Green screens: Ireland’s new FDI regime set to go live

08 March 2024

Green screens:

Ireland’s new FDI regime set to go live


In October 2023, the Irish Parliament signed into law the Screening of Third Country Transactions Act 2023 (“STCTA”).  The new law is set to take effect in the second quarter of 2024 after a Ministerial Order is issued.  Businesses investing in Ireland must take account of its provisions and ensure that necessary consents are sought where necessary.

The new law grants the Irish Government with powers to scrutinise acquisitions and investments of companies or assets based in Ireland where the acquisitions could give rise to national security considerations. The new regime will operate alongside the existing merger control provisions, meaning some transactions will require approvals under each system of controls.

Key features of the STCTA are as follows:

  • STCTA gives further effect to Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.
  • The legislation encompasses both share and certain asset purchases which may affect public order or national security in Ireland;
  • STCTA catches only acquisitions made by persons or entities based in “third countries” outside of the EEA. The meaning of this term is fleshed out below.
  • For the first time, there will be a positive obligation to notify certain transactions which have that effect to the Minister for Enterprise, Trade and Employment (“Minister”). Failure to notify when required to do so may result in the transaction being legally void and without effect or may constitute a criminal offence;
  • The Government may impose certain conditions on an acquisition, unwind steps already taken or block an acquisition completely;
  • While the legislation is principally motivated by mitigating the risk of foreign control over sensitive assets or activities, its scope is not limited to transactions where there is a foreign buyer. There is also no de minimis excluding transactions below a certain size or value.

As discussed below, STCTA provides stringent penalties with non-compliance.

When does the STCTA take effect?

As mentioned above, STCTA will take effect on the issuance of a Ministerial Order, expected in Q2 of 2024.  This would presumably mean between April and August of 2024.

A surprising aspect of the STCTA is that the Minister may call in deals which completed up to 15 months prior to the entry of the STCTA.  After entry into force, (s)he will be able to review transactions concluded either in the five years leading to the date of the review or six months from when (s)he became aware of the transaction, whichever is later.

What type of transactions are potentially reviewable?

The Act potentially applies to any acquisition, agreement or other economic activity which leads to a third country national:

  1. acquiring all or part of, or an interest in, an undertaking in Ireland. An “undertaking in Ireland” is where (a) it is constituted or otherwise governed by the laws of Ireland, or (b) has its principal place of business in Ireland.  This threshold may be met where a third country purchase alters the percentage of shares or voting rights (a) from 25% or less to more than 25%, or (b) from 50% or less to more than 50%
  2. change in control of an asset which is either physically located in Ireland or otherwise owned, controlled or otherwise in the possession of an undertaking in Ireland).


This means for example that there may be a relevant transaction where a third country purchaser acquires a controlling interest or a significant quantity of shares in an Irish registered company which runs data centres (perhaps the Irish subsidiary of a multinational group) (as an example of (i) above).  Alternatively, if that company bought one or a number of data centres in Ireland from that company the transaction could still be in scope (as an example of (ii)).

Helpfully, STCTA does not apply to internal reorganisations or restructuring within the same corporate group.  That exemption is available even in relation to multinational groups where ownership may be transferred to a third country group member.  STCTA would be triggered however if there was a subsequent transaction which took ownership or control of the Irish entity outside of the group to a third country person or undertaking.

Are all such deals notifiable?

 It will come as a relief to investors that the answer is no.  First, the value of the threshold must exceed €2,000,000 (or such other amount as the Minister may dictate from time to time.

Second, the target asset or undertaking must first relate to one of the relevant sectors or activities specified at Article Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, the following.  These include the following:

  • Critical infrastructure, which includes energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure and sensitive facilities, including the land/real estate used crucial for the use of such infrastructure;
  • Critical technologies and dual use items, such as artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies;
  • Supply of critical inputs, including energy or raw materials, as well as food security;
  • Access to sensitive information, including personal data or the ability to control such data; and
  • The freedom and pluralism of the media: amassing too many media outlets creates a risk that news and current affairs will be reported in support of a particular interest or point of view, which in turn is harmful to democracy.

The choice of categories relates directly to the risk of harm to the national interest.  For example, if an enemy state were to obtain ownership of a security contractor which had access to Irish Government buildings, that may enable it to access sensitive information related to the national interest.  In a similar way, controlling critical inputs could allow a hostile foreign government to exercise leverage over the state government.

Mandatory notification and call-in

All parties to the deal have an obligation to file notifiable transactions no later than ten days’ prior to completion.  As referenced below, failure to do so may lead to strict penalties.

The filing must set out key information about the transaction, such as details of the parties and their respective turnover, the value of the deal, products and services affected (in particular those to which the target undertaking or asset relates).   The parties must take care to ensure the accuracy of information set out in the filing.

The Minister has sweeping powers to call in and examine any deal which is “notifiable” according to the criteria above.  To commence a review, the Minister must consider that the deal would affect or be likely to affect security public order in Ireland.  The power may be exercised regardless of whether or not the deal has been notified to the Minister.

Once the decision has been taken to screen the transaction, the Minister will consider whether the transaction will affect security or public order, paying particular attention to the factors listed in Section 13.

Failure to make timely notifications may result in strict penalties.  These may include fines of up to €4 million and/or a term of imprisonment of up to 5 years (for conviction on indictment).  Similar penalties may result from providing false or misleading information in any filing or otherwise in the course of a review or investigation.

What is meant by “third country”?

A “Third Country” includes any state other (i) Ireland (the State), (ii) an EEA Member State or (iii) a contracting party to the Agreement referred to in 2(1)(C) of the Act (Austria, Finland, Iceland, Liechtenstein, Norway and Sweden) or (iv) Switzerland.

For the purposes of STCTA, an acquisition has a “third country” dimension where it is effected by a third country national or undertaking, defined as follows.

  • Third country national – either (i) a natural person habitually resident in a third country or (ii) an unincorporated group or partnership of national persons at least one of whom is habitually resident in a third country
  • Third country undertaking –an undertaking governed by (i) the law of a third country, or (ii) controlled by at least one director, partner or member or other person who is a third country undertaking or a third country national.

Perhaps surprisingly, this definition classifies the UK as a third country, notwithstanding the proximity of the two countries and the existence of the UK-Ireland common travel area.   The same is true for the USA despite the strong traditional and cultural links that country enjoys with Ireland.  UK and US investors may therefore fall within the definition of third country nationals or undertakings.  Consequently, they must therefore take account of STCTA when making acquisitions in the jurisdiction.

How long does the review process last?

As soon as practicable after beginning the review of the transaction, the Minister must address to the parties a “screening notice” in writing.  Thereafter, a “screening decision” must be finalised within 90 days from the date on which the screening notice in relation to the transaction is issued.  The review timetable can be extended to 135 days.

These timelines may be suspended by the Minister where a request for information is addressed to the parties in furtherance of the review but comprehensive replies have not been received within a reasonable time frame.

The issue of a screening notice compels the parties to refrain from completing the transaction or taking any further steps towards completion pending the Minister reaching a final decision as to whether or not to approve the transaction.

If the transaction has already completed, the Minister is empowered to take such steps as may be considered necessary in order to safeguard national security or public order within Ireland.  This may include an order to sell the undertaking or asset(s) which have been acquired, thereby undoing the deal.   In such a scenario, the market will be aware that the sale is distressed and the acquirer bears a significant risk of recouping less than the purchase price from the re-sale.

 Judicial review

At the culmination of the review, the Minister will reach a “screening decision” either approving or prohibiting the transaction (or potentially approving it subject to conditions).  It may be possible for the parties to contest the Minister’s ultimate decision before an internal adjudicator and then before the Irish High Court.

STCTA provides that the parties may, within 30 days from the time they are informed of the screening decision, notify the Minister that they plan to appeal. After giving notice to the Minister, the appellant has 14 days to present the appeal to the adjudicator. An adjudicator’s decision may be appealed to the High Court on a legal issue.

The Act makes it clear that judicial review may be applied to either or both the Minister’s screening decision and the adjudicator’s determination.

Co-existence with competition regime

The STCTA will run alongside the existing Irish merger control regime set out in the Irish Competition Act 2002, as amended by the Competition (Amendment) Act 2022, the focus of which is to protect competition in Ireland rather than public order and security.   The merger control regime is administered by the Competition and Consumer Protection Commission (“CPCC”) in Dublin.

The CPCC recently issued its annual report on merger control in Ireland, which is available here: ..  In February 2024, the CPCC acted decisively to declare invalid a merger between Lloyds Pharmacy and McCabes after the CPCC concluded the parties had not responded fully to a request for information about the merger.

Under Section 18(1)(a) of the Competition Act, a merger or acquisition must be notified to the CCPC if:

  • the parties have a combined Irish turnover of at least €60 million; and.
  • at least two of the parties have an individual Irish turnover of at least €10 million.

Strict anti-gun-jumping rules apply in the Republic of Ireland which prohibit the parties from completing on notifiable transactions which require CPCC approval.  Gun-jumping is a criminal offence (and has previously been prosecuted as such).  Non-compliance may be punished with fines of up to €250,000.

How to deal with call-in risk in transactions?

The parties should be particularly aware that any attempted completion of a deal that falls within the scope of the mandatory notification duty (either under the STCTA or Competition Act) will be void if clearance is not obtained.

From the perspective of the buyer, that means that completion of any relevant relevant deal should be made conditional on obtaining clearance.  The buyer will not wish to commit itself to completing a transaction which may turn out to be illegal and void.  The STCTA legislation appears to indicate that this may also be a risk for the seller.

The buyer should consider if warranty protections are appropriate.  For example, the buyer may rely on the seller’s judgment as to whether or not the target’s activities bring it within one or more of the seventeen listed categories.  Seeking a warranty as to the accuracy of that assessment will provide the seller with some comeback if the deal is ultimately called in.  Perhaps even more importantly, the agreement should contain obligations for the parties to both cooperate with the Minister (and each other) if a screening notice is issued.

Regarding the STCTA, there may be a temptation- to think its application is restricted to transactions involving foreign investment from a hostile state or those relatively rare cases where the target’s activity is closely linked to sensitive matters of state (e.g. services to the military or intelligence services).  As we have seen, investments from the UK and US are potentially caught. National security issues may not always be clear cut however and the parties would do well to reflect on these carefully before decisions.

Paul Henty, Partner

Beale and Company Solicitors LLP