The Screening of Third Country Transactions Bill 2022 will introduce a screening mechanism for foreign direct investments (FDI) in Ireland for the first time.
The Minister for Enterprise, Trade and Employment will have the power to assess, investigate, authorise, impose conditions on, or prohibit third country investments, based on certain security and public order considerations.
The Government’s publication of this Bill was preceded by the Regulation (EU) 2019/452 (the FDI Regulation), which entered into force on 11 October 2020. The FDI Regulation seeks to address concerns of Member States regarding the movement of capital and the protection of strategic assets in the EU. The Bill contains provisions relating to Ireland’s reporting and cooperating obligations under the FDI Regulation.
Based on the current version of the Bill, it is not anticipated that the attractiveness of Ireland as an FDI destination will be affected.
Screening of Third Country Transactions Bill 2022
The aim of the Bill is to “provide Government with powers to protect security or public order from hostile actors using ownership of, or influence over, businesses and assets to harm the State.”
The Bill is only concerned with investors from a ‘third country’, meaning a non-EU or EFTA country. Therefore, it does not apply to domestic transactions.
The nature, scale and type of investments that will undergo investment screening
To be notifiable, a transaction must satisfy all the following criteria:
- A third country undertaking, or a person connected with a third country undertaking, is a party to the transaction.
- The transaction relates, directly or indirectly, to a change in control of an Irish asset, or the acquisition of a significant interest in an Irish undertaking.
- The value of the transaction equals or is greater than €2,000,000, or any other amount that may be prescribed by the Minister.
- The transaction directly or indirectly relates to, or impacts upon one or more of the matters identified in the FDI Regulation, which includes critical infrastructure, critical technologies and dual use items, supply of critical inputs, access to sensitive information, or the freedom and pluralism of the media.
Minority interests are exempted. To be notifiable, the transaction must result in the percentage of shares or voting rights held in an undertaking in Ireland to change from either (i) 25% or less to more than 25%, or (ii) from 50% or less to more than 50%.
Timelines for the notification procedure
The parties to a notifiable transaction must notify the Minister of the transaction not less than 10 days before the date on which the transaction is completed. The notification must contain the prescribed detail about the parties and the transaction.
The Minister must review a notified transaction as soon as practicable after being notified. The Minister must also provide notice to all parties to the transaction as soon as practicable after commencing a review of a transaction (a Screening Notice), unless there are reasonable grounds for believing it would be manifestly contrary to the security or public order of Ireland to do so.
In general, the Minister must issue a decision (a Screening Decision) within 90 days (which can be extended to 135 days). If no decision is issued within the time period, the transaction shall be deemed not to be likely to affect the security or public order of Ireland. The period for the Minister’s decision is paused if a request for further information is issued by the Minister.
During the period between the issue of the Screening Notice and the Screening Decision (or the relevant date set out in the Screening Decision, if applicable) the parties must not take any action for the purpose of completing or furthering the transaction.
The Minister also has a ‘call-in’ and a ‘look-back’ right permitting the Minister to review a transaction that was not notified or notifiable in certain circumstances (notably the Minister must have reasonable grounds for believing that the transaction affects or would be likely to affect the security or public order of Ireland). The following time limits apply:
- if a transaction is not notifiable (including transactions completed prior to enactment of the Bill), within 15 months of completion of the transaction; and
- if the transaction is notifiable, but not notified, the later of (a) five years after completion, or (b) six months after the Minister first becomes aware of the transaction.
Effect of a screening decision
If the Minister decides (or is deemed to have decided) that the transaction is likely to affect the security or public order of Ireland, the transaction is prohibited unless the Minister also makes a direction permitting the transaction subject to certain conditions. Such conditions are at the Minister’s discretion and the Bill expressly notes the Minister may require the parties to pay the Minister’s costs associated with monitoring compliance.
A first appeal may be made within 30 days of the Screening Decision, which will be heard by adjudicator(s) designated by the Minister from a panel of adjudicators. A second appeal on a point of law may be brought before the High Court within 30 days of the decision of the adjudicator(s).
Penalties that may apply to investors/investees
The penalty for most offences under the Bill are:
- on summary conviction, a Class C Fine (currently €2,500) and/or up to six months imprisonment; or
- on indictment, a €4,000,000 fine and/or imprisonment up to five years.
Costs of the screening process
The Bill does not prescribe any fees associated with the making of a notification to the Minister.
Ireland has an impressive track record in attracting Foreign Direct Investment for over 50 years, enabling the Irish economy to surpass global trends. It is not expected that the introduction of a national FDI screening mechanism in Ireland will detract from this.
The fine detail of the new national FDI screening mechanism will only be certain when the Bill is enacted. We will monitor the progress of this Bill.