New legislation
Justification for restrictions
Vertical restrictions

An aspect to consider in merger and acquisition (M&A) transactions is the need for government approvals. By European standards, Spain had a somewhat liberal legislation, which previously only required reporting of the investment by a non-Spanish investor (a horizontal restriction) except for certain strategic sectors for reasons of public policy and security (a vertical restriction) where approval was required.

New legislation

This has changed since Royal Decree Laws 34/2020 and 20/2022. The new legislation requires official approval if a foreign investor acquire 10% or more of the corporate capital of a Spanish company or the control of the Spanish company (by way of a merger or by appointing most directors). This restriction applies to:

  • investors of third countries (which are not members of the European Union);
  • investors of member countries of the European Union when such investors are controlled by a non-European entity; or
  • a non-European entity that has direct or indirect shareholders exceeding 25% of the capital or voting rights of the European investor.

The legislation has also expanded vertical restrictions applicable to certain sectors of the Spanish economy. There has been recent trend in which countries that were previously very liberal have now introduced foreign investment restrictions, and Spain is no exception to this. An example of this is the recent National Security and Investment Law (2021) in the United Kingdom.

Justification for restrictions

In their preambles, the new laws give vague justifications for the new restrictive regime by referring to:

  • the impact of the pandemic;
  • geopolitical tensions;
  • disruption in the value chain; and
  • instability in the financial markets.

However, there are other reasons for the regime – namely, the decline of share prices in the Spanish stock market that are creating a takeover threat by aggressive investors and funds wishing to control the largest corporations of the Spanish economy at a low share price. However, the horizontal restrictions are temporary, as they will be removed after 31 December 2024. It is curious that, prior to Spain joining the European Union, horizontal restrictions were driven by balance of payments and employment or technology considerations. In other words, foreign investors were directed to sectors that would increase exports, ensure a better training of local employees or promote innovation. Nowadays, the parameter seems to have moved to protect entrenched interests in local listed companies, meaning, in the words of journalist Martin Wolf, the "plutocratic class" with close connections with the political establishment.

Vertical restrictions

Regarding vertical restrictions, the new legislation has reinstated the existing restrictions on:

  • critical infrastructure;
  • double use of technology;
  • telecoms;
  • defence and the aerospace industry;
  • energy and oil; and
  • food security.

It has also expanded them to new areas such as:

  • digital infrastructure;
  • semiconductors;
  • artificial intelligence;
  • cybersecurity;
  • nuclear energy storage;
  • nanotechnology;
  • data protection; and
  • mass media.

Certain restrictions are difficult to understand, such as the licensing for the acquisitions of newspapers and TV channels. The reason for this may be the influence of TV and certain newspapers in public opinion during electoral periods. An example was the government veto of the takeover by Vivendi of the El País newspaper. Regarding semiconductors, the restrictions seem premature, as Spain does not have a manufacturing base, so an open policy would make more sense. In defence, the government decisions have been erratic. Santa Barbara SA, the manufacturer of a version of the Leopard tank is an affiliate of General Dynamics. In Indra, a participant in the future European combat aircraft, there is a significant stake of non-Spanish shareholders.


Vertical restrictions are now greater, but their enforcement depends very much on political vagaries. All of this amounts to a recommendation that a potential investor carries out prudent due diligence to ascertain any political charge before embarking on a M&A transaction in certain sectors.

For further information on this topic please contact Alfonso Lopez-Ibor or Olivia López-Ibor Jaume at López-Ibor Abogados by telephone (+34 915 21 78 18) or email ([email protected] or [email protected]). The López-Ibor Abogados website can be accessed at