Until recently, Belgium was one of the few remaining EU Member States without a general, country-wide foreign investment screening mechanism. However, on July 1, 2023, a new mandatory general and suspensory regime came into force. All transactions signed on or after July 1, 2023 meeting the new regime’s materiality thresholds will need to be notified to a newly established Interfederal Screening Commission (ISC).

The new rules aim to safeguard Belgium’s national security, public order and strategic interests; ensuring the continuity of vital processes, avoiding strategic or sensitive information being accessed by foreign actors, and ensuring strategic independence. Transactions involving direct or indirect acquisitions in Belgian entities above certain thresholds by investors established outside the EU across a broad range of industry sectors could be affected. In contrast to the regimes in other EU Member States, the Belgian regime does not capture investments by EU-established investors. However, the new regime does apply to investors established in the UK, Switzerland and other non-EU countries.

The Belgian legislator has opted for a broad scope of application, especially in respect of sectors considered to be strategic. Although the ISC has published a first set of draft guidelines, which respond to a number of interpretation questions, uncertainty remains around several aspects of the new regime, in particular about the broadly defined industry sectors captured by the law. The ISC has stated that it expects investors to notify transactions when they are in doubt about their notifiability. Therefore, it is expected that a large number of investments will be notified to the ISC in its first year of operation.

“The new Belgian regime has now been in force for three months and it still remains to be seen how the broadly defined sectors that are captured by the regime and the remaining grey zones in the interpretation of the newly applicable rules will impact the investment climate in Belgium,” says Tone Oeyen, Freshfields antitrust and foreign investment partner. “Given its potentially broad application, investors should keep the new Belgian FDI regime on their radar and cater for a potential notification in their deal documentation and timetable.”

With thanks to Freshfields Tone Oeyen and Marie de Crane d’Heysselaer for contributing this update.

The Netherlands’ historic liberal stance towards foreign investments has recently become somewhat more stringent, with the introduction of the National Security Investment Act (the Vifo Act), which entered into force on 1 June 2023.

The Vifo Act introduces a broader national security investment screening policy covering investments in vital suppliers (energy, transport hubs and financial institutions), sensitive technology (military and dual-use goods, but also other technology such as semiconductors and photonics) and managers of corporate campuses. Importantly, the Vifo Act can apply retrospectively, as the Minister can review transactions taking effect after 8 September 2020 and before the entry into force of the Vifo Act. By way of example, the Minister announced that it is investigating the acquisition of the Dutch semiconductor developer Nowi by Nexperia (owned by Wingtech Technology from China) with retroactive effect.

Appraisal criteria for investments differ under the country’s various legislative instruments, but the Government’s FDI assessments are based on the principles of protection of national security and public interest only (not economic interest or competition), but which may in practice include a wide range of policy considerations. Notification requirements apply regardless of the nationality of the acquirer(s) without exemptions for domestic or EU-based investors. The Dutch Government aims to minimize the impact on the investment climate and has drafted the relevant legislation accordingly (for instance by having a clear and narrow scope of application and refraining from including a catch-all provision) as opposed to other countries, where the scope of the relevant FDI legislation is broader and more difficult to gauge.

Information about investment approvals, reviews or conditional approvals are limited, as the Minister’s decisions are not public. However, the Minister has published information on how it makes decisions, providing that its substantive review focuses on the identity, nationality and track record of the investor, including all shareholders that own at least 5 percent of the shares in the acquirer. In cases of acquisitions by private equity funds, the Ministry has asked for information on all limited partners accounting for at least 5 percent of the committed capital in the acquiring funds. In addition, acquirers will be asked to specify which jurisdictions (based on identity of the limited partners) account for at least 2.5 percent of the total committed capital in the private equity fund. The Minister will also investigate the control and information rights of the limited partners and may request copies of limited partnership agreements.

“Private equity funds with investors from sensitive jurisdictions are increasingly scrutinized from a national security perspective,” says Freshfields antitrust and foreign investment partner Paul van den Berg. “Private equity firms should make sure they have a complete overview of their investors, their nationality and track record in order to identify potential national security and public interest concerns early in a deal process. It is important to think beyond the legal parameters in considering why an investment may be politically contested.”

With thanks to Freshfields Paul van den Berg, Felix Roscam Abbing and Max Immerzeel for contributing this update.

In contrast to Belgium and the Netherlands, Spain has already had a foreign investment regime for some time. Like many European countries, and despite the fact that Spain has traditionally been a country open to foreign investment, Spain issued a number of royal decree-laws around the COVID-19 pandemic to implement (and refine) its existing FDI screening mechanism. In line with regional and international trends, Spain’s approach to FDI has become more restrictive since March 2020, seeking to protect key strategic sectors of the Spanish economy and the "crown jewels" of the Spanish stock market (the so-called “anti-takeover shield”). Transactions with possible implications for public order, public safety and public health require prior approval.

In this context, Spain has adopted a long-awaited implementing regulation to develop and refine the existing regime, which entered into force as of 1 September 2023, as well as an extension of the temporary regime applicable to EU/EFTA residents (for the third time since its implementation) until 31 December 2024. The legislation concerning FDI in Spain, as of 1 September 2023, consists of: Law 19/2003; Regulation 571/2023, of 4 July, on Foreign Investments (the Implementing Regulation) repealing Royal Decree 664/1999, of 23 April, on Foreign Investments; and Ministerial Order of 28 May 2001, which regulates the procedures for authorisation and for declaring the investment (the Ministerial Order).

The Directorate General for International Trade and Investment (which is part of the Ministry of Industry, Trade and Tourism) reviews reportable transactions, together with the Foreign Investment Board at a later stage. However, the final decision rests with the Council of Ministers (together with the Authority), which approves – conditionally or unconditionally – or blocks a transaction following a report from the Foreign Investment Board. Exceptionally, where investment value is below €5m, the decision is issued by the head of the Directorate General for International Trade and Investment.

Although the ex-ante screening mechanism has increased red tape for investors, public sources indicate most of the transactions reviewed during 2022 were cleared unconditionally: of 98 formal requests, 73 transactions ultimately required prior authorization. Of these, 63 were unconditionally cleared, nine transactions were cleared subject to remedies (i.e., 12.3 percent). According to public sources, only one was prohibited (the proposed acquisition of 29.9 percent of PRISA’s share capital by Vivendi in 2022) as it was not possible to impose any suitable mitigation measures to clear identified concerns. Remaining requests for approval were determined to be out-of-scope of review and dismissed.

In practice, there is a high level of discretion in Spanish transaction reviews. The legislation’s definitions are very broad, particularly with respect to the scope of the strategic sectors triggering a filing requirement and with the meanings of “public order”, “public safety” and “public health” not expressly defined. Although Spain’s regime tends to mirror the EU FDI Regulation and the clarification provided by the new implementing regulation is a major development, a number of practical questions remain unanswered. Experience shows that these rules are ultimately enforced following a combination of technical and political criteria.

Potential FDI legislative developments are now on hold following the dissolution of the Spanish Parliament and are largely subject to the final outcome of the general elections held in July 2023, as each political party may adopt a different approach. The temporary regime for EU/EFTA investors will remain in place until 31 December 2024, and further extensions cannot be excluded. (The regime has already been extended three times.) In addition, many scenarios remain untested and there is uncertainty about the Authority’s application of certain provisions of the new Implementing Regulation. State-owned companies or sovereign wealth funds investing in Spain are increasingly subject to intense scrutiny, and even non-controlling investments are being carefully reviewed.

“The Spanish FDI regime is here to stay. Interesting times are ahead,” says Enrique Carrera, Freshfields antitrust and foreign investment counsel. The new implementing regulation “is really welcome,” he says, as “it clarifies and settles current unwritten practice.”

However, he cautions that uncertainties will remain given the broad scope of the regime: “Close cooperation with the authorities will be key to navigate the regulatory process. All sectors of the economy are potentially under scrutiny. Well-planned assessment will remain key for deal certainty, especially deals involving high-profile Spanish targets.”

With thanks to Freshfields Enrique Carrera and Alvaro Puig for contributing this update.