CELIS Update on Investment Screening – November 2023
Ireland – Introduction of a new FDI screening regime on 31 October 2023
On 31 October 2023, the Screening of Third Country Transactions Act 2023 was signed into law. Since the initial draft was published on 2 August 2022, the Act has undergone a series of amendments during the course of 2023,.
Therewith, for the first time, there is a framework introduced, which enables the Minister for Enterprise, Trade and Employment to review transactions involving foreign investment with possible impact on the public order or security in Ireland and mitigate or prohibit transactions in sensitive sectors identified as problematic. The Act applies to transactions involving a third country investor and an Irish undertaking or asset.
The legislation applies to transactions with impact upon critical infrastructure, supply of critical inputs, critical technologies and dual use items, the access to sensitive information, as well as the freedom and pluralism of the media. Under the Act, the Minister has the right to review transactions regardless of whether they are notifiable or notified, if he believes them to affect the public interest or security of Ireland. The Minister’s screening decision could either authorize the transaction with conditions, such as divestment requirements, behavioural requirements, compliance reporting obligations and ring-fencing requirements, or prohibit the transaction completely. If the provision of reasons for the decision made by the Minister could create a risk to the security, the Minister may decide not to give reasons.
The new Irish inward investment screening regime represents a significant upcoming development in the regulatory landscape in Ireland and is expected to commence operation during Q2 2024.
The Irish Screening of Third Country Transactions Act 2023 can be accessed here.
Sweden – FDI Act enters into force on 1 December 2023
On 13 September 2023, the Swedish Parliament enacted a new FDI Act, which introduces a mechanism for screening foreign direct investments that may pose a risk to Sweden’s security. On 1 December 2023, the legislation enters into force and will be applicable to transactions concluded on or after that date.
Transactions in which investments may endanger the national security, public safety or public order in Sweden have been labelled as Activity Worthy of Protection. The Act applies to vital societal functions activities, exploration, extraction, enrichment or sale of critical raw materials, metals or minerals, security-sensitive activities governed by the Swedish Security Protection Act, sensitive data of location and personal data, war materials, dual-use products, as well as emerging technologies and other strategically protected technologies.
The Screening authority is the Inspectorate of Strategic Products. Operators, planning to transfer part of their security-sensitive activities, must conduct and document a security assessment and a suitability assessment.
The Swedish FDI Act can be accessed here (in Swedish).
EU – Revision of the EU Foreign Direct Investment Regulation
The European Commission has completed its assessment of the framework for the screening of Foreign Direct Investment and has published the results of the consultation.
Most respondents agreed that the EU FDI Screening Regulation had “significantly helped” identifying risky FDI transactions, that the EU-level action had increased the protection from risks and that the protection from risks to security and public order is still of relevance. A hindrance to efficiency is seen in the area of harmonization of timelines for screening notifications.
Denis Redonnet, Deputy Director-General and Chief Trade Enforcement Officer at the European Commission, has already signalized potential upcoming changes to the EU FDI Screening Regulation in a hearing of the European Parliament. Among other things, the issue of divergence between national screening mechanisms concerning the activities in specific sectors viewed as critical was addressed and there are improvements in the functioning of the cooperation mechanism to be made. He also raised concerns regarding the high number of “non-critical cases” being reviewed. Ultimately, in the context of the Xella decision, there could be the need for reform concerning the scope of the FDI rules, since transactions, where the direct investor is established in the EU, but controlled by a non-EU investor, are not in the scope of the FDI regime.
The European Commission plans to put forward proposals for the reform of its screening mechanism in the coming weeks.
The Summary results of the Targeted consultation on the evaluation and revision of Regulation (EU) 2019/452 can be accessed here.
Details of individual replies can be accessed here.
Germany – Russian oil company Rosneft failed with its lawsuit
The German federal government was allowed to place the Schwedt refinery under trust administration, the Federal Administrative Court has ruled. The Russian oil company Rosneft, whose subsidiaries hold a majority stake in the refinery, failed with its lawsuit before the Federal Administrative Court.
The judges ruled that the order issued by the Federal Ministry of Economics was lawful, essentially stating that there was a concrete risk in September 2022 that the Rosneft companies would no longer be able to make their contribution to energy security. In September, a good six months after Russia’s attack on Ukraine, the Ministry of Economics placed the companies Rosneft Deutschland and RN Refining & Marketing under the trusteeship of the Federal Network Agency and thus effectively took control. Both companies are majority owners of the PCK refinery in Schwedt and subsidiaries came under pressure. The ministry had broken new legal ground with this step and justified it with an imminent threat to German supply security. The refinery is very important for the fuel supply in north-eastern Germany and the Berlin area.
Rosneft formally continues to hold 54 percent of the shares in the refinery, but cannot freely dispose of these shares. Other shareholders are Shell and ENI. Following the announcement of the ruling, the Ministry of Economy declared that the trusteeship of the Rosneft subsidiaries would be extended by six months. It would otherwise have expired on Wednesday.
United Kingdom – UK Government considers amendments to investment screening rules
On 13 November 2023, the UK Government issued a Call for Evidence on the scope and implementation of the UK’s National Security and Investment regime.
There have been concerns raised, that the NSI regime operates without sufficient transparency and places disproportionate burdens on companies and investors.
The Government thereupon advocates the approach of safeguarding against the smallest number of deals which threaten the UK national security whilst leaving the vast majority of transactions unaffected. Even though, the government makes clear not to consider changes to primary legislation, changes to the regime of secondary legislation are conceivable, including amendments to the definitions of specified activities within mandatory notification sectors and exemptions from the mandatory notification obligation. Additionally, the guidance for investors could be expanded to improve the understanding of the NSI and the way of communicating with parties involved in affected acquisitions could be subject of change in order to attain transparency of the decision-making process.
Responses to the Call of Evidence can be made online until 15 January 2024.
EU and Angola – Ratification of the first Sustainable Investment Facilitation Agreement
On 17 November 2023, the EU and Angola signed a Sustainable Facilitation Agreement during the EU-Angola Business Forum in Luanda, the first EU agreement of its kind.
The agreement with its commitments to improve sustainability and climate across the economy is expected to attract new EU investment to sectors where Angola’s potential is currently untapped, namely opportunities for investment in green energy, digital innovation, logistics, fisheries, agri-food value chains and critical raw materials. The agreement aims at sustainable investments from EU businesses in Angola, whilst Angolan businesses will benefit from facilitation measures and from improved linkages between foreign investors and domestic suppliers.
After the signature of the Agreement, the EU and Angola will notify each other on the completion of their respective internal procedures. These developments correspond to the commitment of the European Commission to deepen its engagement with the African continent, in line with the Global Gateway.
