The NSI establishes a statutory regime for Government scrutiny of, and intervention in, investments for the purposes of protecting national security. The NSIA:
sets up a mandatory system under which proposed acquisitions of control (for example through the purchase of certain shares or voting rights) in qualifying entities or assets in sensitive sectors are subject to clearance from the Secretary of State before they take place;
sets up a voluntary notification system to encourage parties who consider that their proposed acquisition may raise national security concerns to notify the Secretary of State of the transaction; and
gives the Secretary of State the power to “call in” acquisitions of control over qualifying entities or assets in order to undertake a national security assessment.
(b) Primary legislation
The following pieces of secondary legislation deal with specific areas linked to the NSIA and the investment screening regime:
Notifiable acquisition statutory instrument – this sets out the acquisitions of qualifying entities in the 17 areas of the economy that are subject to the mandatory notification requirements
Monetary Penalties statutory instrument – this sets out the methods for calculating business turnover in the event of the Secretary of State issuing monetary penalties for non-compliance with the National Security and Investment Act
The Secretary of State in the Cabinet Office is able to exercise powers under the NSI, such as imposing conditions on an acquisition, or blocking it altogether. Administrative and policy support for the exercise of these powers is provided by the Investment Security Unit (ISU).
3. Specific sectors covered (foreign investment regime involving specific sectors of the economy / business activities)
Type of transactions caught
The NSIA gives the Secretary of State the power to “call in” acquisitions of control over ”qualifying entities” or ”qualifying assets” in order to undertake a national security assessment.
This call-in power may be exercised where the Secretary of State reasonably suspects that a “a trigger event has taken place [or where arrangements are in place that means a trigger event may take place] in relation to a qualifying entity or qualifying asset, and the event has given rise to or may give rise to a risk to national security” (S 1, NSIA).
The term ”national security” is not defined in the NSIA, meaning that potentially any transaction within the scope of S1 could be called in. However, under S 3 of the NSIA, the Secretary of State publishes a statement as to how (s)he expects to use the power and must have regard to the statement. The government will take into account the following factors when national security risk:
target risk — what does the target do?
acquirer risk — what are the characteristics of the acquirer and what are its relationships?
control risk — what level of control will the acquirer obtain over the target?
The NSIA therefore does not rely on specific financial thresholds but instead focuses on control and influence. Unlike similar regimes in other countries, these provisions cover all transactions, not just those involving foreign investment. The call-off power is also not limited to acquisitions in certain sectors.
Trigger events
The types of transactions caught and the notification thresholds are determined based on specific trigger events. These are described below in our response to Q5.
1) Definition of Trigger Events: Each trigger event involves an individual or entity (the acquirer) acquiring rights or interests conferring control over either:
A Qualifying Entity: A qualifying entity includes any entity other than an individual, whether or not it is a legal person. This encompasses a wide range of entities, such as UK companies, limited liability partnerships, partnerships, unincorporated associations, trusts, and entities formed or recognized outside the UK that carry on activities in the UK or supply goods or services to persons in the UK.
A Qualifying Asset: Qualifying assets consist of:
Land.
Tangible moveable property.
Ideas, information, or techniques with industrial, commercial, or economic value, used in connection with activities in the UK or the supply of goods or services to persons in the UK. This category includes trade secrets, databases, source code, algorithms, designs, plans, software, and more.
2) Thresholds for Trigger Events: Unlike the previous regime under the Enterprise Act, the government’s powers to intervene in transactions under the NSIA do not depend on the target of the acquisition meeting minimum turnover or share of supply thresholds. This change was aimed at preventing parties from bypassing the regime by acquiring assets rather than shares in the company that owns them.
3) Categories of Trigger Events (for qualifying entities): The NSIA Act specifies four categories of trigger events (two covered in the first bullet below) over qualifying entities that may require a national security assessment under the NSIA regime. These categories involve acquiring control of a qualifying entity and include:
Increasing (i) ownership or (ii) voting rights: When the acquirer’s percentage of shares or voting rights in the qualifying entity increases to more than 25%, more than 50%, or at least 75%.
Exercising Control: When the acquisition of voting rights in the qualifying entity enables the acquirer to secure or prevent the passage of any class of resolution governing the entity’s affairs.
Exercising Material Influence: When the acquirer can exercise material influence over the policy of the qualifying entity.
4) Categories of Trigger Events (for qualifying assets): The trigger event occurs where there is an acquisition of a right or interest in (or in relation to) a qualifying asset which gives the acquirer the ability to either:
Use the qualifying asset or use it to a greater extent than before the acquisition.
Direct or control how the asset is used or do so to a greater extent than before the acquisition.
In summary, the NSIA Act identifies specific trigger events related to the acquisition of control over qualifying entities or assets. This approach shifts the focus away from financial metrics and toward ensuring that acquisitions potentially affecting national security are subject to review and intervention by the UK government.
Notification thresholds
A transaction is subject to a duty of mandatory notification where both of the following criteria are met:
Trigger event requirement. As a result of the acquisition, the acquirer gains control of a qualifying entity by either:
✓ increasing the percentage of shares (or votes) that it holds in the entity to: (i) more than 25%; (ii) more than 50%; or (iii) at least 75%; or
✓ acquiring voting rights in the entity that enable it to secure or prevent the passage of any class of resolution governing the entity’s affairs.
Sector requirement. The qualifying entity undertakes particular activities in the UK within a specified high-risk sector of the economy. The definitions of the relevant sectors are discussed further below (Q5).
It is important to note that the power of the Secretary of State to call-in transactions is not limited to those where there is a mandatory duty to notify. Also please note that the duty does not extend to the acquisition of qualifying assets at the current time.
As stated elsewhere, the parties may also make a voluntary filing. They may wish to do this if the mandatory filing duty does not arise but they consider the transaction may be called in.
4. Types of transactions caught and notification thresholds (definition of a foreign investor / activities / turnover / assets subject to foreign investment assessment / investment threshold – e.g. % of votes in the target triggering the notification)
Notification under the mandatory regime must be made by the person gaining control of, or acquiring an interest in, the relevant qualifying entity pursuant to the notifiable acquisition (section 14(1)).
A notification under the voluntary regime may be given by a seller, acquirer or any qualifying entity concerned (section 18(2)). A notification can be submitted on behalf of the notifying party by an authorised representative, such as their solicitor.
5. Parties to be included in the foreign investment assessment (notifying parties and protected entities)
A “qualifying entity” will be subject to the mandatory notification regime if it operates in the UK in any of the activities in any of the 17 sectors that are prescribed in the Schedules to the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021 (SI 2021/1264) (Notifiable Acquisition Regulations). The prescribed sectors are as follows:
Advanced materials
Cryptographic authentication
Suppliers to emergency services
Advanced robotics
Data infrastructure
Artificial intelligence
Defence
Civil nuclear
Energy
Synthetic biology (formerly known as Engineering biology and renamed following the consultation)
Communications
Military and dual use
Computing hardware
Quantum technologies
Transport
Critical suppliers to the government
Satellite and space technology
6. Exceptions
By secondary legislation, the Secretary of State may grant an exemption to certain acquirers with specified characteristics from the mandatory notification regime. This would disapply the obligations to notiy and seek approval for transactions which would otherwise be within the scope of the NSIA. However, it would not remove the ability of the Secretary of State to call in such transactions.
This provision allows the Secretary of State to remove the mandatory notification regime acquisitions which would ordinarily be likely to involve an elevated national security risk in circumstances where there are fewer concerns because of the acquirer’s characteristics (e.g. passive investors).
7. Notification / review type (e.g. mandatory, pre-closing, suspensory)
As explained in our answer to Q1, there are two types of notifications: mandatory and voluntary. Failure to notify and obtain clearance for a transaction which is subject to a mandatory notification requirement may be subject to penalties. The obligation is to notify and seek approval prior to the acquisition being completed (section 14(1)).
On the other hand, voluntary notifications will relate to other transactions, where the duty to notify has not arisen but which could be subject to the Secretary of State’s call-in power and where the parties wish to have certainty around the NSIA risk. There is no standstill obligation for those transactions unless an interim order has been issued.
The Secretary of State has the power to make an interim order, which may (among other things) include provisions requiring persons to do, or not to do, particular things (section 25(4)). This might include, for example:
Prohibiting the parties to an in-flight trigger event from completing the transaction.
Requiring the reversal of any existing integration.
As detailed elsewhere, breaching the terms of an interim order is a criminal offence.
A voluntary notice may be submitted at different points in the process, providing more flexibility:
It can be given when arrangements are in progress or contemplation that, if carried into effect, will result in a trigger event taking place regarding a qualifying entity or a qualifying asset (section 18(2)(b)).
It can also be submitted after a trigger event has already occurred (section 18(2)(a)).
The determination of whether arrangements are in progress or contemplation, which would trigger the need for a voluntary notification, depends on various factors and circumstances. These factors include considering how likely it is in practice that a person will carry out an action in the future that would result in a trigger event taking place. The timing of a voluntary notification can vary based on the progress and likelihood of these arrangements (section 12(2) – (4)).
8. Possibility for third parties to be involved in the review process (requirements, procedural rights etc.)
Third parties may become involved at various points in the process. First, when issuing a “call-in notice”, the Secretary of State may opt to issue this to known, interested third parties such as a sectoral regulator or competitors of the parties or others with an interest in the outcome.
Third parties may also seek a judicial review of a decision by the Secretary of State which they disagree with. However, to launch such an action they will need to demonstrate that they have standing (i.e. sufficient interest) in the decision they wish to challenge before the court.
9. Filing fee
There is no filing fee.
10. Submission deadline / stand-still obligation
Please see our answer to Q7.
11. Availability of pre-notification / informal consultation
Pre-notification informal consultation is possible under NSIA. Parties can engage in informal discussions with the Investment Security Unit (ISU) by email. Additionally, if there is significant uncertainty about whether an acquisition is notifiable under the mandatory notification regime, parties can seek the ISU’s view. However, the provision of a response within a particular timeline cannot be guaranteed.
While the ISU aims to be as helpful as possible, its guidance is non-binding. It may not always provide substantive responses, especially in hypothetical scenarios, to avoid potential misapplication of the advice to substantially different real situations.
12. Scope of information / documents required for filing
As the information requirements differ, we have answered this question by reference to both mandatory and voluntary filings.
Mandatory filings
a) Contact Details and Related Notifications:
Information about the acquirer or their representative.
Contact details, including name, position, email, and telephone.
Authorisation to accept correspondence regarding the notification.
b) Acquisition Details:
Identification of relevant sectors and “trigger events.”
Description of the qualifying entity’s activities within these sectors.
Additional information concerning the acquisition, such as changes in shareholding or voting rights that meet the control thresholds.
Key dates associated with the acquisition.
Whether the acquisition requires approval from UK regulators.
c) Qualifying Entity Details:
Information about the qualifying entity, including its name, business address, and website.
Description of the entity’s UK activities, products, and services.
Whether the entity is authorized to receive or hold information with a UK Government Security Classification.
Details about licenses held by the qualifying entity.
Information on any supply relationship with the UK government in specific areas.
Details of research and development funded by the UK government.
Information regarding contracts requiring personnel to hold National Security Vetting (NSV) clearance.
d) Ownership and Structure of Qualifying Entity:
Pre-acquisition and expected post-acquisition structure charts.
e) Acquirer Details:
Information about the acquirer, including name, country of incorporation or nationality.
Description of the acquirer’s products, services, and activities.
Whether a non-UK government has share ownership or voting rights in the acquirer or in the operation or decision-making of the acquirer.
Any contractual arrangements related to share ownership or voting rights between the acquirer and other parties.
f) Declaration and Other Relevant Information:
Submission of a signed declaration, as required by the specific circumstances. 100
Optional inclusion of other relevant documents and information concerning the acquisition.
Voluntary filings
The voluntary National Security and Investment (NSI) Act notification form is generally shorter. However, in terms of information required, it shares considerable overlap with the mandatory form with some limited distinctions.
13. Proceedings timetable (timing for review)
Where no notification is made Time limits apply for the Secretary of State to issue call-in notices. For non-notified trigger events occurring on or after 4 January 2022:
A call-in notice may be given at any time while the trigger event is in progress or contemplation.
If the transaction has already been completed, a call-in notice can be issued within six months of the Secretary of State becoming aware of the transaction, as long as this awareness occurs within five years of completion. The five-year limit does not apply when there’s a failure to notify a trigger event subject to mandatory notification.
These time limits may be adjusted in cases where false or misleading information has significantly affected a decision made by the Secretary of State.
Timeline where notification is made
The timing of assessments under the National Security and Investment (NSI) Act follows a statutory timetable:
After a call-in notice is given, the Secretary of State has an initial assessment period of 30 working days to determine whether to issue a final order or a final notification regarding the trigger event.
This initial assessment period can be extended by an additional 45 working days if there is a national security risk.
The Secretary of State and the acquirer can agree on a voluntary period for further scrutiny, which has no statutory limit on its duration.
In summary, the overall statutory timetable for reviewing a non-notified trigger event could be up to 75 working days, and for a notified transaction, it could be up to 105 working days. However, the actual review period may be longer in practice, depending on factors such as information gathering or the agreement of a voluntary period for further scrutiny.
During the assessment process, if the Secretary of State issues an information notice or an attendance notice, the statutory assessment period is paused until compliance is confirmed.
According to the latest annual report on the functioning of NSIA (see further Q20 below), the average time taken for call-in decisions during 2022 was 28 working days for mandatory notifications and 27 working days for voluntary notifications. The length of review following a call-in varied, with an average of 25 working days to issue a final notice and 81 working days to issue a final order in relation to called-in transactions. Some transactions proceeded to additional review periods, and a few were ultimately cleared or resulted in a final order.
14. Outcome of the review process (clearance, conditional authorisation, possible commitments etc.)
An investigation under the National Security and Investment (NSI) Act can result in one of three decisions:
Clearance: The transaction is cleared without any further actions or conditions.
Prohibition: The Secretary of State may prohibit the transaction if there is a national security risk. This results in the issuance of a final order blocking the trigger event.
Conditions: In cases where the Secretary of State reasonably considers it necessary and proportionate, they can impose conditions on the clearance. These conditions can include requirements for specific actions or restrictions. The duration of these conditions is determined by the Secretary of State.
The first final order blocking a trigger event was issued in July 2022 (Newport Water Fab / Nexperia case – see answer to Q20), and the 2023 annual report indicates that of the 15 final orders issued in the reporting period, 5 either blocked the transaction or required it to be unwound. NSIA allows for flexibility in imposing conditions, which can apply to various parties involved in the transaction.
15. Publicity of the decision and confidentiality of the information provided
The Government is not obligated to publish information regarding call-in notices or final notifications (clearances). However, Government guidance indicates that it may voluntarily choose to publish this information in certain instances, particularly when the parties disclose such information, or when the acquisition is already in the public domain and the Secretary of State deems it to be in the public interest.
For cases resulting in final remedies, including blocking orders imposed for national security reasons, specific information must be published following the assessment process. This information includes the date the order comes into force, the entities or assets involved, a summary of the order and its reasons, among other details.
In the case of final orders, the Secretary of State is required to publish a notice as soon as practicable. However, they may exclude information that could prejudice commercial interests or contravene national security interests. An example of a final order being published is the one related to the acquisition of Sepura Limited by Sword Bidco, Epiris GP, and Epiris LLP, which was issued on 14 July 2022 (see answer to Q19).
Decisions on cases assessed and cleared without imposing any remedies will not routinely be published. Nevertheless, the government may choose to publish such information, particularly when parties disclose it or when the acquisition is already public knowledge and aligns with the public interest.
Additionally, at the end of each financial year, the Secretary of State must provide an annual report to Parliament. This report contains various information regarding the NSI Regime’s operation during that year, including the number of notices accepted and rejected, the sectors involved, the number of call-in notices, and the number of final notifications and orders issued.
16. Can a decision be challenged or appealed (by whom, on what basis, in which timeframe)
Yes, a decision made under the National Security and Investment Act 2021 (NSIA) can be challenged through the administrative law judicial review process. That can be done by any party which can demonstrate a sufficient interest (standing) in the decision. That requirement is likely to be fulfilled by any notifying party or another party to the transaction.
Judicial review is a legal action under which the Courts review whether a decision taken by a public body was lawful. Judicial review does not consider the merits of a decision (and in general courts afford decision makers a margin of discretion), but questions whether the way in which it was made was lawful. Grounds for judicial review include illegality, procedural unfairness, unreasonableness/irrationality, or for infringement of rights protected by the European Convention of Human Rights.
However, the standard judicial review process is modified in relation to certain decisions under the NSI Act, such that claims for the review of those decisions must be brought within 28 days (as opposed to the standard ”promptly and in any event within 3 months limit”) beginning with the day after the day on which the grounds to make the claim first arose, unless the court considers that exceptional circumstances apply (section 49(4)).
Grounds for judicial review can include issues such as proportionality, differential treatment, incorrect information, failure to gather relevant information, and failure to consider representations. These grounds provide opportunities for businesses or affected parties to challenge NSIA decisions in the High Court.
Separate provisions apply where a person wishes to challenge a fine imposed under the NSIA. Such appeals will be made on a “full merits” basis rather than judicial review. Again, they must be filed within 28 days of notice of the appeal.
17. Sanctions for failure to notify (administrative fines or other administrative sanctions, criminal sanctions, civil law consequences)
Fines and criminal penalties
Pursuant to Ss 32(1), 39(1) and 41(1) of the NSIA, it is a offence for any person to complete a notifiable acquisition without obtaining prior clearance from the Secretary of State. Such a person may suffer the following penalties:
(in the case of an individual or business entity) a fine of up to £10 million or (in the case of business entities and if higher than the £10 million amount) 5% of total worldwide turnover, including the turnover of any businesses owned or controlled by the person being penalised;
(for individuals), up to five years’ imprisonment.
There is still an offence even if the acquisition is later approved by the Secretary of State under the notification or validation procedures in sections 15 to 17 (section 32(2)).
Pursuant to s 36, where the person committing an offence under section 32(1) of the NSI Act is a business entity, officers of the body (e.g. company directors, members of a limited liability partnership) will also be guilty of the offence (and liable to civil and criminal sanctions accordingly) if it is committed with their consent or connivance, or due to their neglect .
For offences related to breaching an order or failing to comply with information or attendance notices, the Secretary of State can also impose penalties calculated by a daily rate to expedite compliance.
It is also an offence to provide information to the Secretary of State which is false or misleading in a material way (s 34 NSIA). Individuals who commit this offence may face a term of up to one year imprisonment.
Voidness of transaction
A notifiable acquisition that is completed without the Secretary of State’s approval will be void (section 13(1)) and legally ineffective. However, the NSIA includes a provision which will enable parties to have their deal made valid retroactively in some cases.
A deal may also be void where it is completed in violation of the conditions of a final order issued by the Secretary of State (section 13(3)).
18. Other national security review distinct from FDI rules
The merger control provisions of the Enterprise Act 2002 may apply independently of the NSIA, such that a transaction may require both competition clearance and approval under the NSIA.
19. Significant legislative/regulatory developments in the past year and possible proposals for reform
Acquisition of Sepura Limited
As mentioned in Q15, the Secretary of State issued its final order in relation to the acquisition of Sepura Limited by Sword Bidco, Epiris GP, and Epiris LLP on 14 July 2022 (varied in June 2023). The Final Order and variation are available here: https://www.gov.uk/government/publications/acquisition-of-sepura-ltd-by-epiris-llp-noticeof-final-order. The order allowed the transaction to proceed subject to restrictions on sensitive information related to communication technology used by UK emergency services.
Newport Water Fab / Nexperia
In a recent development related to the National Security and Investment Act (NSIA), the UK Government exercised for the first time its “lookback” power to review the acquisition of Newport Wafer Fab (NWF) (final order here: https://www.gov.uk/government/publications/acquisition-of-newport-wafer-fab-by-nexperiabv-notice-of-final-order), the UK’s largest semiconductor manufacturer, by China-backed Nexperia. After an extended review period and voluntary extensions, the Secretary of State blocked the transaction. This marked the first use of retroactive powers under NSIA to assess a transaction that had closed before the new regime came into force.
The decision was influenced by both national and international pressures, including concerns about the semiconductor industry’s importance to national security and global interests. The final order required Nexperia to sell at least 86% of NWF’s share capital. The case highlighted the continued enforcement focus on semiconductors, emphasizing their significance in the UK and globally. Nexperia is challenging the decision in court, as the forced sale could impact Newport’s viability and value proposition. The case underscores the importance of the semiconductor industry in the context of national security.
Possible future changes to scope of filing duties
Pursuant to S 6(5) – 6(7), the Secretary of State may (by secondary legislation):
Vary the acquisitions that are subject to mandatory notification, including the possibility of expanding the regime to capture asset acquisitions.
As mentioned in our answer to Q6, exempt certain types of acquirer from the duty to notify or seek approval for a transaction which would otherwise be caught by the regime.
In 2021, the UK Government also confirmed that the mandatory notification sectors will be kept under review and where there is a need to update the regulations due to emerging technology or newly identified national security risks, it will be possible to do this through secondary legislation in the future. Changes may be made if, for example, reviews of relevant transactions routinely are cleared without a need to issue remedies.
1. Relevant legislation (foreign investment legislation in force)
Royal Decree 571/2023, of July 4, on foreign investments (https://www.boe.es/diario_boe/txt.php?id=BOE-A-2023-15549) hereinafter referred as to “RD”), which came into force on September 1, 2023. Its objective is to develop, in relation to investments, Law 19/2003, of July 4, on legal regime for capital movements and economic transactions abroad (https://www.boe.es/buscar/act.php?id=BOE-A-200313471).
The RD of Foreign Investments regulates: (i) investment declaration obligations foreigners in Spain for statistical purposes, which must be carried out after the closing of the operations object of declaration; (ii) the obligations to declare Spanish investments in the exterior for these same purposes; and (iii) as a most relevant issue, the foreign direct investment control mechanisms (the “Control Mechanisms”) under which the closing of certain investment operations requires administrative authorization prior, both the general provision in art. 7 bis of Law 19/2003 (the “Control Mechanism of 7 bis”) and that relating to activities directly related to national defense (the 2 “Defense Control Mechanism”), the relating to acquisitions of property for diplomatic purposes from non-member states of the Union European Union (the “Diplomatic Property Control Mechanism”), as well as a new regime for investments in activities directly related to weapons, cartridges, pyrotechnic articles and explosives for civil use or other material for use by the State Security Forces and Corps (the “Arms Control Mechanism”). It should be remembered that the Control Mechanisms do not imply a prohibition on foreign investment in Spain but are mandatory processes prior to the closing of certain operations. They involve the subject to prior administrative authorization for the closure (not the signing) of certain investment operations in Spain. In particular, the most relevant from a practical point of view for Its frequency of application – the Control Mechanism of 7 bis – incorporates in Spain the framework of foreign investment control provided for in EU legislation; in particular, the Regulation (EU) 2019/452, which regulates the possibility for Member States to impose controls on foreign direct investments in the EU.
Ministry of Economy, Bank of Spain and Investment Registry of the Ministry of Industry, Commerce and Tourism.
3. Specific sectors covered (foreign investment regime involving specific sectors of the economy / business activities)
Not all foreign direct investments are subject to the Control Mechanism of 7 bis, but it depends:
on the sector in which the company under investment develops its business and of
the subjective characteristics of the foreign investor if it is a Non-European Investor, with independence of the business of the company in which it invests.
Due to their purpose, foreign direct investments in the following sectors are subject to the Control Mechanism of 7 bis:
Critical infrastructures, whether physical or virtual, now expressly including the energy, transport, water, health, communications, means of transportation infrastructure communication, data processing or storage, aerospace, defence, electoral or financial, and sensitive facilities, as well as land and real estate that are keys for the use of said infrastructures, understood as those contemplated in the Law 8/2011.
Critical and dual-use technologies, including telecommunications, intelligence artificial intelligence, robotics, semiconductors, cybersecurity, aerospace technologies, defense, energy storage, quantum and nuclear, nanotechnologies and biotechnologies.
Key technologies for leadership and industrial training, including materials advanced and nanotechnology, photonics, microelectronics and nanoelectronics, life sciences, advanced manufacturing systems and transformation, intelligence artificial, digital security, and connectivity.
Technologies developed under programs and projects of particular interest to Spain, which include those that involve a substantial amount or percentage of financing from the budget of the European Union or Spain.
Supply of fundamental inputs, in particular (a) those provided by companies that develop and modify software used in the operation of critical infrastructures in the energy, water, telecommunications, financial and insurance, health, transportation and in the field of food safety; as well as (b) other inputs indispensable and nonsubstitutable to guarantee the integrity, security or continuity of activities that affect the previous sectors, among others.
Sectors with access to sensitive information, in particular personal data or with ability to control such information, including access to specific data about critical infrastructures, to databases related to the provision of services essential or that are not publicly accessible, and activities subject to mandatory to an impact assessment on personal data.
Media, without prejudice to the fact that audiovisual communication services, in the terms defined in the General Law of Audiovisual Communication will be governed by what provided in said Law.
Other sectors whose liberalization of foreign direct investment is suspended by the Government, when they may affect public safety, public order, and public health (currently none).
By the subject that makes them, the direct foreign investments of the following Investors Not Europeans are also subject to the Control Mechanism of 7 bis, regardless of the sector what to invest in:
Whether the foreign investor is controlled directly or indirectly by the Government, including public bodies or armed forces of a third country.
If the foreign investor has made investments or participated in activities in the sectors that affect security, public order, and public health in another State member, and especially in the sectors subject to the Control Mechanism indicated previously.
If there is a serious risk that the foreign investor will engage in criminal or illegal activities that affect public safety, public order, or public health in Spain.
4. Types of transactions caught and notification thresholds (definition of a foreign investor / activities / turnover / assets subject to foreign investment assessment / investment threshold – e.g. % of votes in the target triggering the notification)
Foreign investors are both Non-European Investors and Non-Spanish European Investors (the latter, temporarily, until December 31, 2024), in both cases as these terms are defined below.
They are Non-European Investors: (i) residents outside the EU and EFTA; and 8 (ii) residents of the EU or EFTA whose beneficial ownership corresponds to residents outside the EU and EFTA. This is understood to occur when non-EU and EFTA residents ultimately own or control, directly or indirectly, more than 25% of the capital or voting rights of the investor, or when they exercise control by other means, direct or indirect, of the investor.
They are non-Spanish Europeans: (i) residents of EU and EFTA countries other than Spain; and (ii) residents in Spain whose beneficial ownership corresponds to residents in EU and EFTA countries other than Spain. It is understood that this occurs when EU and EFTA residents outside Spain ultimately own or control, directly or indirectly, a percentage greater than 25% of the capital or voting rights of the investor, or when by other means they exercise the control, direct or indirect, of the investor.
They are direct foreign investments: (i) investments as a result of which the foreign investor has a stake equal to or greater than 10% of the share capital of a Spanish company; (ii) the corporate operation, act or legal business as a consequence of which the foreign investor acquires control of a Spanish company or of all or part of it in accordance with the criteria established in article 7.2 of the Law of Defense of Competition; and (iii) additionally, and only in the event that the investor is a NonSpanish European and until December 31, 2024, operations that have as their object a company listed in Spain, or if carried out on an unlisted one, those whose value exceeds 500 million euros.
5. Parties to be included in the foreign investment assessment (notifying parties and protected entities)
Foreign investments in Spain and their disinvestment will be declared to the Investment Registry of the Ministry of Industry, Commerce and Tourism on a mandatory basis and after carrying them out, except as established in article 5.5 of the RD. The form and deadline for making the declarations will be determined in the implementing regulations of the Royal Decree, with the regulations cited in the Second Transitional Provision being applicable until then.
In general, the investment will be declared by the non-resident holder. When the declaration must be made by a third party, the non-resident holder must provide all the necessary data to carry it out.
On a special basis: a) Investment operations carried out in collective investment institutions and closed collective investment entities will be declared by their management company.
6. Exceptions
The RD delimits foreign direct investments that are not subject to prior control. In general: (i) Those that have no or little impact on the legal rights protected by this regulation. (ii) Internal restructuring in a group of companies. (iii) Increases in business participations by a shareholder who already has a participation greater than 10% and that do not imply a change of control. (iv) Those in which the turnover of the acquired companies does not exceed 5 million euros in the last closed accounting year, provided that their technologies have not been developed under programs and projects of particular interest to Spain.
Along with these general exemptions, the Royal Decree regulates specific exemptions for the energy sector, regardless of the amount and when the assumptions that justify control do not occur (direct or indirect control by a foreign government, with investments in energy sectors). security, public order or public health or risk of criminal or illegal activities): (i) When the companies or assets acquired do not carry out regulated activities. (ii) When as a result of the operation, the company does not acquire the status of dominant operator in the sectors of generation and supply of electrical energy, production, storage, transportation and distribution of fuels or biofuels, production and supply of liquefied petroleum gases. or production and supply of natural gas, under the terms established in the Royal Decree on urgent measures to intensify competition in goods and services markets. (iii) When the foreign investment involves the acquisition of electrical energy production assets, provided that the share of installed power by resulting technology is less than five percent. (iv) When the foreign investment involves the acquisition of companies that carry out the activity of marketing electric energy, in accordance with the provisions of the Electricity Sector Law, provided that the number of clients of the acquired company is less than twenty thousand. As regards the conditions of the investor, non-European investors and non-Spanish European investors are considered foreign investors and it will be monitored that they are not controlled directly or indirectly by the government of a third country, or it is found that there is a serious risk that engage in criminal or illegal activities.
Particularities of investments in activities directly related to National Defense or with weapons and explosives for civil use: (i) The condition of non-resident foreign investors includes resident foreign natural persons, regardless of their nationality. (ii) Included are those that affect the industrial capabilities and areas of knowledge necessary to provide the equipment, systems and services that provide the Armed Forces with the necessary military capabilities, as well as those that are intended for production, maintenance, or trade in defense material in general. (iii) Investments below 5% of the share capital are exempt from control when they do not allow the investor to be part, directly or indirectly, of its administrative body. (iv) Foreign investments that reach between 5% and 10% of the share capital are exempt from authorization, but subject to communication, as long as the investor undertakes in a public deed not to use, exercise or transfer their rights to third parties. to vote, nor to form part of administrative bodies. (iv) Foreign investments that, due to their nature, characteristics, or amount, do not affect the essential interests of Defense, may be authorized by the head of the General Directorate of Armaments and Materials, following a report from the Foreign Investment Board.
7. Notification / review type (e.g. mandatory, pre-closing, suspensory)
The most relevant innovations introduced by the RD of Foreign Investments in the Control Mechanisms are the following:
Deadline to resolve. The period available to authorities to resolve authorization requests in all Control Mechanisms is reduced from six to three months. If no response is obtained after that period, it will be deemed rejected. However, the authorities may require additional information that suspends the calculation of this period to resolve and notify.
Voluntary consultation procedure. The voluntary consultation system is formalized, which, without express legal coverage or a specific deadline to resolve, had been existing in practice. It is applicable to all Control Mechanisms. Through this procedure, which is voluntary, investors can receive, within a maximum period of 30 business days, a confidential and binding response regarding the need for a specific operation to be subject to authorization or not. The interested party may submit a request for authorization if they do not receive a response after that period or if the query is resolved in the sense that it is necessary. Although the RD of Foreign Investments does not expressly indicate it, it should be understood that, if this period elapses, the interested party may in any case wait for the express resolution of the consultation.
Elimination of the simplified 30 business day procedure. The possibility of resorting to the simplified procedure of the Control Mechanism of 7 bis for operations is eliminated whose amount was less than 5 million euros. Since the entry into force of the RD on Foreign Investments, all applications submitted will have the same resolution period of 3 months, although the body competent to resolve will vary depending on the amount of the operation: it will be up to the head of the General Directorate of International Trade and Investment to decide on operations whose amount is equal to or less than 5 million euros, and to the Council of Ministers in the rest of the cases.
Common authorization regime. Among other novelties, regarding the common authorization regime, the following stand out:
✓ the consequences of the violation of the obligation to submit to any Control Mechanism when required: the unauthorized investor will not be able to exercise economic and political rights in Spanish society until the mandatory authorization is obtained – if obtained -; (ii) the possibility of authorizations being subject to conditions is expressly contemplated – something that has already been happening in practice in some cases;
✓ it is indicated that, when two or more investment operations take place within a period of two years between the same buyers and sellers, “they will be considered as one carried out on the date of the last operation” – note that the provision it means expressly to the identity of buyers and sellers, and not of object, but if the company object of investment varies (that is, if the company in which the investment is invested is not the same),
✓ It is not reasonable to understand that this is a single investment operation for the purposes of applying the Control Mechanisms—; and (iv) it is clarified that a single application must be submitted per investment operation, provided that there is an agreement between the parties, and not per investor—that is, if in the same operation there is more than one foreign investor subject to the Control Mechanism and it’s about a concerted operation (with investment agreements between all parties), the application must be unique for the operation and separate applications cannot be submitted per investor.
8. Possibility for third parties to be involved in the review process (requirements, procedural rights etc.)
The investigating authority shall be able to order the investor or the undertaking which is or has been the subject of the investment to provide the information or documents and to grant access.
9. Filing fee
The application is not subject to an administrative fee.
10. Submission deadline / stand-still obligation
See paragraph 7 above.
11. Availability of pre-notification / informal consultation
See paragraph 7.2 above.
12. Scope of information / documents required for filing
To initiate a foreign investment screening, the foreign investor applies on a prescribed form together with a questionnaire which will be approved in the corresponding regulation which develops the RD, but in general term such questionnaire will probably include the main following information:
basic data of the foreign investor and target person: legal entity (company name, registered office, ID No., management data) / natural person (name, surname, date of birth etc.)
information on the ownership structure of the foreign investor and the target person,
information on the products or services and business activities of the foreign investor and the target person,
a list of the EU Member States in which the foreign investor and the target person operate, information about their subsidiaries and branches in the EU,
the source of financing of the foreign investment, • the amount of foreign investment,
the date of planned completion of the foreign investment,
information on the involvement of the target person in projects or programmes of interest to the EU,
information on foreign investor´s current shareholdings and voting rights in the target person.
13. Proceedings timetable (timing for review)
The Control Mechanism of 7 bis is summarized in the following terms:
Prior authorization from the Council of Ministers is necessary to complete the investments direct foreign companies subject to the Control Mechanism of 7 bis, although it will correspond to the head of the General Directorate of International Trade and Investments to resolve on those operations whose amount is less than five million euros.
The maximum legal period to resolve the authorization request is three months. Fits the possibility of the deadline being suspended if additional information is required.
Silence is negative: the investment is considered not to have been authorized if the competent authority does not issue a resolution within the corresponding legal period. However, this does not mean that authorization cannot be granted after that period. Authorization may be granted after that period has elapsed, so the rejection due to silence only has the effect of enabling the investor to go, where appropriate, to the contentious-administrative jurisdiction. The administration will continue to be obliged to issue an express resolution in the authorization procedure and may grant authorization. This will surely be the scenario in complex procedures or that require the adoption of commitments.
14. Outcome of the review process (clearance, conditional authorisation, possible commitments etc.)
Article 7 and article 7 bis of Law 19/2003 do not expressly establish more than the possibility of an investment being authorized or denied, but Royal Decree 571/2023 has explicitly stated that administrative resolutions may consist of:
Authorizations without conditions.
Authorization denials.
Authorizations subject to conditions imposed by the resolution body or to commitments presented by the investor and accepted by the resolution body; either
The file due to withdrawal of the investor or considering that the operation is not subject to any regime of suspension of investment liberalization foreigners.
15. Publicity of the decision and confidentiality of the information provided
The information received by the Spanish authorities in application of the RD of Foreign Investments will be confidential and can only be used for the purpose for which it has been requested.
16. Can a decision be challenged or appealed (by whom, on what basis, in which timeframe)
As mentioned above, the confidential procedure for voluntary consultation with the General Directorate of International Trade and Investment will have a period of 30 business days to respond and will suspend the possibility of requesting authorization until the resolution is notified or the period passes without resolution. expresses. The response will be binding for the Administration in relation to the consultant. This procedure is regulated in article 9 of the RD.
The resolution of authorization requests will correspond, following a report from the Foreign Investment Board:
to the person in charge of the General Directorate of Trade and Investment when the amount of the investment is equal to or less than 5 million euros (here the reference is to the amount of the investment, and not, as in the exemption or de minimis threshold, to the turnover of the acquired company); and
to the Council of Ministers in the rest of the cases.
17. Sanctions for failure to notify (administrative fines or other administrative sanctions, criminal sanctions, civil law consequences)
Foreign direct investments subject to a Control Mechanism carried out without the mandatory prior authorization will lack validity and legal effects as long as it does not occur its legalization, which now includes that the foreign investor will not be able to exercise the rights economic and political in the Spanish company that is the object of the investment until the authorization.
In addition, a fine will be imposed simultaneously, which may amount to the same amount of the content economics of the operation.
18. Other national security review distinct from FDI rules
There is no other national security review.
19. Significant legislative/regulatory developments in the past year and possible proposals for reform
No other relevant changes have been implemented in the past year.
1. Relevant legislation (foreign investment legislation in force)
On 13 September 2023, the Swedish Parliament, following a report from the Committee on Justice, voted to enact new legislation relating to the FDI Regulation. The vote confirmed the Government Bill to the Parliament with no alternations. The new Act will enter into force on 1 December 2023 (the “Act”).
Supplementary ordinances and various statutory provisions have not yet been enacted.
See link (in Swedish): https://svenskforfattningssamling.se/sites/default/files/sfs/2023-09/SFS2023-560.pdf
The Inspectorate for Strategic Products (the “ISP”) is expected to be appointed as the supervisory authority.
3. Specific sectors covered (foreign investment regime involving specific sectors of the economy / business activities)
Under the new Act the Government will have the authority to review and prohibit foreign investments in a broad range of sectors, including critical infrastructure, technology and sensitive industries including defence-related industries. The sectors will be further exemplified in ordinances and regulations from the competent authorities. These are not yet enacted, but examples indicated in the preparatory works include services or infrastructure within energy, transport, healthcare, water supply, food production and food supply, telecommunications, banking and finance, security-sensitive operations, critical inputs or raw materials, activities whose major purpose is processing of sensitive personal data or location data, activities related to emerging technologies and other strategic protected technologies, military equipment and dual-use products.
4. Types of transactions caught and notification thresholds (definition of a foreign investor / activities / turnover / assets subject to foreign investment assessment / investment threshold – e.g. % of votes in the target triggering the notification)
The new Act is said to strengthen Sweden’s ability to safeguard national security and protect critical infrastructure from potential risks associated with foreign investments. The method is to prevent foreign direct investments that may harm national security, public order or public safety in Sweden. Certain investments posing security risks shall be reviewed and, if necessary, restricted or prohibited.
Foreign investor – Government proposal:
The Act defines a foreign direct investment as an investment made by an investor who is:
• a natural person with citizenship of a state not member of the European Union,
• a legal entity domiciled in a state not member of outside the European Union,
• a legal person directly or indirectly owned or controlled by a state not member of outside the European Union; or
• a legal person directly or indirectly owned or controlled by a legal person established in a state not member of a non-European Union or by a natural person who is a national of such a third country.
A foreign direct investment shall also mean an investment made by an investor for the benefit of any of the aforementioned entities.
Activities – Government proposal:
According to the act, activities that require protection pursuant refer to:
• essential activities,
• security-sensitive activities according to the Swedish Protective Security Act (2018: 585),
• exploration, extraction, enrichment or sale of critical raw materials or of metals or minerals that are strategically important for Sweden’s supply,
• large-scale processing of sensitive personal data or location data in or through a product or service,
• the manufacture or development of, research into or provision of war material in accordance with the Swedish Military Equipment Act (1992:1300), or the provision of technical support for such war material,
• manufacturing or developing, researching or providing dual-use items or providing technical assistance for such items; and
• research into, or provision of, products or technology in emerging technologies or other strategically important technologies or activities capable of producing or developing such products or technology.
By essential activities means activities, services or infrastructure that maintain or ensure societal functions that are necessary for society’s basic needs, values or security.
Assets subject to foreign investment assessment:
The definition does not distinguish between investments in the form of start-ups, known as greenfield investments, and investments consisting of the acquisition of existing assets, so called brownfield investments.
Investment thresholds:
Any party that intends to invest, directly or indirectly, in a limited liability company, a European company or an economic interest grouping engaged in activities worthy of protection shall notify the investment if, after the investment, the investor, or any member of its ownership structure, or any person on whose behalf the investor is acting, would, directly or indirectly, hold voting rights which correspond to or exceed any of the thresholds of 10, 20, 30, 50, 65 or 90 per cent of the voting rights in the legal person. A notification shall be made each time an investment is made whereby the investor, a member of the investor’s ownership structure or a person on whose behalf the investor is acting would have votes equal to or exceeding any of the thresholds. A notification must therefore be made if the party holds at least 10 per cent or more of the voting rights in the legal entity.
5. Parties to be included in the foreign investment assessment (notifying parties and protected entities)
The investor is liable to notify the supervisory authority about the investment, The target entity is under a statutory obligation to inform the investor about the requirement to notify. In the absence of a notification, the supervisory authority will arrange prepare the documents necessary for a notification.
6. Exceptions
A notification is not required for the acquisition of shares in a new issue with preferential rights in relation to the number of shares held by the investor.
7. Notification / review type (e.g. mandatory, pre-closing, suspensory)
Within twenty-five working days of a notification being complete, the investigating authority shall decide to either leave the notification without action or initiate an investigation of the investment.
A notification shall be left without action if the investigating authority assesses that there is no reason to assume that the investment is a foreign direct investment that could have a harmful effect on Sweden’s security or on public order or public safety in Sweden.
An investment subject to the notification requirement may only be implemented if the notification of the investment has been left without action or if the investment has been approved in a review.
The investigating authority may decide to initiate a review of an investment in an activity worthy of protection that is not subject to a notification obligation, if there is reason to assume that the investment may have a detrimental effect on Sweden’s security or on public order or public safety in Sweden.
If the review authority has initiated a review on its own initiative, the investment may only be implemented if the investment has been approved during the review.
Within three months of its decision to initiate an investigation, the investigating authority shall decide to either prohibit or approve the investment. However, if there are special reasons, the reviewing authority may communicate the decision within six months. If there is no reason to prohibit an investment that has been reviewed, it shall be approved.
8. Possibility for third parties to be involved in the review process (requirements, procedural rights etc.)
The investigating authority shall be able to order the investor or the undertaking which is or has been the subject of the investment to provide the information or documents and to grant access. An order may be accompanied by a fine.
9. Filing fee
There is no information in the Act about a filing fee. Supplementary ordinance (please see information presented in point 1 above) are not expected to set forth any filing fees.
10. Submission deadline / stand-still obligation
Within twenty-five working days of a notification being complete, the investigating authority shall decide to either leave the notification without action or initiate an investigation of the investment. The deadline does not start until the notification is complete.
The reviewing authority shall, within three months of its decision to initiate a review and decide to either prohibit or approve the investment. However, if there are special reasons, the reviewing authority may issue the decision within six months.
11. Availability of pre-notification / informal consultation
There is no information in the Act about this issue. It may the case that this matter will be specified in supplementary ordinance (please see information presented in point 1 above).
12. Scope of information / documents required for filing
The investor and the undertaking which is or has been the subject of the investment shall be obliged to provide, at the request of the supervisory authority, any information or documents necessary for its examination or to verify compliance with the notified conditions.
The supervisory authority shall have the right of access, to the extent necessary to obtain the information or documents, to areas, premises and other spaces, other than residential premises, used in the activities of the investor or the undertaking which is or has been the subject of the investment.
The investigating authority shall be entitled to order the investor or the undertaking which is or has been the subject of the investment to provide the information or documents and to grant access. An order may be accompanied by a penalty payment.
The investigating authority may request executive assistance from the Swedish Enforcement Authority to gain access. The provisions of the Enforcement Code on the enforcement of obligations that do not relate to payment obligations, eviction or removal shall apply.
Municipalities and regions and the authorities determined by the Government shall provide information to the review authority if the review authority requests it in connection with its review or its control of compliance with the conditions notified and it is necessary for the authority to be able to fulfil its mission under the Act.
According to the Bill, the review authority should consult with the Swedish Armed Forces, the Swedish National Board of Trade, the Swedish Civil Contingencies Agency and the Swedish Security Service in matters reviewed under the Act. The authorities that need to be included in the circle may also vary over time depending on the development of society.
Against this background and with reference to the proposal that the review authority should not be designated in the Act, it does not seem appropriate to regulate in law which authorities should be included in the collaboration. This should instead be regulated in an ordinance. The Government considers that it would be unnecessarily burdensome for the authorities to have to cooperate on all notified investments. Cooperation should be mandatory only for investments that the reviewing authority has decided to review. There is otherwise a risk that valuable resources and time would be used for unproblematic investments.
13. Proceedings timetable (timing for review)
The reviewing authority shall, within three months of its decision to initiate a review and decide to either prohibit or approve the investment. However, if there are special reasons, the reviewing authority may issue the decision within six months.
14. Outcome of the review process (clearance, conditional authorisation, possible commitments etc.)
A notification shall be left without action if the investigating authority assesses that there is no reason to assume that it is a foreign direct investment that could have a harmful effect on Sweden’s security or on public order or public safety in Sweden.
A foreign direct investment in activities worthy of protection shall be prohibited if it is necessary to prevent harmful effects on Sweden’s security or on public order or public safety in Sweden.
If there is no reason to prohibit an investment that has been reviewed, it should be approved.
15. Publicity of the decision and confidentiality of the information provided
According to the proposal, a confidentiality-breaking provision will be introduced in the Public Access to Information and Secrecy Act (2009:400), which means that international cooperation does not prevent the Swedish Armed Forces or the Swedish Security Service from providing information to the investigating authority if the information is necessary for the investigating authority to be able to fulfil its mission. Information may only be disclosed if the interest in disclosing the information takes precedence over the interest that secrecy is intended to protect.
16. Can a decision be challenged or appealed (by whom, on what basis, in which timeframe)
Decisions on injunctions and fines may be appealed to the Administrative Court in Stockholm.
Leave to appeal is required for appeals to the Administrative Court of Appeal.
Decisions on prohibitions regarding foreign direct investment in operations worthy of protection and decisions on approval with conditions may be appealed to the Government.
Other decisions may not be appealed.
17. Sanctions for failure to notify (administrative fines or other administrative sanctions, criminal sanctions, civil law consequences)
The investigating authority may decide to levy a penalty on a person who has not made a notification to the examining authority even though there was a duty to notify and has not fulfilled its obligation to provide information.
18. Other national security review distinct from FDI rules
None.
19. Significant legislative/regulatory developments in the past year and possible proposals for reform
Formally, the minister of Economic Affairs and Climate is the relevant authority. In fact, the Bureau Toetsing Investeringen (the Bureau for Verification of Investment) abbreviated in Dutch as the “BTI” leads the relevant processes.
3. Specific sectors covered (foreign investment regime involving specific sectors of the economy / business activities)
Sectors covered are:
• vital providers in the sectors of heat transport, nuclear energy, air transport and ground handling, port area, banking, financial market infrastructure, extractable energy, gas storage;
• providers of sensitive technology including: dual-use products (the definition of which is aligned with Regulation 2021/821), military goods and technologies included in the EU Common Military List; and
• managers of corporate campuses.
4. Types of transactions caught and notification thresholds (definition of a foreign investor / activities / turnover / assets subject to foreign investment assessment / investment threshold – e.g. % of votes in the target triggering the notification)
Transactions fall within the scope of the Vifo Act if the target company has an actual connection with the Netherlands. This concerns the factual connecting factors: is the company managed from the Netherlands and is production or research carried out in the Netherlands?
In addition, it is important to note that all acquirers fall within the scope of the Vifo Act. It is irrelevant whether the acquirer is from the Netherlands, Europe or another country. Even if the acquirer is a Dutch company, the transaction could fall within the scope of the Vifo Act and the parties must report the transaction to the BTI.
A transaction must be reported in case of so called acquisition activities relating to the abovementioned sectors. This includes investments, mergers, acquisitions and demergers that give a buyer control over a company.
For target companies providing sensitive technology (as mentioned above), a transaction falls within the scope of the Vifo Act if the buyer/investor acquires significant influence. A buyer/investor may be deemed to have acquired significant influence if he has 10% of the voting rights in the general meeting of shareholders of the target company.
5. Parties to be included in the foreign investment assessment (notifying parties and protected entities)
Notifying parties:
• the acquirer of:
✓ control or
✓ significant influence in the target company, and
• target company.
6. Exceptions
There are multiple exceptions to the Fivo Act control regime. These are applicable to situations wherein:
• it is only possible for the State of the Netherlands, provinces, municipalities or other public bodies, on the basis of a statutory provision, to be the acquirer of a certain acquisition activity, either directly or indirectly;
• another law makes the acquisition activity subject to a specific national security test, regardless of the content of that specific test;
• another law is applicable that provides for a specific test on national security grounds, but that test only does not apply to a target company because the acquisition activity does not meet a minimum scope of acquisition activity set out in the other law or is of a different nature from that prescribed by the other law for review.
• the acquirer is a legal entity that is independent of a listed target company, if the purpose of such acquirer is to promote the interests of such target company, and a company affiliated with it, which acquires control or significant influence after the announcement of a public offer for the duration of up to two years to protect such target company;
• the acquirer is the State of the Netherlands, a province or a municipality located in the Netherlands or another public body under Dutch law; or
• the acquirer is a legal entity whose statutory objective is to promote the interests of the financial system involved in an orderly and controlled manner in the resolution of a vital banking provider, for which it has been determined by De Nederlandsche Bank or, depending on the division of competences under Article 7 of Regulation 806/2014, the resolution board referred to in Article 42 of that Regulation, that the conditions for
resolution of that target company have been met.
7. Notification / review type (e.g. mandatory, pre-closing, suspensory)
Any intention to carry out an acquisition activity that falls within the scope of the Vifo Act must be notified by the intended Target or the acquirer to the BTI. In principle, an acquisition activity does not take place until:
• the BTI (on behalf of the Minister) has notified that no review decision is required; or
• a positive review decision has been made.
8. Possibility for third parties to be involved in the review process (requirements, procedural rights etc.)
Any third party that is a so called “belanghebbende” or “interested party/stakeholder” has the right to object to a decision by the BTI. In order to be an interested party, the party must have his own personal, objectively determinable, actual and sufficiently certain, as well as a directly ‘affected’ interest.
Such a party has the same rights as the party that filed the initial notification of the acquisition activities, such as the right to be heard, the right to a motivated decision and the right to file supporting evidence
9. Filing fee
None.
10. Submission deadline / stand-still obligation
There is a standstill obligation. The concerned parties are not allowed to effectuate the acquisition activity until:
• the BTI (on behalf of the Minister) has notified that no review decision is required; or
• a positive review decision has been made.
The BTI (on behalf of the Minister) can grant an exception to this standstill obligation.
Exemption can only be granted if the public interest is at stake, with a risk of economic, physical or social harm to society or parts thereof or adverse effects on financial stability, if the exemption is not granted
11. Availability of pre-notification / informal consultation
It is possible to (anonymously) engage informally with the BTI.
12. Scope of information / documents required for filing
• Description of the acquisition activities
• Information about the acquirer, the group companies of the acquirer, the representative of the acquirer and documents to prove his/her capacity
• Information about the target company (including the EU-states wherein the company is active, the sectors in which the company is involved and the sensitive technology involved (if any))
• The nature of the acquisition activities
• Answers to questions that are relevant to national safety
• Financing and motives for the transaction
• Copies of the most recent transaction documentation
• Whether or not the acquisition is also notified to other anti-trust authorities in different member states
• Whether or not the acquisition activities will likely have an effect on Projects of Common Interest
13. Proceedings timetable (timing for review)
Action
Timing
Notification of envisaged acquisition activities by the acquirer and/or the target
Before the acquisition takes place, or in case of an acquisition as a result of inheritance, within 2 weeks after the stake has been inherited
Notifcation by the BTI (on behalf of the Minister) whether or not a review decision is necessary
Within 8 weeks after receiving the notification of the envisaged acquisition, or if suspended by the BTI (on behalf of the Minister), within a maximum of 6 months
If the BTI (on behalf of the Minister) has decided that a review decision is necessary, a request for this review decision has to be filed in order to proceed
N/A
Review decision by the BTI (on behalf of the Minister)
Within 8 weeks after receiving the request, or if suspended by the BTI (on behalf of the Minister), within a maximum of 6 months (taking into account and subtracting earlier extension of the review period for the notification)
Please take into account that any time the BTI (on behalf of the Minister) requests for additional information, the term is suspended until said information has been provided.
If, following a notification, it appears that there is a foreign direct investment that falls within the scope of Regulation (EU) 2019/452, the periods of 6 months mentioned above can be extended with another 3 months.
14. Outcome of the review process (clearance, conditional authorisation, possible commitments etc.)
The BTI (on behalf of the Minister) can give full clearance to an acquisition activity if it decides that the activity does not constitute a risk to national safety. If it decides that it does in principle cause a risk to national safety, it can forbid giving effect to the acquisition activity.
However, it can also attach conditions to the approval, including but not limited to:
• adhering to additional safety and usage requirements regarding the usage of sensitive information;
• establishing a security commission or appointing a security official;
• prohibiting the sale of certain products or the rendering of services to certain companies or countries;
• establishing a supervisory board; and/or
• mandatory certification of shares through a trust fund.
If the target company is active with sensitive technologies, additional conditions can be attached, such as:
• giving certain technology or (genetical) code to the state for safekeeping;
• mandatory sharing of information with the BTI (on behalf of the Minister) before the termination of certain activities or the moving of certain activities to a third party country
15. Publicity of the decision and confidentiality of the information provided
The decision is not made public.
16. Can a decision be challenged or appealed (by whom, on what basis, in which timeframe)
Interested parties may object against the decision to impose requirements or regulations on an acquisition activity or impose a ban. They have to object within 6 weeks after the decision is made. The BTI (on behalf of the Minister) will have to decide on the objection within 12 weeks after the initial decision was made. The decision on objection can be appealed through an administrative procedure with the court of Rotterdam if the appeal is filed within 6 weeks after the decision on objection. A decision from the court of Rotterdam can be appealed within 6 weeks at the “College van Beroep voor het bedrijfsleven” or the “Trade and Industry Appeals Tribunal”.
17. Sanctions for failure to notify (administrative fines or other administrative sanctions, criminal sanctions, civil law consequences)
The consequences for failure to notify can be: Administrative sanctions
• A fine of up to a maximum of EUR 900,000 or a fine not exceeding 10% of the company’s annual turnover (for functionally offending natural persons or legal persons),
• the BTI (on behalf of the Minister) can order the acquirer or the target company to do what is necessary to resolve the undesirable consequences of the acquisition activities.
Criminal (breach of the Vifo Act is an economic crime) For intentional breaches:
• fines of up to EUR 90,000,
• imprisonment for a maximum of six years.
For unintentional breaches:
• fines of up to EUR 22,500,
• imprisonment for a maximum of one year.
Civil law consequences are (depending on the manner of acquisition) the effect that the acquisition is:
• deemed to be null and void, or
• voidable by a judge.
18. Other national security review distinct from FDI rules
Based on the Electricity Act 1998, any change must be notified in relation to control in a generating plant with a nominal electrical capacity exceeding 250 MW or a company operating a generating plant with a nominal electrical capacity exceeding 250 MW. The change must be notified with the Minister.
Under the Gas Act, any change relating to control in an LNG facility or an LNG company must be reported to the Minister by one of the parties involved in the change.
The Minister may impose further requirements on the proposed change of control relating to the qualifying generating plant or LNG facility. The Minister may also decide to prohibit the change. The Minister will do so if he or she considers that risks to public safety, security of supply or security of delivery arise because of the change of control.
• Telecommunicatiewet (Telecommunications Act) i.e. the Wet ongewenste zeggenschap telecommunicatie (Unwanted control of telecommunications act) which has been inserted into the Telecommunicatiewet
Based on the Telecommunications Act, the minister has the power to prohibit the acquisition and holding of ‘predominant control’ in a telecommunications party if, in the minister’s opinion, such control leads to a threat to the public interest. In order to keep track of qualifying takeovers in the telecommunications sector, the Telecommunications Act provides for a notification requirement. The notification obligation under the Telecommunications Act applies if (i) predominant control is acquired in (ii) a ‘telecommunications party’ and (iii) this leads to ‘relevant influence’ in the telecommunications sector.
Predominant control exists when effective control over the telecommunications party is conferred. This occurs, inter alia, when a party (i) alone or in concert, directly or indirectly, holds at least 30% of the votes in the general meeting, (ii) can appoint or dismiss more than half of the directors or supervisory board members, or (iii) is a priority shareholder.
A telecommunications party is a branch office, a Dutch legal person, a sole proprietorship or a partnership, being a provider or holder of a controlling interest in a provider of (i) an electronic communications network or electronic communications service, (ii) a hosting service, internet node, trust service or data centre (excluding data centres mainly for own use), or (iii) a category of networks or services designated as such by the Dutch government.
The question of whether predominant control results in relevant influence in the telecommunications sector determines what the consequences would be if this control would be used to cause harm. For this purpose, it is not important whether the acquirer or holder of control actually has the intention to cause harm.
19. Significant legislative/regulatory developments in the past year and possible proposals for reform
The Vifo Act has only entered into force on 1 June 2023.
1. Relevant legislation (foreign investment legislation in force)
Foreign investment is most welcomed in Portugal and any possible exception is specifically ruled by law, shall be duly founded and reasoned by the Portuguese Government by means of a formal decision, which is subject to full jurisdictional control. The relevant legislation in force is the Decree-Law nº 138/2014, of 15 September (“DL n.º 138/2014” – https://diariodarepublica.pt/dr/detalhe/decreto-lei/138-2014-56819089). The specific sectors covered are the main infrastructures and other assets relating to the national security, the strategic assets in the sectors of energy, transport and communications.
The foreign investment scrutiny stipulated by DL n.º 138/2014 shall comply with and respect the rules and obligations that bind Portugal internationally, contained in international conventions or in acts, agreements and decisions of the World Trade Organisation. Besides, the Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing the framework for the screening of foreign direct investments into the EU shall apply accordingly.
There is no specific foreign investment regulator. The relevant authority that shall conduct and decide upon the foreign investment scrutiny procedure is the Council of Ministers, which is the collegiate body of the Portuguese Government, following the proposal of the member of Government responsible for the sector in which the strategic asset is included.
3. Specific sectors covered (foreign investment regime involving specific sectors of the economy / business activities)
The specific sectors covered are the main infrastructures and other assets relating to the national security, the strategic assets in the sectors of energy, transport and communications.
4. Types of transactions caught and notification thresholds (definition of a foreign investor / activities / turnover / assets subject to foreign investment assessment / investment threshold – e.g. % of votes in the target triggering the notification)
The transactions caught are those involving the acquisition of direct or indirectly control over strategic asset(s) or activities, regardless of their legal form, where the ultimate acquiror is a person or entity sited outside the European Union (EU) or the European Economic Area (EEA), that may jeopardise the national security or the security of the national supply of services that are fundamental to the national interest, in a real and sufficiently serious manner, to be determined according to the following criteria:
• The physical security and integrity of strategic assets;
• The continuous availability and operability of strategic assets, as well as their capacity to punctually fulfil obligations, especially those of public service, imposed by law on the entities that control them;
• The continuity, regularity, and quality of general interest services provided by the entities controlling the strategic asset(s); and
• The preservation of the confidentiality, imposed by law or public contract, of the data and information obtained in the exercise of their activity by the persons who control the strategic assets and of the technological assets necessary for the management of the strategic asset(s).
In this context, “control” is the possibility of exercising a decisive influence over the strategic asset(s), under the terms of the Competition Act. It arises from any act, regardless of the form it takes, which implies the possibility of exercising, on a lasting basis, solely or jointly, and taking into account the circumstances of fact and law, a decisive influence over the activity of a company, including among others:
• The acquisition of all or part of the share capital; or
• The acquisition of ownership, use or enjoyment rights over all or part of a company’s assets; or
• The acquisition of rights or conclusion of contracts that confer a decisive influence on the composition or deliberations or decisions of the bodies of a company.
An acquisition of control will be considered as possibly endangering national security or the security of the supply of essential services for national interest in the sectors of energy, transport and communications, when:
• There are serious indications, based on objective elements, of the existence of connections between the acquiring entity and third countries that do not recognize or respect the fundamental principles of the democratic rule of law, or which pose a risk to the international community due to the nature of their alliances or their relations with criminal or terrorist organizations or individuals associated with such organizations, taking into account the official positions of the European Union on these matters, if any;
• The acquiring entity:
✓ Has in the past used the position of control held over other assets to create serious disruptions to the regular provision of essential public services in the country where they were located or in neighboring countries;
✓ Does not ensure the primary allocation of assets, as well as their reversion at the end of the corresponding concessions, when applicable, especially considering the absence of suitable contractual provisions for this purpose.
• The referred operations result in a change in the purpose of strategic assets when they threaten the continuous availability and operability of assets for the punctual fulfillment of applicable obligations, especially those related to public service, as provided by law.
5. Parties to be included in the foreign investment assessment (notifying parties and protected entities)
The member of the Government responsible for the area in which the strategic asset is included may, at any time, request any administrative entities, including sector regulators, to provide information or take any steps deemed necessary to exercise the powers provided for in DL n.º 138/2014.
The administrative entities shall take the necessary measures to cooperate effectively with the member of the Government responsible for the area in which the strategic asset in question is included, in the exercise of the powers provided for DL n.º 138/2014, including by exchanging the necessary information and carrying out checks, inspections and enquiries directed to any third entities, including companies or individuals, when they are justifiably requested to do so, ensuring the protection of personal, classified or national security data to which they have access, under the terms of the law.
Please also see information presented in Q 11 and Q 13 below (re: entities responsible for the foreign investment scrutiny procedure).
6. Exceptions
N/A
7. Notification / review type (e.g. mandatory, pre-closing, suspensory)
No foreign investment voluntary notification is mandatory for the purposes of DL n.º 138/2014.
However it will be recommendable to ensure legal certainty in cases where there might be any possible risk of foreign investment scrutiny procedure by the Government and, in this case, a consultation application will be mostly advisable (please see point 11. below).
8. Possibility for third parties to be involved in the review process (requirements, procedural rights etc.)
As mentioned in point 5. above, the member of the Government responsible for the area in which the strategic asset is included may, at any time, request any administrative entities, including sector regulators, to provide information or take any steps deemed necessary to exercise the powers provided for in DL n.º 138/2014.
Besides, under the general administrative law, third parties may be endowed with procedural legitimacy to be involved in the review process, even with limitations and related constraints, given the special confidentially and exceptional nature of this foreign investment scrutiny procedure.
9. Filing fee
N/A
10. Submission deadline / stand-still obligation
There is no submission deadline or stand-still obligation for the purposes of DL n.º 138/2014.
However, please see points 7, 11
11. Availability of pre-notification / informal consultation
A potential acquiror aiming to enter into an acquisition that may lead to the application of DL n.º 138/2014 may submit a consultation application (“requerimento de confirmação”) describing the terms of the proposed operation, henceforth requesting the Government member responsible for the sector in which the relevant strategic asset is integrated, a confirmation that an opposition decision will not be adopted.
Such confirmation will be deemed granted (tacit approval) if, within 30 days from the receipt of the consultation application, the applicant is not notified of the commencement of the foreign investment scrutiny procedure.
12. Scope of information / documents required for filing
The applicant must submit all the relevant information and documents describing the operation, including those demonstrating the inexistence of any risk to the national security.
Additionally, the Government member responsible for the sector in which the relevant strategic asset or essential service is integrated can establish and detail by decree (“portaria”) the specific information and documents required in each case.
13. Proceedings timetable (timing for review)
Within 30 days from the conclusion of an operation resulting, directly or indirectly, in the acquisition of direct or indirect control by a person or entity from third countries outside the EU and the EEA over strategic assets, or afterwords from the date when such acquisition become publicly known, the Government member responsible for the sector in which the relevant strategic asset or essential service is integrated may initiate the foreign investment scrutiny procedure, by means of a reasoned decision, in order to determine the risk of such acquisition to national security or to the security of the national supply of essential services for national interest.
If the foreign investment scrutiny procedure is initiated, the acquiror shall submit the relevant information and documents following as per any official requests, which can be listed and detailed by a decree (“portaria”).
From the date of complete submission of the information and documents required, and within 60 days, the Council of Ministers, upon the proposal from the Government member responsible for the area in which the relevant strategic asset is included, may take a final decision. The absence of a final decision within this period of 60 days is considered as a decision of non-opposition (tacit approval).
14. Outcome of the review process (clearance, conditional authorisation, possible commitments etc.)
The outcome of the review process may be:
• A decision of non-opposition (tacit or formal approval, i.e. clearance);
• A conditional decision subject to possible commitments; or
• An opposition decision (prohibition).
If an opposition decision is adopted, the acts and agreements related to the transaction at stake are null and void, including those related to economic exploitation or the exercise of rights over the assets or entities controlling them.
If a conditional decision is adopted, the validity and effectiveness of the acts and agreements related to the transaction at stake will be conditioned to the implementation of the imposed commitments, subject to inspection and additional review procedure.
15. Publicity of the decision and confidentiality of the information provided
The decisions taken by the Council of Ministers are obligatorily subject to publication in the Official Gazette (“Diário da República”).
Besides, the general rules on access to administrative documents as ruled by Law n.º 26/2016, of 22 August, shall apply. Among others, any confidential information by nature or law, including business secrets, shall not be disclosed or accessed.
16. Can a decision be challenged or appealed (by whom, on what basis, in which timeframe)
A decision of the Council of Ministers can be challenged or appealed under the general terms of the administrative law, by the applicant with procedural legitimacy to appeal and on the basis of any formal or substantial unlawfulness (illegality).
According to the Code of Administrative Procedure (CPA), approved by Decree-Law n.º 4/2015, of 7 January, the time limit for complaints and appeals by interested parties to whom the administrative act must be notified only runs from the date of notification, even if the act has been subject to mandatory publication (article 188, n.º 1). The time limit for complaints and appeals by any other interested parties against acts that do not have to be compulsorily published begins to run from the earliest of the following events: notification, publication or knowledge of the act or its execution (article 188(2)).
According to the Code of Procedure in Administrative Courts (CPTA), approved by Law n.º 15/2002, of 22 February, the deadline for filing a (single) appeal is 15 days for urgent cases (articles 36 and 147), 15 days for other specific cases in the CPTA (article 48(5) and 30 days in general (article 144).
17. Sanctions for failure to notify (administrative fines or other administrative sanctions, criminal sanctions, civil law consequences)
N/A
18. Other national security review distinct from FDI rules
N/A
19. Significant legislative/regulatory developments in the past year and possible proposals for reform
In accordance with the 2022 report of the European Commission on the first year of application of the mechanism for scrutinising foreign direct investments in the European Union, it has been established an inter-ministerial group at the technical level and Portuguese authorities were making efforts to update the current law.
However, the Commission’s 2nd annual report only mentions Portugal as one of the Member States with a “national mechanism for analysing FDI in place”.
Therefore, reforming the current mechanism remains an open possibility. Nevertheless, some considerations can be made in light of the Commission staff working document accompanying the first annual report and the European framework:
While Decree-Law 138/2014 seems aligned with the new European Regime, certain amendments might be made to focus on establishing procedural guidelines for information exchange and fostering collaboration with other Member States and the Commission, which might imply adjustments to the deadlines currently set for opening investigations and adopting decisions.
On the other hand, it is also possible that the national legislator will extend the scope of Decree-Law 138/2014 to other areas of economic activity, since the European regime also expressly mentions the following sectors: water, health, media, data processing and storage, aerospace, defence, electoral, finance and sensitive facilities.
