Screening of third country transactions in Ireland to become the norm

Under the terms of the Screening of Third Country Transactions Bill, parties to Irish transactions would have to notify the minister for enterprise, trade and employment about transactions involving third countries outside of another EEA jurisdiction or Switzerland with a value of up to €2,000,000, or that relate – directly or indirectly – to Ireland’s critical infrastructure, including energy, transport, water, processing of personal data and health.

Parties must also notify the minister if such a transaction involves the use of critical technologies such as artificial intelligence, cybersecurity, and defence, as well as the supply of energy, raw materials or food. If a transaction is notifiable, the parties must inform the minister of it at least 10 days before its anticipated completion.

Neil Keenan of Pinsent Masons said the value threshold for triggering a review of a transaction is “relatively low in the international context”, meaning reviews “are likely to become a feature of many Irish-based transactions” in future. He said: “We expect mergers and acquisitions to be particularly affected by the change, though it may also impact on other general corporate transactions involving investment or fund-raising from entities outside of Ireland or other EEA countries or Switzerland.”

Keenan said: “The Bill considers both the UK and U.S. to be third countries, which will have a significant impact on a lot of companies undertaking transactions in Ireland – as well as Irish firms receiving investment from those jurisdictions.”

The Bill sets out the information that must be submitted with the notification, including the transaction value, the source of funding, annual turnover and number of employees of each party. The minister would then have the power to block transactions that they deemed to present risks to national security or public order in Ireland.

If the minister is not notified of a transaction, they may still review it within five years of the completion date. They also have the ability to review the transaction for a period of six months which starts on the date that they first become aware of the transaction. However, the law will not have retrospective effect and so will not apply to any transactions completed before it comes into force.

The Bill follows the introduction of EU regulations in 2019 that established a framework for the screening of foreign direct investments into the union. Similar measures were introduced in the UK after the National Security and Investment Act came into force earlier this year.

Keenan said: “Companies will need to consider how the Bill applies to any Irish transactions, along with the requirement to notify and seek clearance from the Competition and Consumer Protection Commission (CCPC) about certain notifiable mergers – which has also recently been amended by the 2022 Competition (Amendment) Act. The sectors likely to be impacted most include energy, financial services, technology and life sciences – it will particularly affect any clients operating in the AI, robotics or cybersecurity space or any clients that process personal data or sensitive information.”

“Clients will need to complete an analysis on the applicability of the Bill when considering potential acquisition targets in Ireland, and consider how any obligation to make a filing will impact transaction timelines. This should be factored in as early as possible to avoid delays,” Keenan added.

Sarah Hope of Pinsent Masons said: “The obligation to make a filing may also result in an increase of split exchange and completion transactions, where the parties enter into a binding agreement for sale which is conditional upon approval being received from the minister. The minister will also have the ability to block a transaction that they believe affects, or would be likely to affect, the security or public order of the state.”

She added: “Domestic clients will need to consider this as a possible outcome when transacting with counterparties outside of an EEA country or Switzerland. Likewise, international companies doing business here will need to be prepared to make a filing to the minister and provide the requisite information for review.”