Introduction
Prior notification process and screening procedure
Enforcement measures
On 15 September 2021, the Luxembourg minister for foreign and European affairs tabled a bill establishing a national screening mechanism for foreign direct investments that are likely to affect security or public order.(1) The purpose of the Bill is to implement EU Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019, which establishes a framework for the screening of foreign direct investments entering into the European Union (the Regulation). The Bill will affect investors outside the European Economic Area that wish to invest in a Luxembourg entity that conducts activities on Luxembourg territory and is regarded as critical in various sectors (eg, energy, health, defence, finance, telecoms, data, media). The investors concerned will be required to provide certain information to the competent authorities – namely the minister for the economy and the finance minister, prior to the proposed investment. In order to comply with the Regulation, the Bill provides for the following:
- a prior notification process and screening procedure; and
- enforcement in the event of non-compliance with the prior notification obligation or the screening decision.
The Bill also provides for:
- the establishment of a national contact point to ensure that the cooperation set out in the Regulation is achieved; and
- the creation an inter-ministerial committee to assist and advise the designated ministers.
In addition, the Bill contains provisions on an authority to process, collect and provide information, including personal data.
Prior notification process and screening procedure
The Bill introduces a national screening mechanism for foreign direct investments, in the form of an ex ante procedure subject to inter-ministerial supervision.
The first step requires the foreign investor to notify the minister for the economy of their intention to invest in critical infrastructure that falls within the scope of the Bill (outlined in article 2 of the Bill). According to the Bill's explanatory notes, this notification does not have a suspensive effect, which means that the investor may proceed with the preliminary stages of the proposed investment at their own risk.
The competent authorities will then perform a preliminary analysis on a case-by-case basis, which may lead to a screening procedure to assess whether the investment is likely to affect security or public order. If a screening procedure is initiated, it should not exceed 60 calendar days, although this period is suspended if additional information is requested and resumes only once such information has been received.
At the end of the procedure, a decision will be taken to either prohibit or allow the investment (article 10 of the Bill). If the screening procedure is initiated, the investors concerned may not proceed with the investment until an affirmative decision is issued.
The Bill provides for specific enforcement measures and sanctions where a prior notification is not made, or the screening decision is not respected. In particular, the competent authorities can order the foreign investor to modify the transaction or to restore the previous situation; alternatively, they can decide to withdraw the authorisation. They can also impose a fine of up to €1,000,000 on natural persons and €5,000,000 on legal entities in accordance with article 11 of the Bill; fines may be appealed to the administrative court within one month after the notification is made (article 12 of the Bill).
For further information on this topic please contact Margaretha Wilkenhuysen, Yoanna Staechele-Stefanova, Romain Sabatier or Antoine Pétronin at NautaDutilh Avocats Luxembourg by telephone (+352 26 12 29 1) or email ([email protected], [email protected], [email protected] or [email protected]). The NautaDutilh Avocats Luxembourg website can be accessed at www.nautadutilh.com.
Endnotes
(1) No 7885 (in French).