CELIS Update on Investment Screening – December 2023

Romania – New Amendments to the Romanian FDI regime

On 6 December 2023 the Government Emergency Ordinance no. 108/2023 (“GEO 108/2023) was published in the Official Gazette. GEO 108/2023 provides for new amendments to Romania’s Competition Law no. 21/1996, aimed at fully transposing the EU Directive 1/2019 into local law.

Main legislative changes include the meaning of foreign direct investment and the definition of EU investment, new procedure timelines and the FDI screening fee. GEO 108/2023 provides that all EU investments, regardless whether they are subject to merger control procedures or not, are subject to FDI screening, provided that the investment exceeds EUR 2 million and the investment falls under the list of sensitive sectors. Sensitive sectors include, inter alia, border security, security of citizens and communities, energy, critical infrastructure, IT and communications systems, financial, tax, banking and insurance activities, weapons, protection of agriculture and environment and the protection of state funded companies or of their management during privatization.

EU investors must provide all required information to the Commission for Examination of Foreign Direct Investments (“CEISD”) in a term of 15 calendar days as of the request. The fee for FDI screening amounts to EUR 10,000, which shall be paid upon the submission of the file and shall be refunded if the CEISD find that FDI screening conditions are not met.

The Government Emergency Ordinance no. 108/2023 amending the Competition Law no. 21/1996 can be accessed here (in Romanian).

Norway – Proposal for significant changes to the Norwegian FDI regime

A Government appointed Commission proposed significant changes to the Norwegian FDI regime. The Investment Control Commission was appointed by Royal Decree on October 28, 2022. The investigation was handed over to the Ministry of Trade, Industry and Fisheries on December 4, 2023.

The Committee believes that the current system and regulations for controlling foreign direct investment do not work well enough for reasons of national security interests. Relevant cases are not detected systematically or to a sufficient extent, there is a lack of a suitable legal basis for intervening in investments that pose a risk to national security and a lack of transparency regarding which investments may be subject to screening.

The Committee proposes establishing a targeted and predictable notification system, drafting a new law on investment control, setting up a separate investment control authority, and establishing closer cooperation with neighboring countries and the EU on investment control. The Committee proposes as well, that companies within “security sensitive sectors” should be subject to a screening process to assess whether the investment may harm Norway’s national security interests.

The Official Norwegian Report 2023: 28 can be accessed here (in Norwegian).

EU – European Court of Auditors publishes special report 27/ 2023

The European Court of Auditors published a special report concerning screening foreign direct investments in the EU. The main focus of the audit was to assess whether the Regulation (EU) 2019/452 establishing a framework for the screening by member states of FDI is efficient and effective at addressing security and public-order risks.

Overall, it was concluded, that the Commission has taken appropriate steps to establish and implement a framework for screening FDI in the EU. However, improvements need to be made concerning differences in terms of scope, coverage in terms of defining critical sectors and understanding of key concepts, which reduce the effectiveness and efficiency of the framework.

It was determined, that the Regulation does not have sufficiently clear provisions to ensure that key concepts are always interpreted consistently and that comparable rules are applied to comparable situations with the goal of avoiding undue restrictions to the free movement of capital and rights of establishment. Additionally, it was found, that member states do not provide any preliminary eligibility and risk assessments of the cases they notify, which leads to a high volume of low-risk or ineligible cases, which overburden the cooperation mechanism.

Although the Commission’s eligibility and risk assessment identifies risks and enables forward-looking thinking on potential vulnerabilities, issues in the Commission’s assessments were identified and aspects of the recommendations which may raise challenges for enforceability, or be inconsistent with a market-economy environment.

Even though the operational tools, IT systems and resources implemented by the Commission were found to be appropriate, systematic changes are being proposed, such as the requirement of feedback from member states on their screening decisions, that would enable the Commission to monitor and report on the effectiveness of the screening framework.

The special report 27/2023 of the European Court of Auditors can be accessed here.

A brief overview on the report in a video is available here.

Germany – Investment control subject to fees from 1 January 2024

On 15 September 2023, the Special Fees Ordinance of the Federal Ministry of Economics and Climate Protection (“BMWK”) and the Federal Office of Economics and Export Control (“BAFA”) for War Weapons Control, Export Control and Investment Control (“BMWKB-GebKAIV”) came into force. This means that from 1 January 2024, fees will be charged for the first time for services provided by the BMWK and BAFA in the areas of war weapons control, export control and, in particular, investment screening.

Due to the steadily increasing number of investment screening procedures, this change is extremely important in practice. The fees vary depending on the review phase, duration and degree of difficulty of the procedure.

The Special Fees Ordinance can be accessed here (in German).

Germany – Acquisition of a German medical device manufacturer by a Chinese company

The Federal Ministry of Economics and Climate Protection (“BMWK”) was not allowed to prohibit the acquisition of a German medical device manufacturer by a Chinese company. This was decided by the Berlin Administrative Court.

The plaintiff is part of a Chinese group of companies that manufactures medical devices for anaesthesia and respiration. In July 2019, it took over a company based in Rhineland-Palatinate, which sells ventilators, among other things, by means of a share transfer. After the target company filed for insolvency in October 2018, the plaintiff concluded the restructuring agreement governing the takeover with the insolvency administrator. At the beginning of July 2020, the plaintiff applied to the Ministry for a so-called clearance certificate. The Ministry then opened the cross-sector investment review procedure on the basis of the Foreign Trade and Payments Ordinance (AWV) and prohibited the acquisition in April 2022.

The lawsuit was directed against the prohibition. The plaintiff is of the opinion that the review procedure was initiated late. Furthermore, the Ministry had delayed the procedure for too long by making a large number of inquiries, which is why the prohibition notice was issued too late. Finally, the public order or security of the Federal Republic of Germany was not endangered by the takeover of the target company.

The 4th Chamber of the Administrative Court annulled the contested prohibition notice. The Ministry had already failed to hear the applicant properly. Irrespective of this, the timely opening of an examination procedure was not required for a prohibition. The court did not have to examine whether the prohibition was necessary to ensure public order or safety in this situation.

The official press release of the BMWK from 16 September 2023 can be accessed here.