The First Court Decision on the Austrian FDI Screening Regime

By  Dr. Johannes BarbistBinder Grösswang


I. Introduction

A regular CELIS blog reader will know already: Austria is at the forefront of EU jurisdictions when it comes to FDI filings submitted to the EU cooperation mechanism (counted by population, see here for a compilation of the data). However, until very recently there were no decisions by Austrian courts on the Austrian FDI legislation, the Investment Control Act (Investitionskontrollgesetz – InvKG).

Finally, on 25 January 2024 the Federal Administrative Court (Bundesverwaltungsgericht – BVwG) handed down the first decision in a rather atypical case (GZ W177 2283132-1/2E).


II. The facts of the case

An investor planned to initially acquire more than 25% (but less than 50%) of the voting rights in an Austrian target (“Target”). On 4 May 2023, the investor requested a certificate of non-jurisdiction (Unbedenklichkeitsbescheinigung – UB) pursuant to section 9 InvKG (“UB Application”). He argued that the transaction was not notifiable (the underlying transaction not being a foreign direct investment within the meaning of the InvKG, the Target not pursuing any activities listed in the Annex to the InvKG). The Austrian Investment Control Authority (Federal Minister of Labour and Economic Affairs – BMAW) (“Authority”) was asked to formally confirm this view by issuing an Austrian-style UB (which is very different to the Unbedenklichkeitsbescheinigung under German FDI law).

The Authority disagreed and informed the investor on or around 22 June 2023 that the transaction was notifiable, that the investor’s application for the grant of an UB would be treated as an application for approval and that the approval procedure pursuant to section 7 InvKG would therefore be initiated (ex lege) (“Requalification Letter”). As a result, the Authority was obliged to initiate the EU cooperation mechanism (phase 0) and, after its expiry (typically after 35 days), to pursue the national preliminary examination procedure, with a preliminary review lasting a maximum of one month (phase 1). If necessary, this is followed by a detailed review lasting a maximum of two months (phase 2). This sequence of procedural steps in the aftermath of the Requalification Letter is explicitly foreseen by the InvKG. The investor could thus relax and did not have to engage in proactive measures (in particular, need not submit a new formal application for approval pursuant to section 6 InvKG). The decision does not indicate, however, whether the Phase 0 was indeed initiated by the Authority at the end of June or in July 2023 (we rather doubt it).

In any case, the investor got nervous and, on 9 August 2023 (1.5 months after receiving the Requalification Letter), applied for approval of the planned acquisition “pursuant to Section 9 InvKG”.

On 10 October 2023, the authority issued an administrative decree (Bescheid) stating that there were no objections to the planned transaction because there was no reasonable suspicion of a threat to security or public order within the meaning of Section 3 InvKG.

The investor was nevertheless unhappy and lodged a complaint on 7 November 2023, arguing that the transaction was not notifiable and that the approval proceedings should therefore not have been started. In addition, the complainant (Beschwerdeführer) noted that, due to the decision of the Authority, any future increase of the shareholding in the Target would also require an approval.

The BVwG dismissed the complaint by holding that the complainant did not suffer a burden (Beschwer) as the BMAW had cleared the transaction. At first sight, this conclusion is convincing – in light of the specific circumstances it is not.


III. The reasoning of the BVwG

The BVwG first reiterated the general principle under Austrian procedural laws that every complaint consists of a complainant and the complaint. A complaint is thus only permissible in case of a burden (Beschwer) of the complainant:

“This exists if the contested administrative act deviates from the request made by the complainant to the administrative authority to its detriment (formal burden) or if, in the absence of a request, the administrative authority burdens the appealing party with its administrative act (material burden)

This is not the case if the complainant’s application for an administrative act requiring an application has been granted in full … Complaints against such decisions that have been granted in their entirety must be rejected as inadmissible.” (translated by the author, emphasis added).

In relation to the specific case, the BVwG came to the following conclusion:

“It may be true that the [complainant] originally only applied for the issuance of an [UB] and that an approval procedure pursuant to § 7 InvKG was subsequently initiated. However, after the [complainant] was informed that the approval of the authority in question was required for the planned acquisition, the [complainant] itself submitted an application for approval pursuant to the InvKG

Furthermore, the procedure for issuing an [UB] within the meaning of § 9 InvKG, as well as the approval procedure within the meaning of § 7 InvKG, must be re-initiated for each additional (newly planned) direct investment. The [complainant’s] argument that … he would have to apply for approval again for each further increase in the shareholding in the Target, therefore leads to nothing insofar as a new investment or an increase to 50%, as announced in the complaint, must also be re-examined by the authority under investigation in the event that an [UB] is issued.

Since the [complainant’s] application for approval was ultimately granted in full, the complaint in question is therefore inadmissible due to a lack of burden … and a decision was therefore to be made in accordance with the ruling.” (translation by the author, emphasis added).


IV. Critical assessment of the BVwG decision

Our below comments should be taken with a grain of salt (the decision of the BVwG is only a few pages long and very rudimentary about the facts of the case). But we try to give some eagle eye orientation


  1. The first argument (no burden of the complainant)

The core question is evident: Is it correct to qualify the application for approval “pursuant to section 9 InvKG” as being a genuine (stand-alone) application for approval within the meaning of the InvKG and administrative law with the effect that the complainant cannot validly complain against the clearance decision? Does it matter in this context that the complainant applied for approval only after receiving the Requalification Letter and initially only requested a certificate of non-jurisdiction (UB) pursuant to section 9 InvKG?

Section 9 InvKG regulates the UB. If the Authority concludes that the transaction is notifiable, it must inform the applicant that the application “will be treated as an application for approval” and that section 7 InvKG (approval procedure) must be applied. The UB Application is reinterpreted ex lege into an application for approval (legal fiction). The legislative materials also state (crystal) clear that “no subsequent application for approval is therefore required” from the investor.

Just for your orientation: If the investor believes that a transaction is notifiable, he will apply for approval pursuant to section 6 InvKG (standard entry gate for FDI approval proceedings in Austria). In our case, the investor argued that a transaction is not notifiable and thus submitted an UB Application pursuant to section 9 InvKG. Given that the Authority disagreed and sent a Requalification Letter on 22 June 2023, the Authority was obliged to step through the second entry gate for FDI approval proceedings in Austria, i.e., to initiate the EU cooperation mechanism (phase 0) as the first stage of the approval procedure based on the Requalification Letter (we doubt that this was done in this early phase of the proceedings).

The InvKG does not provide for an application for approval “pursuant to § 9 InvKG”. Viewed from the distance the complainant probably only wanted to persuade the Authority to initiate (or continue) the approval procedure based on the Requalification Letter, something the Authority was obliged to do in any case. It is therefore fair to conclude that the application for approval “pursuant to § 9 InvKG” cannot have any legal effects in general and more specifically, certainly not when assessing the burden of the complainant in the administrative court proceedings.

Equally, the ex lege requalification of the UB Application into an application for approval does not alter the fact that the complainant’s UB Application was directed at a subject matter different to a clearance of the transaction.

As a result, the complainant was “burdened” and the BVwG would have been obliged to assess the complaint substantively.


  1. The second argument (new approval required in case of a share increase)

The BVwG assumes that each subsequent acquisition (such as the intended future increase of the shareholding to 50%) triggers a new obligation to apply for clearance of (on the part of the investor) and to examine the new transaction again in detail (on the part of the Authority).

This is incorrect: If the Authority concluded that the initial transaction was not notifiable, a subsequent transaction would also not be notifiable. The decision whether the initial transaction is notifiable therefore also determines the destiny of subsequent transactions involving the Target. Naturally, this only applies if and insofar as the circumstances do not change, i.e., the acquirer structure remains the same and the Target does not pursue other business activities.


V. Summary

The Austrian FDI world has its first court decision. It is a bad case making a bad precedent.

The Austrian court describes the facts in a very limited manner making it impossible for outsiders to ultimately assess what happened. Why did the investor apply for approval “pursuant to § 9 InvKG” (although he was already in receipt of the Requalification Letter)? Was it because the Authority had not kicked off the approval proceedings for several weeks? If that was the motivation (what we assume), we are convinced that the investor’s “reminder” crafted in the form of an application for approval “pursuant to § 9 InvKG” cannot be qualified as a genuine application for approval pursuant to section 6 InvKG. In light of the specific circumstances, this can certainly not trigger the same procedural effects as regards the question of a burden.

The BVwG certainly errs in its second argument. If the Authority issued a certificate of non-jurisdiction for the initial transaction, the follow-on transaction (increasing the shareholding to 50%) would equally not be notifiable in Austria. Neither the investor nor the Authority would need to take any action.

Let us hope for a second case, a more detailed description of the facts and a correct interpretation of the InvKG (procedurally and in substance).


Interested to learn more about the Austrian Investment Control Act? Check out the Survival Guide Austrian Investment Control edited by the blog authors.

Interested to learn more about the ruling of the BVwG. Check out the May 2024 edition of the renowned law gazette “NZKart – Neue Zeitschrift für Kartellrecht” with an article from Johannes Barbist on this first Austrian FDI court case.

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