Foreign Direct Investment (FDI).
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) refers to any type of investment by a foreign investor in a target company established within the EU. Through such an investment, the investor obtains the ability to participate in management or exercise control as a shareholder over the company’s economic activities. This may involve foreign investments by either private companies or State-Owned Enterprises (SOEs) and investment funds.
The Need for Legislation
There is growing concern about foreign investors seeking to gain control over EU companies with vital technologies, infrastructure, or sensitive information. Concerns regarding security and public order have grown further following the COVID-19 pandemic, the war in Ukraine, and other geopolitical tensions.
As a result, new legislation has been introduced at both the European and national levels to enable the screening of foreign direct investments, and ultimately, to better protect essential EU interests from high-risk acquisitions.
The European Union & FDI
With the adoption of EU Regulation (EU) 2019/452, a framework was established for the screening of FDI within the European Union. This regulation lays down procedural rules, including obligations for information exchange between Member States, the possibility for the European Commission (EC) to issue non-binding opinions, and minimum requirements for national FDI-screening mechanisms.
On 24 January 2024, the European Commission submitted a legislative proposal aimed at strengthening economic security within the EU, including a tightening of the foreign investment screening process. The existing regulation is therefore currently under review.
The Netherlands & FDI – The Investment Screening Act (Wet Vifo)
The Investment, Mergers and Acquisitions Security Screening Act (Wet Vifo) entered into force on 1 June 2023. This law aims to protect strategically important sectors and technologies from risky foreign investments.
Under the Wet Vifo, foreign investors and target companies are required to notify the Bureau of Investment Screening (BTI) of any investment activities – such as mergers, takeovers, or changes in control.
The BTI assesses the risks associated with these transactions and may impose far-reaching but proportionate measures and sanctions to safeguard national security.
The Wet Vifo applies to the following sectors and activities:
- Essential services, infrastructure, and business campuses
- Sensitive and highly sensitive technologies
- Sector-specific frameworks for mining, natural gas, telecommunications, and electricity
FDI Expertise
COMP. Lawyers can assist you in identifying potential risks, developing an appropriate strategy to address them, and guiding you through the notification process under the FDI-screening procedure.