. Also, please indicate what is the degree of discretion of the authority to apply the legal criteria in question.

N/A

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

N/A

17. Publication in Official Gazette or other

N/A

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

N/A

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

Ukraine is currently not a member of the EU but was granted the status of a candidate for accession on June 23, 2022. In 2014, Ukraine and the EU signed an Association Agreement which came into force in 2017. The Association Agreement stipulates that Ukraine shall take steps to harmonize and approximate its national legislation with the EU regulation in fields such as customs, sea transport, public procurement and competition. The Association Agreement is silent on harmonising the FDI legal framework with EU regulation. The EU uses a decentralised process where the competence for FDI screening lies within each Member State. As such, EU Regulation 2019/452 does not require Member States to introduce FDI screening mechanisms.

Given the political course of Ukraine, it is likely that if Ukraine introduces FDI screening mechanism, it will be based on the EU legal framework in material respects.

21. Other relevant information

Ukrainian companies submit standard form reports on FDI they received to the State Statistics Service of Ukraine on a quarterly and annual basis. Such reports are used by the National Bank of Ukraine for data collection purposes, rather than for screening and/or blocking FDI.

There are some specific restrictions to FDI in Ukraine, for example restrictions on:

Foreign investors investing in agricultural land;
Investment in mass media and electronic communication by investors originating from zones that are designated as offshore by the Ukrainian government (e.g. BVI, Belize);
Investment in mass media, electronic communications, privatization, and gambling by Russian investors.

Ukrainian law also provides that foreign investors may enter into joint investment activity agreements without incorporating them as legal entities, provided they register such agreements with the Ministry of Economy of Ukraine. Following registration foreign investors may gain custom duty exemptions on imports. A 2012 change in customs legislation contradicts this requirement, and rendered registration an inexpedient formality. As a result, in November 2019 the Ukrainian government proposed to abolish the requirement to register such joint investment activity agreement and submitted a draft law to the Ukrainian parliament which is still being considered.

Following Russian aggression in the East of Ukraine and Crimea, the National Security and Defence Council of Ukraine ("NSDC”) (with the approval of the President of Ukraine) imposed sanctions on multiple companies and individuals according to the Law of Ukraine "On Sanctions" in order to ensure the protection of national interest and rights of Ukrainian citizens. These sanctions include the freezing of assets, prohibition of commercial operations in Ukraine, prohibition of settlements, prohibition of capital outflow out of Ukraine, and prohibition of participation in privatization.

Following the Russian invasion of Ukraine that started on 24 February 2022, Ukraine adopted the Law of Ukraine “On the Basic Principles of Forced Expropriation in Ukraine of Property of the Russian Federation and Its Residents”. This law is aimed at enabling Ukrainian authorities to expropriate property owned by the Russian Federation and its residents-entities for reasons of public necessity without any compensation. In May 2022 Ukraine adopted a new law introducing a mechanism for expropriation of property blocked by Ukrainian sanctions (the Law of Ukraine “On Amendments to Some Legislative Acts of Ukraine to Increase the Effectiveness of Sanctions Related to the Assets of Individuals”). During martial law, the Ukrainian courts are allowed to expropriate without compensation assets of a sanctioned person whose property is blocked in Ukraine by the NSDC, if such person is engaged in organizing, participating, financing or informational supporting of the armed aggression against Ukraine.

Contacts: Galyna Zagorodniuk

Last updated June 2023

1. Country: United Kingdom

2. Five biggest FDI countries of origin (indicate percentage if available)

The top source markets for FDI projects (by number of projects) into the UK for 2021-2022 were:

United States (23.9%)
India (6.7%)
Germany (6.3%)
France (5.3%)
Netherlands (4.7%)¹

_{[1] Report available from: https://www.gov.uk/government/statistics/department-for-international-trade-inward-investment-results-2021-to-2022/department-for-international-trade-inward-investment-results-2021-to-2022-html-version (underlying data at: https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fassets.publishing.service.gov.uk%2Fgovernment%2Fuploads%2Fsystem%2Fuploads%2Fattachment_data%2Ffile%2F1085946%2Fdit-inward-investment-results-tables-2021-to-2022.ods&wdOrigin=BROWSELINK).}

3. Legal Framework in Force

The UK foreign direct investment screening regime is established by the National Security and Investment Act 2021 (the “NSIA”). The regime enables the UK Government to investigate all transactions which may have an impact on national security in the UK. The NSIA regime has been in force since 4 January 2022.

The ultimate responsibility for enforcing the NSIA sits with the Secretary of State for Business, Energy and Industrial Strategy (“BEIS”), but the day-to-day responsibility is with an entity within BEIS called the Investment Security Unit (“ISU”), which consults with other relevant government departments during its review.

The NSIA applies to transactions involving target entities and/or assets. It is not limited to full acquisitions but covers a number of different levels of control (e.g. acquisition of certain minority interests, material influence and certain other commercial arrangements such as benefiting from IP licences).

The NSIA establishes a “hybrid” notification regime, as follows:

Mandatory: transactions which involve the acquisition of shares, voting rights or control over entities whose UK activities fall within at least one of 17 sectors² which the UK Government considers to be particularly sensitive will require a mandatory notification to BEIS. Transactions which trigger a mandatory notification may not complete before they receive clearance.
Voluntary: transactions which fall outside the 17 mandatory sectors can be notified to the ISU on a voluntary basis. This is typically the case where the parties believe that the transaction has the potential to give rise to national security risks, for example where the target’s activity is closely related to the 17 sectors, and the parties would like the legal certainty offered by an ISU review.

Only the voluntary notification regime applies to acquisition of assets – the mandatory regime does not apply.

The ISU also has the power to call-in qualifying transactions for a national security review on its own initiative where it has formed a reasonable belief that the transaction may give rise to national security concerns. Where a transaction has not been notified, the ISU is able to call the transaction in for review within six months of the date on which the ISU becomes aware of the transaction, provided that this occurs within five years of completion of the transaction³.

Breaches of the NSIA, including completing a transaction within the mandatory regime before receiving clearance, can result in civil and criminal penalties, and the transaction itself would be void under English law.

_{[2] The relevant sectors are (1) Advanced Materials, (2) Advanced Robotics, (3) Artificial Intelligence, (4) Civil Nuclear, (5) Communications, (6) Computing hardware, (7) Critical Suppliers to Government, (8) Cryptographic Authentication, (9) Data Infrastructure, (10) Defence, (11) Energy, (12) Military and Dual-Use, (13) Quantum Technologies, (14) Satellite and Space Technology, (15) Suppliers to the Emergency Services, (16) Synthetic Biology and (17) Transport.}

_{[3] NB the five year backstop does not apply where an acquirer has failed to notify a transaction that falls within the mandatory notification regime.}

4. Last revision of the Legal Framework

Since becoming fully operational in January 2022, there have been few revisions to the legal framework itself (with the exception of minor amendments to supporting legislation).

However, BEIS has issued a number of guidance documents covering areas such as:

The information needed to complete a notification form
General market guidance notes

In June 2022, BEIS also issued its first annual report on the first three months of the NSIA.

5. Contextualization of the Legal Framework (Historical or other)

The NSIA was implemented to provide a new, standalone system for the UK Government to screen acquisitions for national security risks and introduced mandatory notification. The UK Government’s previous powers to intervene on national security grounds primarily stemmed from the Enterprise Act 2002 and were closely intertwined with the UK’s merger control regime, under which notification is voluntary. As discussed above, the NSIA has established a specialist department within BEIS (the ISU) which is charged with the operation and enforcement of the NSIA, relieving the UK’s merger control regulator (the Competition and Markets Authority) of national security responsibilities.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

The rules are as set out below. The NSIA does not distinguish between investments from EU member states and ex-EU investments. While the substantive national security risks may be thought to be lower in cases involving a UK investor as compared to a non-UK investor, the NSIA applies equally to UK and non-UK investors.

The NSIA applies irrespective of whether either of the parties have a legal presence in the UK. For the target’s activities to be caught, it is sufficient for it to have sales in the UK.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

For a transaction to fall within the scope of the NSIA, it must involve a so-called “trigger event”. The trigger events differ depending on whether a legal entity or assets are being acquired.

The trigger events for transactions involving legal entities include the acquisition of a right or interest which result in one of the following:

The percentage of shares in the qualifying entity held by the acquirer increasing to more than 25%, more than 50% or at least 75%;
The percentage of voting rights in the qualifying entity held by the acquirer increasing to more than 25%, more than 50% or at least 75%;
The acquisition of voting rights in the qualifying entity enabling the acquirer (whether alone or together with other voting rights it holds) to secure or prevent the passage of any class of resolution governing the affairs of the entity; or
The acquirer being able to exercise material influence over the qualifying entity's policy.
The trigger events for transactions involving assets include the acquisition of rights or interests in an asset that result in the acquirer being able to:
Use the asset, or use it to a greater extent than before the acquisition.
Direct or control how the asset is used, or do so to a greater extent than before the acquisition.

The NSIA is not confined to the acquisition of entities which are incorporated in the UK or assets which are located in the UK. The NSIA also apply to entities incorporated outside of the UK as long as the relevant entity carries on activities in the UK or supplies goods or services to individuals in the UK. Assets located outside of the UK will fall within the NSIA if they are used in connection with activities carried on in the UK, or in connection to the supply of goods or services to individuals in the UK.

8. Scope - sectors covered

The mandatory regime under the NSIA covers transactions where the acquired entity is active in one of the following sectors: (1) Advanced Materials, (2) Advanced Robotics, (3) Artificial Intelligence, (4) Civil Nuclear, (5) Communications, (6) Computing hardware, (7) Critical Suppliers to Government, (8) Cryptographic Authentication, (9) Data Infrastructure, (10) Defence, (11) Energy, (12) Military and Dual-Use, (13) Quantum Technologies, (14) Satellite and Space Technology, (15) Suppliers to the Emergency Services, (16) Synthetic Biology and (17) Transport_⁴.

The voluntary regime under the NSIA applies to all sectors of the UK economy. BEIS has however stated that it is more likely to use its call-in power (as described above) for transactions where the activities of the acquired entity or asset are closely linked to the 17 mandatory sectors. By contrast, transactions which take place outside of and are unrelated to the mandatory sectors are unlikely to be called-in, as national security risks are expected to be less prevalent outside of the 17 sensitive areas⁵.

_{[4] The 17 mandatory sectors are defined in The National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (available here:}_{https://www.legislation.gov.uk/uksi/2021/1264/contents/made). High-level guidance on the mandatory sectors can be found here: https://www.gov.uk/government/publications/national-security-and-investment-act-guidance-on-notifiable-acquisitions/national-security-and-investment-act-guidance-on-notifiable-acquisitions.}

_{[5] Please see: https://www.gov.uk/government/publications/national-security-and-investment-statement-about-exercise-of-the-call-in-power/national-security-and-investment-act-2021-statement-for-the-purposes-of-section-3#areas-of-the-economy-in-which-qualifying-acquisitions-are-more-likely-to-give-rise-to-a-risk-to-national-security-and-more-likely-to-be-called-in}_.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

A) For transactions which fall within the mandatory regime, the acquirer must seek pre-authorisation and obtain clearance from BEIS before the transaction can be implemented.

B) Transactions which fall within the voluntary regime can be implemented without making a filing to BEIS or, if a voluntary filing is made, can be completed prior to receiving clearance from BEIS. In addition, BEIS also has the power to call-in transactions on its own initiative and screen for national security concerns on an ex-post basis.

B) Please see response to point 7.

C) For asset acquisitions, the regime is voluntary irrespective of the sector in which the asset is used. For acquisitions of interests in legal entities, the regime is voluntary unless the activities of the target fall within one of the 17 sectors discussed above (in which case a mandatory filing is triggered).

10. Design – reciprocity?

N/A

11. Design – Procedures and Deadlines

For notified transactions, whether mandatory or voluntary, the acquirer will begin the process by preparing and submitting a notification form to the ISU using an online portal. There is a different form depending on whether the transaction falls within the mandatory or the voluntary regime.

Once the NSIA application has been submitted, the review process is broadly as follows:

Short period for BEIS to confirm the notification is complete. There is no formal deadline for BEIS to confirm that a filing is complete, but in our experience this normally takes 1-5 days.
Once accepted as complete, the following timetable applies:
1. Initial review up to 30 working days for BEIS to either clear the transaction (in which case the process ends) or issue a call-in notice for a full national security assessment.
2. If called-in, BEIS has up to a further 30 working days to carry out its full national security assessment. At the end of this period, BEIS will either: (a) clear the transaction (in which case the process ends); or (b) issue a final order imposing remedies (e.g. conditions to protect sensitive information, restrict access to certain sites / assets or block the transaction outright). Please note the period for a full assessment can also be extended by an additional 45 working days if BEIS believes there is a national security risk and it needs more time to assess the risks.
The total maximum review period for notified transaction is therefore 105 working days and the earliest clearance date is 30 working days from acceptance of the notification.

Where a transaction is not proactively notified by the acquirer but is called-in by BEIS on its own initiative, the timetable will not include the initial 30 working day period in which BEIS determines whether to call-in the transaction. The maximum review period for non-notified transactions is therefore 75 working days (30 working days national security assessment, plus a potential additional 45 working day extension).

The following points should also be noted:

It is possible for the review to be extended beyond the maximum periods noted above, if BEIS and the acquirer agree to such an extension in writing; and
The ISU has the power to issue information notices to the parties (as well as to third parties), requesting information necessary to carry out its assessment. If an information notice is issued, the review period will pause until the relevant party has responded to the information notice and the ISU has confirmed that the response is complete / satisfactory.

12. Design – Transparency and Information requirements (Filing Forms?)

For notified transactions, the acquirer is required to provide the information set out in the applicable NSIA notification form. As mentioned above, the ISU is also able to issue information notices to the parties and request further information.

In terms of transparency, our general experience with the regime to date suggests that the ISU is highly unlikely to engage in an iterative dialogue with the parties. It is also unlikely to provide much, if any, information on its assessment and the potential national security risks it is examining. The ISU is more likely to engage in discussions with the parties where it has determined that a transaction will, or is likely to, require remedies.

The IUS does not publish which transactions are notified to it, only the Final Order which either clears, imposes remedies or prohibits a transaction is published. The Order provides a brief summary of the parties, the transaction and the national security risk identified.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Ultimately, a transaction can be cleared in its entirety, cleared subject to undertakings (e.g., information sharing protocols or other ring-fencing provisions) or prohibited. If prohibited, BEIS can order that the transaction, or part thereof, is unwound if it has already completed.

Transactions falling within the mandatory regime will be deemed void under UK law if they are completed without clearance from BEIS.

14. Interaction with other legal frameworks (ex: merger control)

As mentioned above, the NSIA has established a standalone regime for national security scrutiny in the UK and is entirely separate from the UK merger control regime.

The Secretary of State may issue a final order and impose remedies (including blocking a transaction) if he/she:

a) is satisfied on a balance of probabilities that:

a trigger event (as discussed in point 5) has taken place, or arrangements are in process which would result in a trigger event if carried into effect; and
a risk to national security has arisen from the trigger event, or would arise if carried into effect; and

(b) reasonably considers that the remedies are necessary and proportionate to prevent, remedy or mitigate the risk to national security.

The NSIA does not contain a definition of “national security”, giving the ISU significant discretion in applying the NSIA and in deciding whether a transaction has given rise to national security risks.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

Decisions taken by BEIS pursuant to the NSIA are subject to standard judicial review, with the exception of decisions to impose civil penalties for breaches of the NSIA which are subject to a full merits review. Judicial review in the UK is relatively limited and would not involve the court assessing the merits of the decision itself but rather a review of the process by which the decision was reached.

In the absence of exceptional circumstances, a claim for judicial review must be brought within 28 days from the day after which the grounds for the appeal arose.

17. Publication in Official Gazette or other

Under the NSIA, BEIS is not legally required to publish either decisions to call-in transactions for detailed national security reviews or clearance decisions. The BEIS may nevertheless decide to voluntarily publish such information (e.g. if the Secretary of State considers publication to be in the public’s interest).

The NSIA does require BEIS to publish Final Orders which impose remedies as a condition for clearance. BEIS can exclude from such publication any information which is either likely to prejudice the commercial interest of a person or which would be contrary to national security. Published decisions are typically very brief, without any detailed discussion on the national security risks involved and will only provide a high-level description of the remedies imposed.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

At the time of writing, BEIS has blocked the following three transactions:

Vision-sensing technology: on 20 July 2022, BEIS prohibited a licensing agreement that would have enabled Beijing Infinite Vision Technology Company Ltd. to use and develop intellectual property relating to vision-sensing technology that had originally been developed by the University of Manchester. BEIS concluded that the technology had potential military applications and could be used to build defence or technological capabilities that could present national security risks to the UK.
Electronic Design Automation: on 17 August 2022, BEIS prohibited the proposed acquisition of Pulsic Limited (a UK company specialising in electronic design automation (“EDA”) products) by Super Orange HK Holding Limited (a Chinese chip manufacturer). BEIS concluded that Pulsic’s EDA products could be exploited to introduce (automatically and/or without the knowledge of the user) features that could be used to build defence or technological capabilities in civilian or military supply chains.
Semiconductors: on 16 November 2022, BEIS prohibited Nexperia’s acquisition of Newport (a UK manufacturer of chips and the silicon wafers that microchips are etched onto). Prohibiting the transaction, BEIS noted (amongst other things) that national security risks arose from the location of the Newport site as it could facilitate access to technology and expertise of other major industrial companies situated in the region. The final order required Nexperia to divest itself of at least 86% of its holding in Newport.

All three of the above transactions involved Chinese or Hong Kong acquirers.

Aside from the above prohibition decisions, a number of transactions have which have been cleared subject to remedies. Such remedies included, for example, restrictions on the sharing of information between the acquired entity and the acquirer, removal of acquirer representatives from the board of the acquired entity and the appointment of a Government representative as an observer on the board of the acquired entity.

We are not aware of any judicial review proceedings against a decision by BEIS under the NSIA. However, Nexperia indicated that it intends to commence such proceedings against BEIS’ decision to prohibit its acquisition of Newport⁶.

_{[6] See: https://www.nexperia.com/about/news-events/press-releases/Nexperia-is-shocked-by-the-Secretary-of-State-s-order-to-divest-Newport-Wafer-Fab.html}

19. Stakeholders views on the Legal Framework

With the NSIA having been fully operational for almost one year at the time of writing, the following themes in terms of shareholder views should be noted:

Wide application of NSIA: by design, the NSIA is very widely drafted and will require a filing to be made whenever the acquired entity is active in one of the 17 mandatory sectors. There are no de minimis rules or other thresholds which must be met in order for the NSIA to apply. It covers investments by both UK and non-UK acquirers and also covers internal re-organisations where the ultimate beneficial owner remains the same.
Limited engagement from BEIS: a consistent complaint from stakeholders is the limited engagement with BEIS during the course of a review process (especially during the initial 30 working day review period). Parties will typically not have any direct access to a case handler or a named individual with responsibility for the assessment. This makes it very difficult for acquirers to: (1) identify what national security risks BEIS is considering during its review and (2) determine whether to proactively suggest remedial measures to BEIS (and the form and scope of such remedies).

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

N/A

21. Other relevant information

N/A

Contacts: Alexandra Kamerling and Martin Strom

Last updated June 2023

Multi-jurisdiction guide for screening foreign investments

Netherlands

Norway

Poland

Portugal

Romania

Slovakia

Spain

Sweden

Ukraine

United Kingdom