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Matheson responds to DBEI Public Consultation on FDI screening

AUTHORs: Helen Kelly, Kate McKenna Date: 06/07/2020
As part of the Department of Business, Enterprise and Innovation’s (DBEI) public consultation on screening of foreign direct investments, Matheson has recently submitted its response document which sets out our perspectives on the design of any future investment screening mechanism. The public consultation process which has now concluded comes on the back of Ireland’s implementation of EU Regulation 2019/452 (FDI Regulation), due to come into effect on 11 October 2020. The FDI Regulation establishes a framework for the screening of foreign direct investments in the European Union (EU). In addition, it introduces a cooperation mechanism whereby the European Commission and each Member State can exchange information and raise specific national security concerns about potential investments in strategic EU companies by foreign entities and state-owned firms.

In May 2020, we published an article noting that while the FDI Regulation places no obligation on Ireland to adopt an investment screening regime, it introduces a number of cooperation and reporting requirements that are to be fulfilled by a designated ‘national point of contact’, the DBEI. Equally, the outbreak of Covid-19 has injected a sense of urgency into FDI screening policy at European Union level with a view to ensuring that vulnerable industries such as healthcare, biotechnology and infrastructure are not subject to unfavourable foreign investment. Since our recent publication, there has been little guidance offered nationally on what the design of any investment screening mechanism might look like. However, there have been several developments internationally which we set out below:

International Developments


On 21 June 2020, the UK government announced that the Enterprise Act 2002 (the “Act”) would be amended to add an additional public interest ground (effective from 23 June 2020) allowing the government to intervene in specific merger transactions where the proposed transaction could hinder the UK’s ability to combat a public health crisis, such as the spread of Covid-19. As it currently stands, the UK government’s principal mechanism for reviewing transactions that give rise to national security concerns is set out in the Act itself. This piece of legislation is the UK’s primary merger control regime and is governed by the Competition and Markets Authority (“CMA”). As part of the Act, the Secretary of State is authorised to issue an intervention notice to the CMA if certain public interest considerations are potentially affected by the proposed transaction. Under new guidance, the government proposes implementing the National Security and Investment Bill (announced in December 2019) which would allow-

Government to review transactions that give rise to ‘trigger events’, with a wide range of UK investments and acquisitions falling under this umbrella term.
Parties to the proposed transaction may opt to voluntarily report a trigger event to the government. Unilaterally, the government will be given discretion to ‘call in’ a trigger event if it believes it to be in the public interest.
Once implemented, the government is set to be given increased regulatory power to (i) impose certain conditions on the proposed transaction with a view to mitigating national security risks, (ii) force contracting parties to unwind the transaction post completion, and (ii) block transactions prior to closing. On foot of complications arising from Brexit and Covid-19, it is anticipated that legislation to this effect will not be enacted until late 2020 or early 2021.


Since June 2020, Germany has introduced several changes to its FDI regime (through the amended Foreign Trade and Payments Act and respective Ordinance), including amongst others:

Transactions concerning ‘critical infrastructure’ are now subject to a suspensory effect. With this change, they cannot be completed without prior approval of the Ministry of Economic Affairs and Energy. In addition, several industries particularly within the healthcare sector (PPE producers, essential therapeutics and in-vitro diagnostics) have been included within the definition of critical infrastructure.
The concept of ‘gun running’ (sharing of sensitive information prior to transactional clearance) has been made a criminal offence.
On matters of public order and national security, the Ministry of Economic Affairs and Energy may consider whether a foreign purchaser is directly or indirectly state-owned (either through the government, semi-state bodies or armed forces), including through ownership structure or significant funding.

In a similar vein to Ireland, there is currently no general Dutch FDI regime, with the exception of a recent amendment (May 2020) allowing for the review of transactions in the energy and telecoms sector. Additionally, Holland has sought to progress an FDI screening regime through parliament in an effort to protect its national security. Based on ‘buyer identity’, the national security test will involve an assessment of the following risks (i) continuity of vital processes (ii) integrity and exclusivity of data and know-how related vital processes and highly sensitive technology, and (iii) the creation of strategic dependency on other countries. It is anticipated that the proposed regime will have retrospective effect from 2 June 2020 in a number of clearly defined sectors.


In April 2020, Italy introduced its FDI regime which covers specific activities in three sectors (i) defence and national security (ii) energy, transport, network and communications and (iii) strategic activities. It is noted that within these sectors (particularly (i) and (ii)), additional notification requirements apply to specific and categorised activities identified as ‘critical’ by ministerial order rather than an all-encompassing category of public interest or concern. The Italian regime also seeks to rely heavily on the interest acquired and the identity of the buyer in determining what notification and enforcement powers apply to varying sectors.

As mentioned from the outset, the design of any Irish investment screening mechanism that may be proposed is as yet unclear, as is its likely impact on the foreign direct investment environment in Ireland. We watch this space and any future national developments with interest.

Should you have any queries about the impact of Ireland’s future FDI screening regime on your business, please do not hesitate to contact your usual Matheson contact or any member of Matheson’s EU, Competition and Regulatory Group.

This article was co-authored by Helen Kelly, Kate McKenna and Ciaran Campbell of Matheson’s EU, Competition and Regulatory Group.


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