CELIS Update on Investment Screening – February 2024
Ireland – Draft Guidance and Notification Form on the Irish Screening of Third Country Transactions Act 2023
On 16 February 2024, the Department of Enterprise, Trade and Employment published the Draft Guidance on the Irish Screening of Third Country Transactions Act 2023, as well as a Draft Notification Form. The regime is expected to enter into force by 30 June 2024.
The Guidance sets out the responsibilities and obligations arising for investors and target companies as a result of the Act. The Act relates to matters such as critical infrastructure, f.e. aerospace, data processing, defence, sensitive facilities, energy and communications, critical technology, critical inputs including raw materials and food security, the access to sensitive information and the freedom or pluralism of the media. Third Country is defined as outside the EEA and Switzerland.
The Draft Guidance states that the Draft Notification Form is in line with the European Commission’s form used to facilitate the exchange of information between Member States and the Department is developing an online case management system to administer the notification process.
The Irish Screening of Third Country Transactions Act 2023 can be accessed here.
The Draft Guidance on the Irish Screening of Third Country Transactions Act 2023 can be accessed here.
The Notification Form on the Irish Screening of Third Country Transactions Act 2023 can be accessed here.
Bulgaria – Bulgarian Parliament adopts final text of the bill on the amendment of the Investment Promotion Act
With the introduction of a bill to amend the Bulgarian Investment Promotion Act in June 2023 and after extensive discussions and numerous revisions follows the adoption of the final text in Parliament on 22 February 2024. Therewith, the end of the legislative process to enact a comprehensive FDI regulation for Bulgaria, remaining one of the EU countries without FDI screening regime, is marked. The bill is expected to enter into force in the coming weeks.
The bill follows the concepts of the EU FDI Screening Regulation. Prior screening is required for all foreign direct investments originating directly or indirectly from a non-EU controlled investor (including the US and the UK) and targeting any of the sectors listed in Article 4(1) of the EU FDI Screening Regulation, if the investment involves the acquisition of at least 10% of the capital of a company operating in Bulgaria or exceeds EUR 2 million, including greenfield investments. Specific foreign direct investments are subject to screening under the draft law regardless of the above conditions, e.g. persons involved in certain activities including those related to the production of petroleum-based products in connection with critical infrastructure or involving investors from Russia or Belarus. Foreign direct investments that would otherwise fall within the scope of the new regime will be assessed independently of the investment thresholds (EUR 2 million and 10%) if there is a direct or indirect participation of a non-EU state in the foreign investor.
Ultimately, the Council may reject the application or approve the investment subject to compliance with certain behavioral or structural measures to restore security or public order, including the modification and/or suspension of business activities. If an investment is made without the required approval, the transaction remains valid, but the investor is subject to a fine of 5% of the investment value, with a minimum of BGN 50,000 (approximately EUR 25,500).
EU – Commission is launching its first in-depth investigation into the potentially market distortive role of foreign subsidies
On 16 February 2024, the European Commission announced that it has opened its first in-depth investigation into a foreign subsidy potentially distorting the internal market under the Foreign Subsidies Regulation.
The investigation follows a notification sent to the Commission by CRRC Qingdao Sifang Locomotive Co Ltd, a subsidiary of CRRC Corporation, a state-owned Chinese train manufacturer. It concerns a public tender procedure launched by the Bulgarian Ministry of Transport and Communications for the supply of several push-pull electric trainsets and related maintenance and personnel training services.
Under the Foreign Subsidies Regulation, companies are required to notify public tenders in the EU if the estimated value of the contract exceeds €250 million, and if the company has received at least €4 million in foreign financial aid from at least one third country in the three years prior to notification. After an initial examination of CRRC Qingdao Sifang Locomotive’s notification, the Commission considered that it was justified to open an in-depth investigation, as there were sufficient elements to conclude that this company had benefited from a foreign subsidy distorting the internal market. To do this, the Commission had to determine whether the foreign financial contribution constituted a subsidy conferring a direct or indirect selective advantage on the company and enabling it to bid at an unjustified advantage.
In accordance with the provisions of the Foreign Subsidies Regulation, the Commission may, at the end of its in-depth investigation, (i) accept the undertakings proposed by the company if they fully and effectively eliminate the distortion of competition, (ii) prohibit the award of the contract, or (iii) adopt a no-objection decision.
India – Facilitated entry for FDI in the space sector
The recent approval by the Indian Union Cabinet to allow foreign direct investment of up to 100 per cent in the space sector in order to gain a greater share of the global space market is a decisive step towards liberalization of a sector that has long been subject to strict regulatory control. Prior to this policy change, such investments were allowed, but required government approval, which sometimes meant months of waiting.
India has divided its space sector into three broad categories for the purpose of investment: Companies that manufacture rockets for launching satellites, companies that manufacture satellites and companies that manufacture parts for manufacturing satellites. India has allowed 100% foreign investment through the so-called automatic route, which means that no government approval is required for investments in the category of manufacturing of components for satellites. This will lead to better access to technologies for critical communication systems such as antennas, transponders and power systems. Additionally, it allowed 74% overseas investment without approval from the government in satellite manufacturing and its operations. Finally, the Indian government approved 49% FDI under the automatic route to build rockets and its parts.
