CELIS Update on Investment Screening – June 2022
Belgium – Introduction of a general FDI regime
The next EU member state is about to implement the EU Foreign Direct Investment (FDI) regulation and to present its first FDI regime. On 1 June 2022, the federal and regional governments of Belgium agreed on a draft legislative text that will introduce a mandatory FDI regime which will capture foreign transactions in various industry sectors. The regime will apply to foreign investments that threaten national security, the public order, or the strategic interests of the Belgian regions. Every direct and indirect acquisition of more than 25 per cent of the voting rights in entities in Belgium, irrespective of their size or turnover, is covered by the regime. This has implications for current investments, especially in the sectors of critical infrastructure, technologies and raw materials, sensitive information, and private security. In these cases, the regime provides for a necessary notification prior to the investment as well as for a three-stage procedure: The Pre-Notification Phase (1), the Assessment-Phase (2) and the Screening-Phase (3).
The regime is expected to enter into force on 1 January 2023.
Italy – Draghi vetoes Chinese takeover
On 14 May, the CELIS Country Reporters for Italy reported on the latest amendments to the Italian golden powers. One month later, on 7 June, Italy’s Prime Minister Mario Draghi has now made use of this regulatory regime and prevented a takeover a transfer of technology and software to China in a deal involving industrial robot maker. This is the seventh time since 2012 that the government has made use of his “golden powers” to prevent undesired foreign influence in strategically important industries, such as energy, health or banking. Of these seven episodes, six happened under the government of Mario Draghi.
For further information on the Italian “golden powers” please read the CELIS Briefing Note from 14 May 2022.
United Kingdom (UK) – First report on UKs national security and investment regime
On 20 June, the UK’s Government’s Department for Business, Energy & Industrial Strategy (BEIS) has published its first report on the new national security and investment regime. The report covers the first three months and provides some interesting insights on the National Security and Investment Act 2021 (NSIA) which came into force on 4 January 2022. In these three months, the Investment Screening Unit has received 222 filings and reviewed 17 transactions in more depth. Three of those 17 transactions have been cleared unconditionally while the other 14 were still under review. The report proves the UK regime’s ability to screen a wide range of different transactions and that the regime turns out to be an efficient and fast instrument for most notifications. The data and figures are mainly interpreted in such a way that the NSIA regime is operating in line with expectations. The fact that there were fewer filings than expected is attributed to a global slowdown in M&A and investment activity.
For further information you may consult the report here.
Ireland – Forthcoming FDI regime
Not only Belgium but also Ireland will implement for the first time a FDI regime alongside the EU FDI regulation. The bill will apply to third country transactions and is expected to be published in July 2022. The forthcoming FDI regime aims to protect Ireland’s critical technology and infrastructure and relates primarily to foreign acquisitions of high-tech companies with significant Intellectual Property rights, EU citizen and business data sets, and key infrastructure or public utilities. The Minister for Enterprise, Trade and Employment shall be the responsible to respond to possible threats for Ireland’s security and public order that originate from foreign direct investments. To exercise this function, he will be able to assess, investigate, authorize, condition, prohibit or unwind foreign investments from outside of the EU, based on a range of security and public order criteria. Companies that do not cooperate will have to face a fine of up to €4 million.
The relating press release from 26 June 2022 by the Irish Department for Enterprise, Trade and Employment can be found here.
EU – Provisional political agreement concerning the proposition of a new regulation on foreign subsidies distorting the internal market
On 30 June 2022 a provisional political agreement between the European Parliament and the Council of the European Union concerning the proposition of a new Regulation on the grant of subsidies from Governments outside the European Union (EU) has been reached. The regulation has been proposed by the European Commission on 5 May 2022 and applies to foreign subsidies to companies that are active within the EU which are considered to distort the internal market. The proposition is extremely far reaching because it allows the European Commission to require companies that are operating within the EU to take measures in order to eliminate distortive effects of subsidies that they have received of foreign institutions. This means that the Commission will have the power to prohibit notified concentrations like mergers or joint ventures. The proposal is now subject to approval by the Council and the European Parliament. On the Council’s side, the provisional political agreement needs to be approved by the Permanent Representatives Committee (COREPER), before going through the formal steps of the adoption procedure.
The official press release can be found here.