On the 6 of January 2025, the Foreign Direct Investment screening regime came into effect. The Screening of Third Country Transactions Act 2023 (The Act) created more powers of review and scrutiny of foreign direct investments into the state coming from entities controlled outside of the EU, the EEA (The European Economic Area) or Switzerland.
What does the Act Do?
This Act introduces a mandatory notification requirement for certain investments in Irish Businesses. Criminal liability may be imposed on those who fail to make such a notification. This Act will ultimately bring delays for closing timelines for affected deals due to the implementation of the notification system.
A mandatory notification to the Minister for Enterprise, Trade and Employment (The minister) shall apply to investments where:
- The transaction involves a change in control of an asset in the state, or a change in the percentage of voting rights held in an undertaking in the state
- There is a third country undertaking involved in the transaction
- The transaction relates to an affected sector (outlined below)
- The value of the transaction is at least €2 million
Affected sectors:
The sectors affected by the Act are as follows.
- Critical infrastructure (energy, water, defence etc.)
- critical technologies or dual use items (including AI, Robotics etc.)
- critical inputs (energy, raw materials, food security etc.)
- access to sensitive information (personal data or the ability to control this information)
- freedom and plurality of the media.
Transactions that relate to or impact one of these areas are likely to fall within the scope of the act. This has the effect of being a wide catching regime.
Notification:
In practice, the party acquiring the asset or shares etc, is expected to take responsibility for submitting the notification to the minister. This process is operated under due diligence. However, all parties to a transaction have an obligation to ensure that the information being submitted is accurate. If a transaction falls within the scope of the Act and the minister is not notified, this will be seen as a criminal offence. Penalties for an offence can include a fine and/or imprisonment.
The Act requires that a notification be made at least 10 days before the transaction is complete. Once the notification has been made the Act provides for a 90 day screening process which can be extended by a further 45 days in exceptional circumstances. Therefore, the screening process may take up to 135 days.
Following the screening process the minister can allow the transaction, prohibit the transaction or allow the transaction to proceed conditionally.
Appeal:
Once a decision has been issued by the minister, the parties must submit an Intent to Appeal within 30 days if they wish to challenge the decision. The minister will then assign an adjudicator and issue an adjudication notice. The parties then have 14 days to issue their notice of appeal.
The Ministers call in power:
One final noteworthy feature of the Act is a discretionary power held by the minister under Section 12 to review transactions that do not meet the mandatory notification requirement. The minister will be able to review a non-mandatory notification transaction for a period of 15 months after the completion of the transaction.
The minister can additionally review a mandatory transaction, which for whatever reason was not notified. This power can be exercised up to 5 years from the date on which the transaction was completed or 6 months from the date the minister became aware of the transaction.
In Summary:
- The introduction of this Act will cause delays and uncertainty for any deal caught due to the 90 to 135 day screening process.
- The relatively low threshold of €2 million also means that many transactions are likely to be caught by the Act.
It is also noteworthy that an offence under the act can be applied not just to a body corporate but also to a director, manager or any other person who is purporting to act in such capacity.