The control of Belgian foreign direct investment (FDI) mandatory as of July, 1 2023

The cooperation agreement provides for a.o. the establishment of an Inter-Federal Screening Committee (ISC), a notification requirement and a foreign direct investment screening mechanism.

1. To which investments does the scheme apply?

The term "Foreign Direct Investment" means "any kind of investment by a foreign investor aimed at establishing or maintaining lasting direct relations between the foreign investor and the enterprise, including investments that allow effective participation in the management or control of that enterprise".

More specifically, this includes :

• On the one hand, investments that directly or indirectly result in the acquisition of at least 10% of the voting rights in companies and entities established in Belgium, which had an annual turnover of more than EUR 100 million in the financial year preceding the investment and whose activities are related to the sectors of defence, energy, cyber security, electronic communications or digital infrastructures ; and
• On the other hand, investments resulting directly or indirectly in the acquisition of at least 25% of the voting rights in companies or entities established in Belgium, and whose activities touch on
   
  • infrastructures vital for energy, transport, water, health, electronic communications and digital infrastructures, media, data processing or storage, aviation, electoral or financial infrastructure, satellite navigation systems;
  • technologies and raw materials essential for security (including health security), national defence or maintenance of public order, military equipment and dual-use products, technologies of strategic importance such as AI, robotics, semiconductors, cyber security, aerospace defence, energy storage, quantum and nuclear technologies and nanotechnologies;
  • the supply of critical inputs, including energy and food security;
  • access to sensitive information, including personal data, or the ability to control such information;
  • the private security sector; and
  • media freedom and pluralism.

A foreign direct investment amounting to 25% of the voting rights whose activity relates to technologies of strategic importance in the biotechnology sector in addition requires that the investee company had an annual turnover of more than EUR 25 million in the financial year preceding the investment.

Green field activities are excluded from this scheme. Investments aimed at creating new economic activities ("green field"), without taking over existing economic activities, are excluded from the scope of the scheme.

2. Who is considered a "foreign investor"?

• Any individual with principal residence outside the European Union and
• Any undertaking from a third country, namely an undertaking incorporated under the laws of a third non-EU Member State and otherwise organised where the registered office or main activity is outside the EU, as well as
• Any company where one of the ultimate beneficiaries (UBO) has its main residence outside the EU.

Public authorities, government agencies, public enterprises and private companies and institutions, are also subject to the regulations.

3. What is the screening procedure?

Any proposed investment falling within the scope of this regulation must be notified - before effective implementation - to the ISC.

The ISC must be provided with certain information, including the ownership structure and identity of the foreign investor and the company in which it plans to invest, the capital participation and UBO, the value of the investment, the products, services and business activities of both companies, the financing of the investment and its origin.

Specifically, the ISC is going to test whether the proposed transaction may harm public order, national security or strategic interests.

The ISC may decide to conclude the review procedure positively, with or without additional remedies, or to prohibit the transaction. The ISC may initiate an additional screening procedure.

Based on the screening procedure, the ISC will prepare a report and an opinion to the competent minister, either with or without remedial measures. These remedial measures must be complied with in order for the proposed transaction to be approved. If the remedial measures are not complied with, the procedure is concluded with a negative opinion and the transaction is rejected.

It is important to note that implementation of the investment must be suspended until a final decision is taken.

An appeal is possible against the final decision on the admissibility or otherwise of the transaction. However, the appeal has no suspensive effect.

4. Sanctions

The ISC may impose an administrative fine if the notification requirement is not complied with. This fine can range from 10% to 30% of the amount of the investment.

5. Conclusion

The foreign direct investment regime is very recent. An evaluation of its actual impact will not be possible until there is enough practical experience.

Nevertheless, on a practical level, it can already be observed that the timing of transactions that fall or may fall under this regime may be strongly affected, as they will have to be put on hold pending the approval of the minister.

Thus, it is strongly advised to check for every investment whether the FDI screening may be applicable, and if so, to take this additional timeframe into account in the planning....

If you believe you may be subject to this scheme or have any additional queries in this regard, please do not hesitate to contact us at info@seeds.law or +32 (0)2 747 40 07.