CELIS Update on Investment Screening – July 2023

Spain – Spanish FDI Regulation enacted on 4 July 2023

Over the past three years, Spain has significantly strengthened its FDI regime. On 4 July 2023, the Spanish Council of Ministers approved the Royal Decree 571/2023 of 4 July on foreign investments and therewith amended and developed a number of rules that had been introduced by the Spanish FI authorities under the 2020 screening mechanism.

The new rules provide a control mechanism, that can guarantee greater clarity and legal certainty for investors. Of particular importance is the revision of the exemption regime. Time-limited investments, which do not create any real capacity to influence the company, as well as certain operations in the energy sector that are not considered to pose a risk to national security are now exempt from the licensing regime. The Regulation creates also an exemption for transactions involving a target with less than EUR 5 million in sales in the last closed accounting year, unless the target holds technologies that have been developed under program of particular interest to Spain – however, this exemption does not apply to certain mining or telecom activities. Furthermore all applications for authorisation will be decided under the ordinary procedure, regardless of the amount of the investment. The statutory deadline to make a decision on a formal FI approval process is reduced from the previous six-month maximum to three months. Internal restructuring within a group of companies and increases in shareholdings that do not involve a change of control are not considered as direct investment.

The regulation will come into force on 1 September 2023 and will apply to applications filed after that date, while any existing applications as of that date will be decided under previous rules.

The Royal Decree 571/2023 can be accessed here (in Spanish).

EU – European Commission adopts rules for implementing the Foreign Subsidies Regulation

On 10 July 2023 the European Commission has adopted the rules for implementing the Foreign Subsidies Regulation (FSR), which detail the procedural aspects of the implementation of the FSR. The FSR is directly applicable as of 12 July 2023 and the notification requirements commence on 12 October 2023.

The Implementing Regulation and in particular the notification forms detail the reporting obligations of notifying parties, specifying the information that needs to be included in the notification forms for concentrations and public procurement procedures. Additionally, there are detailed rules provided on the procedure for notifications to the Commission, the Commission’s investigation process, the procedural rights of the parties regarding the access to files and the protection of confidential information, the calculation and suspension of time limits for the provision and submission of information, as well as the transmission and signature of documents by notifying parties to the Commission through digital means.

The Foreign Subsidies Regulation (EU) 2022/2560 of 14 December 2022 can be accessed here.

The Implementing Regulation (EU) 2023/1441 of 10 July 2023 can be accessed here.

European Court of Justice – National FDI regimes must respect the EU fundamental right of establishment

On 13 July 2023 in Case C-106/22, the ECJ delivered its decision in relation to a preliminary reference submitted by the Budapest High Court.

This judgment relates to the acquisition of the Hungarian company “Janes és Társa”, that owns a quarry in Lázi (Hungary), by the Hungarian concrete-production company Xella. In October 2020 Xella concluded a sales agreement for the purpose of acquiring 100% of the shares, however, prohibited under the Hungarian FDI law on the grounds of “national interest” on 30 December 2020. The future indirect ownership of Janes with a market share of 20.77 % of raw materials in the region by a parent company established in Bermuda would pose a longer-term risk to the security of supply of raw materials to the construction sector. Xella challenged the decisions before the Budapest High Court by arguing that the prohibition was arbitrary discrimination or a disguised restriction on the free movement of capital as established under EU law. Xella argued, that the lack of clarity in the concept of “national interest” could violate the fundamental principle of the rule of law.

The final decision of the ECJ reached the conclusion that the FI mechanism needs to be examined in the light of the freedom of establishment and that in the given case, there was a “particularly serious restriction” on the stated freedom and the current restriction was not justified. The ECJ found, that ensuring security of supply in the construction sector, especially at local level, was not considered to be a “fundamental interest of society” as defined in EU case law.

The Judgment of the Court (Second Chamber) of 13 July 2023 in Case C-106/22 can be accessed here (in English) and here (in Hungarian).

India and the United Kingdom – Tata Group to set up one of Europe’s largest gigafactory for battery cell manufacturing in the UK

Tata Sons announces its plans to establish a global battery cell gigafactory outside India in the UK near Bridgwater with a capacity to produce 40GW of cells annually – an investment, which will deliver electric mobility and renewable energy storage solutions for customers in the UK and Europe. The investment of over £ 4 billion is one of the largest investments ever made in the UK automotive sector and establishes a competitive green tech ecosystem in the UK at scale.

Jaguar Land Rover, a wholly owned subsidiary of Tata Motors Limited, which is part of Tata Sons, as well as Tata Motors, will be anchor customers, with supplies commencing from 2026.

The official Press Release by the UK government can be accessed here.

European Investment Bank and Brazil – EIB has signed an agreement to lend EUR 300 million to Banco Santander Brasil for small-scale solar energy investments

On 17 July 2023 during the EU-VELAS Summit of Heads of State and Government and the EU-LAC Business Forum, the world’s largest multilateral public bank, the European Investment Bank, and Banco Santander Brasil have signed a EUR 300 million loan in Brussels to foster the use of renewable energy in Brazil. Solar photovoltaic plants will be installed on homes and on local business premises.

The project is part of the European Union’s Global Gateway investment strategy, which is aimed to help tackle the most pressing global challenges, from fighting climate change, to improving health systems and boosting competitiveness and security of global supply chains. The European Commission and the EU High Representative have set out the stated European strategy to mobilise up to EUR 300 billion of investments for sustainable and high-quality projects between 2021 and 2027.