An extract from The Foreign Investment Regulation Review, 8th Edition

Foreign investment regime

i Preliminary note

First, with regard to foreign direct investment (FDI) measures, it is essential to clarify that the Portuguese government has not implemented any restrictions as a result of the covid-19 pandemic and as such the Portuguese FDI legal framework (which has been in force since 2014) has remained unchanged.

In fact, in 25 March 2020, the European Commission (EC) issued new guidance on foreign investment screening in response to the current health and economic crisis, aiming to preserve EU companies and critical assets, notably in areas such as health, medical research, biotechnology and infrastructure essential for security and public order. Following this guidance, some Member States have already announced measures introducing a more restrictive approach to foreign investment reviews in Europe. However, given that the EC guidance does not introduce any new binding laws in relation to foreign investment screening, either at EU or Member State level, the relevant Portuguese governmental authorities have taken no action in this direction nor announced any future measures and they are not expected to do so.

Therefore most foreign investment in Portugal continues to be unregulated. Nevertheless, authorisation is required for investment in sensitive areas, in particular defence and other regulated areas such as banking, media and financial services; however, the majority of requirements apply to both national and foreign investors. Foreign investors in Portugal must also take into consideration EU and national competition rules and other EU policies.

ii CorporateLegal environment

As a general rule, Portuguese law does not impose any specific restrictions on foreigners or foreign investment in corporate matters.

Notably, regulations on the incorporation of companies, mergers and acquisitions, the day-to-day business activities, duties and liability of shareholders and directors, merger control and antitrust apply irrespective of nationality.

Notwithstanding the above, some differences in the treatment of Portuguese and foreign entities do exist under Portuguese law (although exceptional), such as the approach taken in connection with groups of companies.

Regulation on affiliated companies and groups

The Portuguese framework on corporate groups is based on the central concept of an 'affiliated company', which is deemed to exist upon the occurrence of legally defined types of relationships between companies.

Holding companies are legally authorised to direct the management of their subsidiaries if a company is wholly controlled by another company, or a company agrees to subject its management to the direction of another company (which may or may not be its parent company). Holding companies may also issue binding orders to the board of directors of subsidiaries. The orders may be disadvantageous to the controlled company if they serve the corporate group's interests or those of the holding company (despite the existence of specific limits).

This potential power is nevertheless counterbalanced by the requirement that the holding company comply with several duties in relation to the subsidiary's financial undertakings. The holding company is liable for all obligations of the subsidiary arising before or after the occurrence of the change in control, and the subsidiary may request that the holding company assume responsibility for its annual losses.

It is important to take into consideration that some of the aspects of the legal framework on groups and, in particular, the possibility of issuing binding orders and the liability of the holding company, are only applicable if the registered offices of both companies are located in Portugal.

iii Regulated sectorsBanking and other financial institutionsSummary of supervisory system

Under Portuguese law, the provision of banking services is a regulated activity that may only be carried out professionally by authorised credit institutions or financial companies and it remains subject to the supervisory powers of the regulatory authority of the Member State of origin.

Supervision of the Portuguese banking system is governed by the Portuguese Credit Institutions and Financial Companies Legal Framework, approved by Decree-Law 298/92 of 31 December, as amended, and the notices, instructions and circulars issued by the Bank of Portugal. The supervision of credit institutions, and in particular their prudent supervision, including monitoring activities carried out abroad, is entrusted to the Bank of Portugal under its basic law enacted by Law 5/98 of 31 January, as amended, and Decree-Law 298/92.

InsuranceSummary of supervisory system

Under Portuguese law, insurance services are a regulated activity and may only be carried out professionally by authorised insurance companies and are subject to the supervisory powers of the regulatory authority of the Member State of origin.

Supervision of the Portuguese insurance system is governed pursuant to Decree-Law 94-B/98 of 17 April, as amended, which establishes the legal framework and requirements for taking up and pursuing insurance and reinsurance activities, and the regulations and circulars issued by the Portuguese Insurance and Pension Funds Supervisory Authority (ASF).

EnergySummary of the supervisory system

The supervision of energy production, transport, distribution and trade is regulated by Decree-Law 97/2002 of 12 April, as amended. Article 1 thereof establishes the Energy Sector Regulatory Authority as the domestic regulatory authority for the gas and electricity sectors.

Production, transport, distribution and trade of electricity

The legal framework for the production, transport, distribution and trade of electricity is regulated under Decree-Law 29/2006 of 15 February, as amended, which establishes the general grounds for the organisation and functioning of the national electricity system, and under Decree-Law 172/2006 of 23 August, as amended, which specifically regulates the production, transport, distribution and trade of electricity in Portugal.


Decree-Law 172/2006 establishes that energy production activities under the ordinary regime are free, subject to the granting of a production licence following a request by the licensing entity.

Transport and distribution

Both the transporting and distribution of electricity will be carried out under a public service concession agreement awarded through a public tender, unless the concession is granted directly to a state-controlled entity. The concession is performed under a public service framework on the basis of its classification as a public utility.


Decree-Law 172/2006 states that trade in electricity is free, subject to a licence granted by the licensing entity. The licence must be requested by a company that is registered in an EU Member State.


The legal framework governing the telecommunications sector is regulated under Law 5/2004 of 10 February, as amended (the Electronic Communications Law).

Pursuant to the Electronic Communications Law, the provision of electronic communications networks or services requires a general authorisation. Companies that intend to offer networks and services of electronic communications must submit a short description to the regulator, ANACOM, of the network or service they wish to initiate, and give notice of the date on which the activity is expected to commence, further submitting any details necessary for their full identification under terms to be defined by ANACOM. Once that notification is made, undertakings may immediately commence the activity, subject to the limitations resulting from the allocation of rights to use frequencies and numbers.

Television broadcasting

The legal framework for television broadcasting is based on the Television Act, which governs access to and the exercise of television activity. The main regulatory authority for such activity is the Portuguese Regulatory Authority for the Media.

The Television Act establishes that channel licences are granted through a public tender, and lays down restrictions regarding minimum capital requirements and the ownership of capital (in particular regarding political associations, trade unions, etc.).

Air transport

Portuguese law does not impose any specific restrictions on foreigners or foreign investments in air transport matters. Most mandatory requirements and procedures are established in Regulation (EC) No. 1008/2008 of the European Parliament and of the Council of 28 September 2008 on common rules for the operation of air services in the Community. For an undertaking to be granted an operating licence by the competent licensing authority (in Portugal, the ANAC, pursuant to Decree-Law 40/2015 of 16 March), EU Member States or nationals of EU Member States must own more than 50 per cent of the undertaking and effectively control it, directly or indirectly, through one or more intermediate undertakings, except as otherwise established in an agreement with a third country to which the European Union is a party.

Restricted activities

In general, foreign and domestic companies are free to invest in any industry. However, there may be specific requirements when performing activities for the public administration sector, such as winning a bid for a concession contract.

Therefore, private firms, except when licensed by a public entity through an administrative contract, are prohibited from directly carrying out the following economic activities:

  1. collection, treatment and distribution of drinking water and disposal of urban wastewater, both through fixed networks; and solid waste collection and treatment in the case of municipal and multi-municipal systems;
  2. rail transportation operated for public service;
  3. operation of seaports; and
  4. exploitation of natural resources of the subsoil or that may be considered part of the public domain.

Similarly, foreign investment projects must be compatible with specific legal requirements if they could in any way potentially affect public policy, or safety or health matters.

Projects of this nature require an assessment of compliance with statutory requirements and preconditions established under Portuguese law.

Included in this category are activities concerning the production of weapons, munitions and war materials, or those that involve the exercise of public authority. Such activities must comply with legally mandatory conditions and requirements, and thus require specific licences. Access conditions and the pursuit of commerce and industry of goods and military technology are regulated by Law 49/2009 of 5 August, namely the conditions of access to trading activities (in addition to the purchase, sale and lease activities of any of its contractual forms, import, export, re-export activities or flows of military goods and technologies, as well as broker-related business) and industry (research, planning, testing, manufacturing, assembly, repair, modification, maintenance and demilitarisation of military goods or technology) of military goods and technologies, as well as military activities themselves, either by enterprises and individuals based in Portugal, or qualified entities in other EU Member States.

Non-European investment in national strategic assets – those in connection with the main infrastructures and assets related to defence and national security, or to the basic energy, transportation and communication services – may have to comply with the Strategic Assets Special Framework.

The Strategic Assets Special Framework sets out some restrictions that specifically apply to entities from outside the European Union and the European Economic Area (Foreign Investors) that intend to acquire direct or indirect control (Control) over assets in specific sectors of the economy: main infrastructures and assets related to defence, national security, energy, transportation and communication services (Strategic Assets).

According to the framework set out in the Strategic Assets Special Framework, the Portuguese Council of Ministers, following a proposal by the Minister overseeing the sector to which the relevant Strategic Asset pertains (the Sector Minister), may oppose the conclusion of a transaction in relation to a Strategic Asset in the event that it results in the direct or indirect acquisition of control of that Strategic Asset by a Foreign Investor and that circumstance poses a real and severe threat to national security or the provision of basic services considered fundamental to the country. The procedure ex officio for clearing the acquisition of Control by a Foreign Investor over a Strategic Asset is outlined below.

  1. Within 30 calendar days of the execution date of the relevant agreement (or other legal instrument, as applicable) pursuant to which the Foreign Investor will directly or indirectly acquire Control over a Strategic Asset, or of the date the transaction became public knowledge, if later, the Sector Minister may open an assessment procedure to determine the risk that the acquisition may pose to national security or the provision of basic services considered fundamental to the country.
  2. When the procedure referred to in point a is opened, the Foreign Investor is legally obliged to provide all information and documentation requested by the Sector Minister. The Minister in charge of foreign affairs and the Minister in charge of national and homeland security are immediately notified of the opening of the procedure.
  3. Within 60 calendar days of delivery by the Foreign Investor of the information or documentation requested by the Sector Minister, the Council of Ministers may oppose completion of the transaction envisaged by the Foreign Investor.
  4. If the Council of Ministers opposes completion of the transaction envisaged by the Foreign Investor, the legal instruments underlying the transaction, and any subsequent acts related thereto, including transfer of ownership of the Strategic Asset, are null and void.
  5. The decision by the Council of Ministers to oppose completion of the transaction is subject to appeal by the Foreign Investor.

In addition to the procedure ex officio described above, which is triggered by the Sector Minister, the Foreign Investor may, on its own initiative, request confirmation from the Sector Minister that the envisaged transaction will not be opposed by the Council of Ministers. If the request for confirmation is not answered within 30 days, the Strategic Assets Special Framework sets out that tacit confirmation is given. The request for confirmation must be accompanied by a description, by the Foreign Investor, of the terms and conditions of the intended transaction involving the acquisition of Control over the Strategic Asset.

The real and severe threat to national security or the provision of basic services considered fundamental to the country is asserted exclusively by the following criteria:

  1. the physical security and the integrity of the relevant Strategic Asset;
  2. the permanent availability and operability of the relevant Strategic Asset, as well as its ability to fully comply with its obligations, in particular the functions of public service that are the responsibility of the entities that control them, in the terms prescribed by law;
  3. the continuity, regularity and quality of the services of public interest to be provided by the person or company who controls the relevant Strategic Asset; and
  4. conservation of the confidentiality, imposed by law or public contract, of the data obtained during the course of activity by those who control the relevant Strategic Asset and of the technological resources required for management of the relevant Strategic Asset.

Moreover, the acquisition by a Foreign Investor of Control of a Strategic Asset is considered to be potentially capable of representing a threat to national and homeland security or to the provision of basic services considered to be fundamental for the country, whenever:

  1. there is serious evidence, based on objective factors, of the existence of a connection between the purchaser and third countries that:
    • does not observe the principles of the rule of law;
    • represents a risk to the international community as a result of the nature of its alliances;
    • maintains relations with criminal or terrorist organisations or with persons associated with such organisations, taking into account the official positions of the European Union in these matters, if any;
    • where the purchaser has used, in the past, a controlling shareholding held over other assets with the purpose of creating serious difficulties in the regular provision of essential public services in the country where it was located or in neighbouring countries; or
    • does not ensure that neither the allocation of the assets to its main function, nor their reversion at termination of the corresponding concession agreements, if applicable, in particular considering the absence of appropriate contractual provisions for said purpose; or
  2. the relevant transaction alters the function of the relevant Strategic Asset, threatening the permanent availability and operability of the Strategic Asset to comply with its applicable obligations, in particular the functions of public service, in the terms prescribed by law.