Tobias Björklund of Setterwalls said that in Sweden, since 1 January, rules of the Protective Security Act are applicable to transactions with security-relevant entities involved. But the Swedish government has also appointed a special investigator to assess how a national system for FDI screening could be designed. Björklund said: "A final report from the special investigator shall be published no later than 2 November 2021”.
Typically, there are different thresholds of investment in a target company at which FIC filing will become mandatory. For example, in Germany, filing is always required for acquisitions of parts of defence-related companies, of whatever size. In contrast, investments in critical infrastructure companies are only caught if a foreign investor envisages to purchase 10% or more of the voting rights in the target. It is usually not relevant if the investment is structured as a share or asset deal. In the UK, transactions involving the purchase of an interest of 25% or more in a target in 17 particular sectors of the economy will be subject to the mandatory notification regime.
In many countries different rules apply to EU and non-EU investors. It is usually also of particular importance if an investor or one of its majority shareholders is controlled by a foreign government or armed forces or has been involved in criminal activities. This is one of the provisions stipulated in the EU FIC regulation and has been assumed explicitly in the FIC rules in Spain and Germany. The UK also notes that this factor will be important in a national security assessment.
Anders Hagstrøm of Bech-Bruun in Denmark said: "The Danish FDI regulation also covers indirect investments. If an American company buys a Canadian company with a Danish subsidiary within one of the particularly sensitive sectors, the investment must be approved by the Danish Business Authority prior to completion”.
According to Lorenzo Stellini of Italian firm GPBL, FIC screening in the various European countries ultimately serves national security and economic interests. "In assessing whether a transaction requires filing, one will have to analyse three main elements: the industry sectors involved, investment thresholds and the background of the individual foreign investor," he said.
Similar to merger control filing rules, in European countries with FIC rules closing and implementing a transaction is prohibited before FIC clearance. Careful FIC analysis has therefore become vital in tech M&A transactions, due to the serious legal consequences resulting from a violation of the FIC rules. If closing occurred before clearance the transaction may be prohibited retrospectively and then has to be fully or partially reversed. Further consequences may include high fines and even criminal penalties for the investor and its management. In France, for example, the FIC authority may charge the foreign investor with a fine of twice the amount of the unauthorized investment or 10% of the annual turnover excluding taxes of the target company of the investment or €5 million for a legal entity or €1m for an individual, whichever is the highest.