Belgium’s FDI Screening Mechanism: 17 Months of Navigating the Blackbox

1. Introduction

Belgium's Foreign Direct Investment (FDI) screening regime, implemented on 1 July 2023, is designed to protect the national security and strategic interests of Belgium and its federated entities. Now, over 17 months into the regime, and with the release of the first Annual Report on FDI Screening, it is a fitting time to reflect on the insights gained.

During the regime’s first 12 months, 68 investments were reported, totalling EUR 2.1 billion in Belgium, with EUR 1.8 billion already approved. Reflecting broader European trends, most investments originated from the U.S. and the UK, accounting for 43.4% and 29% of the reported deals, respectively. To date, no transactions have been blocked.

The early stages of the regime have highlighted some procedural ambiguity, leaving investors and legal professionals with questions about its practical workings. However, review times have been relatively brief, and authorities make visible efforts to work swiftly, helping to reduce potential delays for transactions.

Overall, Belgium’s FDI screening framework is comparatively lenient relative to other EU countries such as Austria, Denmark, France, Germany, Italy, and Spain, which together represent about 90% of all EU FDI notifications.

This overview outlines Belgium’s FDI screening process, its coverage, and the current challenges it faces.

2. The Belgian FDI regime

Under Belgium's FDI framework, specific foreign investments must receive prior approval from the Interfederal Screening Commission before they can be implemented, a step referred to as "closing."

Which foreign investors? Belgium's FDI regime targets only non-EU investors, setting it apart from regimes in other EU countries like France and the Netherlands, where certain intra-EU investments may also require screening. Notably, Belgium's regime also includes investments made by entities from EFTA Member States.

The Belgian regime targets natural persons with their primary residence outside the EU, undertakings with their registered office or main activities outside the EU and undertakings whose ultimate beneficial owner (UBO) resides outside the EU. As a result, also investments made by companies located within the EU are caught, to the extent they are controlled by an entity located outside the EU.

Additionally, investments may need to be reported even without a change in UBO; such internal restructurings accounted for about 13% of all notifications in the regime's first year.

Which sectors? The Belgian FDI regime concentrates on sectors where foreign investments are considered likely to impact national security, public order, or strategic interests. These sectors include:

• Critical infrastructure (e.g., energy, transport, health, telecoms, digital infrastructure, media, data processing or storage aerospace, defence, etc.)
• Technologies of strategic importance to safety, defence, public security, military equipment, dual-use goods, technologies
• Supply of critical inputs (incl. energy, raw materials and food security)
• Activities that allow access to sensitive information
• Private security
• Media (including news outlets, broadcasting services, newspapers)
• Defence
• Biotech.

Which investments? The screening mechanism under Belgium’s FDI regime applies to investments that result in either: (i) an acquisition of control, whether direct or indirect, over a Belgian entity, or (ii) an acquisition of 10% or 25% of voting rights in a Belgian target, depending on the sector involved.

"Control" is defined in line with merger control regulations and includes both joint and sole control, enabling some alignment between FDI screening and merger review procedures.

The threshold for voting rights—10% or 25%— depends on the relevant sector in which the Belgian target is active. In addition, in biotech and defense, notification is only required if the Belgian target’s turnover exceeds EUR 25 million or EUR 100 million, respectively. Determining the applicable threshold can be complex due to some overlap in sector categories under Belgian law; where overlap exists, the lower threshold applies. The table below sets out the applicable thresholds for each sector.

While greenfield investments are not currently subject to notification, asset transactions may require notification if they involve a change in control, as may certain internal restructurings.

When can the transaction be implemented? Transactions within the regime’s scope require prior approval before they can be implemented (referred to as the “standstill” obligation). This restriction prevents parties from implementing the transaction until the competent authority grants clearance. Non-compliance with this obligation can lead to fines of up to 30% of the investment’s total value.

3. What is the timeline of the procedure?

The review process starts with a preliminary assessment by the ISC Secretariat, in which the notification documents are examined and supplementary information or opinions may be requested. Although no formal time limit applies to this preliminary phase, experience from the first 12 months suggests that the Secretariat typically completes this review within approximately a week, averaging six days.

Once the notification is deemed complete, the ISC Secretariat forwards the documents to the competent ISC members and the Coordination Committee on Intelligence and Security. From this point, the ISC has 30 days to either approve the transaction or initiate a more detailed screening procedure. If no decision is adopted within the deadline, the transaction will be deemed approved. However, the 30-day period can, in certain circumstances, be suspended, extended, or reset (“interrupted”). Over the first year of operation, the average time from notification to decision in this initial “verification procedure” has been approximately 31 days.

If a more comprehensive screening procedure is required, the ISC undertakes an in-depth assessment of any potential risks to public order or national security. This stage requires a minimum of 28 days but is frequently extended to allow for oral hearings, negotiation of remedies, input from the European Commission, or further information requests. At the conclusion of this process, the ISC may approve the transaction, impose remedies, or block it entirely.

The FDI regime foresees a range of possible remedies, including, among others: implementing a code of conduct for handling or sharing sensitive information, appointing a compliance officer with security clearance, requiring the deposit of technology or know-how with a third party, and placing limits on the foreign investor's level of investment. Negotiations on remedies suspends the applicable time periods for one month, with the option to renew this extension for an additional month.

In the first 12 months, the ISC initiated this screening procedure in five cases, one of which was completed within 52 days of notification. Generally, ISC members do not use the full amount of time permitted to reach a decision.

4. Thoughts and lessons learnt 17 months in

Strategic or not? All FDI regimes inherently involve some level of opacity, which is understandable given that the criteria used by screening authorities directly relate to national security, public order, and the strategic interests of the Member State. Naturally, a Member State may prefer to keep such interests confidential, as disclosing them could itself lead to negative consequences.

In Belgium, however, this opacity is heightened by the country's complex, multi-layered governance structure. As indicated by its name, the "Interfederal Screening Commission" consists of 12 members, each representing one of Belgium’s nine federal, regional, or community governments or commissions. This broad representation ensures that foreign investment screening involves all levels of government, safeguarding their respective interests.

While the Annual Report offers some indication of the competence of the ISC members, notifying parties have no certainty in this regard. A member's competence is generally determined by the territorial link to the investment, typically based on the location of the headquarters or place of establishment of the Belgian target company, although other factors may also come into play. As a result, it is not always clear which authorities will be involved in the decision-making process. Given that each level of government within Belgium’s federal structure has its own concerns and priorities, notifying parties must, to some extent, navigate this process without clear guidance when preparing their notifications to address potential concerns. This issue is further complicated by the fact that each competent ISC member carries out its screening duties largely independently.

Nevertheless, the ISC is aware of the regime's lack of clarity and transparency and has expressed its intention to seek appropriate solutions. This proactive approach is highly commendable.

Limited Interaction with Authorities, but a Responsive and Accessible Secretariat

The ISC Secretariat plays a central role in Belgium’s FDI regime, acting as the key coordinator between the various members of the ISC and the notifying parties. However, since the Secretariat is not directly involved in the decision-making process, it is difficult for it to establish a role as a point of contact for anything beyond procedural matters. For instance, pre-notification discussions, which are common in other regulatory approval regimes such as merger control, are unlikely to become a regular practice within the Belgian FDI framework.

Nevertheless, the one-stop-shop system—where notifying parties only need to make a single notification—should be praised, as it eliminates the need for duplicate (or: nonuplicate) submissions to the different competent authorities in Belgium. Based on our experience, the ISC Secretariat is notably responsive and strives to offer guidance where possible, although this typically amounts to advising parties to "notify in case of doubt."

Impact on contractual documentation. Similar to the procedures in merger control, the Belgian FDI regime necessitates a certain level of caution in transaction documentation:

• Parties should undertake a thorough assessment to ascertain whether the Belgian FDI regime applies;
• If considered applicable, contracts should include a condition precedent that regulatory approval should be obtained before closing;
• It is also recommended to include a provision to require non-notifying parties to cooperate with the process and provide the necessary information within a reasonable timeframe;
• Typically, parties also include long-stop dates, but these should be sufficiently far in the future to accommodate for any clearance delays; and
• Finally, but importantly, provisions for remedies and the implications of potential refusal by the ISC should be included.

It is important to keep in mind the lack of transparency in the regime when defining the level of contractual risk. Decisions are not published, and even parties are not privy to the considerations of the ISC, making it difficult to anticipate what remedies may be necessary to address the authorities' concerns. This is unlike merger control, where an extensive catalogue of decisions, judgments, guidelines, and economic assessments allows parties to form a preliminary view of the remedies that may be required to gain approval. Therefore, parties may want to maintain some flexibility to walk away from the investment if the required remedies become unacceptable from a commercial standpoint.