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EU FDI framework regulation (EU) 2019/452 (the “Regulation”)

  • Ireland
  • Competition, EU and Trade

05-11-2020

The Regulation, which was adopted by the EU during 2019, creates a system to cooperate and exchange information on investments from non-EU countries that may affect security or public order so as to make sure that the EU is better equipped to protect its interests, while remaining among the world’s most open investment areas.

The Regulation, which covers a broad category of foreign investments affecting “security or public order” will apply broadly from 11 October 2020. EU Member States are not obliged to screen FDI, but as a result of the Regulation, Member State and European Commission cooperation and information sharing on FDI will increase.

Irish businesses and foreign investors in Ireland may have to provide the Irish government with information on proposed or completed transactions. The information includes the ownership structure and identity of the investor involved, the source, value and timing of investment, and sectors and products/services involved.

EU framework for screening investments

Member States and the Commission will have the possibility to cooperate on incoming FDI affecting security and public order.

The Member State where the investment takes place:

  • has to provide information on the investment upon request;
  • has to notify cases which undergo national screening; and
  • can request comments/opinions.

Other Member States:

  • can request additional information; and
  • can provide comments.

The European Commission:

  • can request additional information; and
  • can issue opinions (possibly following comments from other Member States).

The Member State where the investment takes place:

  • has to take into account comments and opinions received; and
  • has the final word on how to treat the investment.

The usual length of the procedure is 35 days.

The following information will be exchanged:

  • Who is the investor and the target company?
  • In which sectors do they operate and where?
  • What is the value of the investment and where the funding is coming from?
  • When does the transaction take place?

The Regulation lists several EU funded projects and programmes which may be relevant for security and public order, and which will deserve particular attention from the Commission. That list includes for instance Galileo, Horizon 2020, TransEuropean Networks and the European Defence Industrial Development Programme. The list will be updated as necessary.

The Regulation also includes an indicative list of factors to help Member States and the Commission determine whether an investment is likely to affect security or public order including where the investment involves:

  • critical infrastructure;
  • critical technologies;
  • the supply of critical inputs, such as energy or raw materials;
  • access to sensitive information or the ability to control information, or
  • the freedom and pluralism of the media.

Member States and the Commission may also consider whether the investor is controlled by the government of a third country, whether the investor has previously been involved in activities affecting security or public order, or whether there are serious risks that the investor engages in criminal or illegal activities.

Ireland and the Regulation

The Department of Business, Enterprise and Innovation held a public consultation on Ireland’s implementation of the Regulation in May 2020. This consultation will help to inform the policy position that Ireland adopts in relation to the Regulation, with particular consideration given to the potential establishment of an Investment Screening mechanism in Ireland.

On 13 September 2020, Ireland announced that it was introducing primary legislation to provide for a domestic Irish legislative screening mechanism under the Regulation.

The Irish government’s Legislation Programme for Autumn 2020, refers to the Screening of Investment into Ireland Bill (the “Bill”). The programme notes that the purpose of this Bill is “To put in place a framework for screening foreign direct investments into Ireland from third countries” and that work is underway on drafting the Bill.

IDA Ireland is now also developing a new five-year strategy. This strategy will map the future of FDI jobs growth and transformation in Ireland, setting ambitious targets for the coming five years. No doubt, IDA Ireland will consider the Regulation while developing its new strategy.

We will be providing further updates as the legislation is initiated and enacted.

For more information, please contact

Sean Ryan, Partner in our Corporate department - SeanRyan@eversheds-sutherland.ie

Emma Mullen Reynolds, Solicitor in our Corporate department - EmmaMullenReynolds@eversheds-sutherland.ie