A world of opportunity - Foreign investment in Europe
02 October 2023
02 October 2023
The investment regimes in Europe are among the most open in the world. But a growing concern about the impact of foreign investment on security and public order has led to increased regulation.
This guide will help you navigate the foreign investment control regimes in the major European jurisdictions.
Use the interactive map on the PDF guide to explore a jurisdiction of interest.
In recent years, there has been a proliferation of foreign direct investment (FDI) regimes worldwide, including in the EU.
It is therefore increasingly important to consider what FDI approvals may be required early on in any investment / M&A activity and to ensure that the deal timetable factors in the relevant review periods. Our team is very experienced in coordinating FDI filings alongside merger control and other filings.
In March 2019, the EU enacted the EU Screening Regulation, which provides for a cooperation mechanism for screening foreign direct
investments in EU Member States. The Regulation came into effect on 11 October 2020 and it gives EU Member States and the European
Commission the ability to exchange information, provide comments and issue opinions on foreign direct investment. However, Member States
retain decision-making power in relation to FDI in their jurisdictions.
In March 2020, the European Commission issued guidance to Member States on foreign direct investment and the protection of Europe’s
strategic assets. The guidance was issued ahead of the EU Screening Regulation entering into force and as a reaction to the economic effects
of the Covid-19 pandemic. In the guidance, the European Commission urged Member States without a (fully-fledged) screening mechanism
to implement one and in the meantime to use all other available options to address cases where a foreign acquisition would create a risk to
security or public order in the EU.
As of 2 September 2022, the European Commission had screened over 740 FDI transactions. In its second annual report (published in
September 2022) the European Commission stated that 86% were assessed in 15 calendar days and less than 3% of transactions resulted in a
European Commission opinion (reserved for cases raising more complex issues).
As of August 2023, 19 Member States have FDI screening mechanisms in place. In addition to the jurisdictions covered in this note, the
following countries have FDI regimes in place: Austria, Czech Republic, Denmark, Finland, Hungary, Latvia, Lithuania, Malta, the Netherlands,
Poland, Portugal, Romania, Slovenia and the Slovak Republic.
There are also proposals for new / expanded regimes in Croatia, Estonia, Greece, Ireland and Sweden. Of the Member States,
only Bulgaria and Cyprus have no publicly reported initiative underway to introduce an FDI screening mechanism.
A new screening regime for FDI by non-EU investors into Belgium entered into force on 1 July 2023.
Investments in a Belgian entity active in:
Investments by non-EU investors (ultimate beneficial owner) that result in:
Verification Procedure: an initial review period of 30 calendar days applies; the clock will be stopped if the Interfederal Screening Committee (ISC) requests additional information.
Screening Procedure: if the transaction requires further investigation, there will be a further review period of at least 28 calendar days.
Whether the investment could have an impact on national security, public order, or the strategic interests of the Belgian federated entities, taking into account whether:
Fines of up to 30% of the investment value in relation to the Belgian entity for:
Where a previously unnotified investment is notified within 12 months of completion, the fine will be limited to 10% of the investment value.
Fines of up to 10% of the investment value for:
Generally, foreign investments in France only require declarations to be made to the Banque de France after completion. However, prior consent must be sought for investments in certain sensitive or strategic sectors.
Any activity involving the exercise of public authority or which relates to activities:
The French Monetary and Financial Code sets out a list of business sectors that are considered "strategic" (including defence, transport, energy, water, health, R&D activities relating to critical technologies etc.).
Filing is mandatory and authorisation must be granted before the investment can be completed.
30 business day screening period to assess whether the transaction is in scope or is authorised without conditions.
A further 45 business day period if a more in-depth review is needed, including if conditions need to be imposed.
Whether the investment affects French national interests. The authorisation can also be refused if French authorities consider that the investor:
For making an investment without required prior authorisation or non-compliance with conditions:
Currently no significant reforms are planned.
Germany has an established foreign direct investment review mechanism which allows the Federal Ministry of the Economy to review investments for national security concerns.
There are two regimes: the cross-sectoral review and the sector-specific review.
Cross-sector review: transactions in any sector may be called in. However, 27 sectors have been specified as potentially giving rise to security concerns (including energy, IT, telecommunications, finance, transport, health, water supply and critical or emerging technology sectors such as AI, robotics etc.).
Sector-specific review: certain defence and IT security companies (including manufacturers/developers of weapons and certain other military technology and companies with IT security features used for processing classified government information).
Cross-sector review: for acquisitions by non-EU resident investors relating to 27 specified activities notification is mandatory. For any other acquisition, filing is voluntary.
The acquirer may also seek a certificate of non-objection for non-notifiable transactions.
Sector-specific review: filing is mandatory for acquisitions by non-German investors.
Cross-sector review and sector-specific review: 2 months to initiate a review and, if a review is initiated, up to 4 months to review the proposed investment. In certain circumstances, the review period may be extended by up to 4 months.
Cross-sector review: whether the acquisition poses a threat to the public order or security of Germany, another EU Member State or certain projects of EU interest. Particular factors which may suggest a threat to public order or security include:
Sector-specific review: whether the acquisition poses a potential threat to the essential security interests of Germany.
Failure to comply with notification obligations, prohibitions or orders issued by the Ministry of Economy or with gun-jumping provisions may be sanctioned as a criminal offence, as well as incur administrative fines of up to €500,000.
Currently no significant reforms are planned.
Generally, Italy does not distinguish between domestic, European and foreign investors. However, with respect to specific strategic sectors, the Italian Government has the power to veto certain transactions in order to protect the national interest.
Any activity involving:
All sectors: any resolution, arrangement or transaction executed by companies owning strategic assets in Italy which results in a change in the assets' ownership structure or purpose.
Defence and national security: any acquisition by Italian, EEA and non-EEA investors which exceeds the following thresholds:
Other sectors: acquisition by EU/EEA investors (including Italian investors) of control of an Italian company active in the communications, energy, transport, healthcare, agri-food or financial sectors.
Any acquisition by non-EEA investors which results in control or exceeds (including any shares already directly or indirectly owned) the following thresholds:
5G, cybersecurity and cloud services: any purchase of goods or services relating to the design, implementation, maintenance and operation of these services in Italy, or of technology-intensive components required for such implementation or operation.
Filing is mandatory and the Government has the power to intervene if no filing is made.
Pre-notifcation procedure: 30 days, after which the parties will be informed whether a notification is required.
Review period: up to 45 business days from filing (which may be extended to a maximum of 75 business days where further information is requested).
5G services: review period of up to 30 business days for 5G networks, but this may be extended by 40 business days depending on the complexity of the case.
The Italian Government will assess whether the resulting situation entails a risk to Italy's essential interests, public order or public security, considering (i) the transaction structure; (ii) continuity of supply; (iii) the acquirer's activities; and (iv) the acquirer's links to states that do not recognise democracy or to criminal organisations.
It will also take into account the position of the EU (if any) and the existence of sector regulations.
For failing to notify a transaction, fines may be imposed amounting to:
The transaction will also be void.
Currently no significant reforms are planned.
A new screening regime for FDI by non-EU/EEA investors into Luxembourg entered into force on 1 September 2023.
Investments in an entity active in a critical activity in Luxembourg, including activities in the energy, transport, water, healthcare, telecommunications, airspace and defence sectors, as well as certain key financial sector activities such as activities of the central bank or relating to Luxembourg's financial infrastructure (including payment and settlement systems).
Investments by non-EU / EEA investors that result in the acquisition of direct or indirect control of a Luxembourg entity operating in one of the affected sectors.
An investment results in the acquisition of control if the investor obtains:
However, acquisitions of securities which do not grant the investor any direct or indirect control over the target and which are being made with the intention to effect a financial placement (portfolio investments) are explicitly excluded from the notification requirement.
Filing is mandatory and approval must be granted before the investment can be completed.
The notification will trigger a pre-assessment phase of up to 2 months during which the Ministry of Economy will decide whether to launch an in-depth screening procedure. The in-depth screening procedure may last up to 60 calendar days.
During the pre-assessment phase and the screening procedure, the foreign investor may continue to take preparatory steps with a view to finalising the investment at the investor's own risk. However, the investment must not be completed until the Ministry of Economy has issued a positive screening decision.
Whether the investment is likely to affect the security of or public order in Luxembourg in accordance with the following five factors:
Failing to notify a transaction or completing a transaction without approval may result in an order requiring the investor to modify the terms of the investment or to unwind it entirely.
Failure to comply with specific orders and injunctions may result in fines.
Foreign investment in Spain is subject to certain authorisation and/or declaration requirements. Traditionally, foreign investments within the defence sector have been subject to prior authorisation by the Council of Ministers which also has the power to require prior authorisation for foreign investment on an ad hoc basis. In March 2020, the Spanish Government enacted a new regime applicable to non-EU/EFTA investors in the context of the ongoing Covid-19 crisis and extended it in November 2020 to EU/EFTA investors in certain cases ("New FDI Control"). As the former regime was not repealed, there are currently two parallel regimes in force in Spain.
Ex-post declarations: all sectors.
Prior authorisation: defence activities and under the New FDI Control:
Prior declaration: all sectors if the investor is from a country identified as a tax haven and the investment is 50% or more, unless the investment is made in a listed company or regulated fund.
Other sectors: there are additional regulations for acquisitions in the audio-visual, energy and air transport sectors.
Ex-post declarations are required for the following investments by foreign investors:
Investment in a listed company carrying out activities related to national defence will require authorisation where the investment represents more than 5% of the target's share capital or allows the investor to participate in the target's managing body.
Prior authorisation is required for:
Both declarations and prior authorisations (if required) are mandatory.
An investor may carry out an investment immediately after submitting a declaration, but must wait for prior authorisation where that is required.
Transactions of less than €1m in value are exempt from the requirement for prior authorisation (except for national defence).
Maximum 6 month review period. If approval is not granted within the 6 month review period then the transaction is deemed to have been prohibited.
Under the New FDI Control, a fast-track procedure with a review period of 30 days is available for transactions whose value is less than €5m.
Assessment will generally be based on the Spanish public interest. Under the New FDI Control, transactions will be assessed to determine whether they may jeopardise security, public order or public health in Spain.
The transaction may be rendered void.
Failure to obtain authorisation prior to investment (where required) may result in a fine of between €30,000 and the total amount of the investment and a public or private warning.
In November 2020, the UK Government announced a new national security and investment regime for the UK. The regime entered into force on 4 January 2022 and applies to domestic and foreign investors.
Mandatory regime: the Government has identified 17 key sectors as potentially raising particular national security concerns (including civil nuclear, communications, data infrastructure, defence, energy, transport, military and dual-use, critical suppliers to the government and various technology sectors such as artificial intelligence, cryptographic authentication, advanced robotics, computing hardware, quantum technology and advanced materials). Specific activities in these sectors are subject to mandatory prior approval.
Voluntary regime: all other activities or sectors. Government guidance indicates a voluntary filing may be more advisable when the target carries on activities which are closely linked to specified activities in the key sectors.
The Secretary of State also has the power to call in transactions in any sector.
Mandatory regime: acquisitions of control over a qualifying entity which carries on specified activities within the 17 key sectors are subject to mandatory notification.
Control is generally defined as acquiring more than 25% of the shares/voting rights. Acquisitions which result in investor holding more than 50% or 75% will be treated as new trigger events.
A qualifying entity:
However, in order to be subject to mandatory notification, the qualifying entity must generally carry on the relevant specified activities in the UK.
Voluntary regime: in addition to the trigger events applying to the mandatory regime, the acquisition of "material influence" is a trigger event for the voluntary regime.
Asset deals (including land and IP) may also be caught by the voluntary regime. Acquisition of a right or interest will be a trigger event if the person is able to: use the asset (to a greater extent than before); or direct/control how the asset is used (to a greater extent than before).
Transactions which fall within the mandatory notification regime must be notified and approved before completion.
Parties may choose to make a voluntary filing for transactions which do not fall within the mandatory regime. The Secretary of State has the power to call in a transaction for up to 5 years after the event, but this is reduced to 6 months from when the Secretary of State is made aware of the trigger event.
Initial 30 working day review period.
If the transaction is called in for a more detailed review, the Secretary of State has an additional period of 30 working days following the call-in notice, extendable by a further 45 working days. Further extensions may be agreed.
When deciding whether to issue a call-in notice, the Secretary of State expects to primarily consider whether:
If a transaction is called in, the Secretary of State will then determine whether it gives rise to a national security risk and if so, what remedies should be imposed.
If a transaction which falls within the mandatory regime is closed prior to approval, it will be void. Other sanctions include: