Foreign Investment Screening Regime commences in Ireland

Key Features of the Screening Regime
 

Ministerial Powers

The Act grants the Minister for Enterprise, Trade, and Employment (the "Minister") the authority to review, approve (with or without conditions), or prohibit transactions that may pose a risk to public order or national security. The scope of the regime includes transactions resulting in a change of control over Irish assets or specific shareholdings in undertakings in the State by a "third country undertaking". A "third country undertaking" includes:

• third country nationals;
• an undertaking that is constituted or otherwise governed by the laws of a third country; and
• an undertaking that is controlled by at lease one director, partner, member or other person that is a third country national, or is an undertaking that is constituted or otherwise governed by the laws of a third country.

For the purposes of the above, a "third country" means a country other than Ireland, an EU Member State, an EEA Member State, or Switzerland. As such, investments by UK and US based investors, in relevant transactions, will be caught by the Act and will require a mandatory notification to the Minister. 

Scope of Transactions

For a transaction to fall under the regime, it must:

• involve relevant activities, such as critical infrastructure (including, amongst others, energy, transport, water, health, communications, media, data processing or storage), supply of critical inputs, critical technologies, access to sensitive data, or the media; and
• meet the value threshold, which is currently set at €2 million.

Mandatory Notification and Call-In Power

Parties to a relevant transaction must notify the Minister of the transaction at least 10 days prior to the completion date and approval must be obtained before completion can take place. 

The Minister has a “call-in” power to review transactions that do not meet the mandatory notification criteria but are deemed, in the Ministers view, to potentially impact public order or security in Ireland.

Transactions can only be “called-in” for review by the Minister for up to 15 months after the transaction completion date. 

Additionally, the Minister may retrospectively use the "call-in" power to review transactions that completed within the 15 months prior to the commencement of the Act. 

Review Timelines

The Minister has 90 days to make a decision regarding a notified transaction. This period may be extended to 135 days, if required.
Implications for FDI transactions 

The introduction of the Act will have significant implications for FDI transactions. All parties will now be required to carefully assess:

• Filing obligations: Whether the transaction meets the criteria for mandatory notification.
• Preparation of notification: Ensuring all required information is submitted.
• Review timelines: Factoring potential delays into transaction timelines to include the review period. 
• Penalties for non-compliance 

Failure to notify a relevant transaction or proceeding with a prohibited transaction is a criminal offence which can result in significant fines and imprisonment for responsible individuals. 

Conclusion 

The screening regime marks a new era for FDI in Ireland which aims to ensure economic openness is balanced with protecting national security and critical activities. Parties will now face additional hurdles for relevant transactions and must factor the new regime into their transaction planning to ensure compliance and avoid delays or penalties.
 

Written by Peter O'Neill.