22 November 2023
The Screening of Third Country Transactions Act 2023 (the Act) has now been signed into law. The Act will be implemented by way of Ministerial Order, which is expected to occur in Q2 of 2024. The Act establishes a new foreign investment screening regime in Ireland and gives further effect to Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. The Act is designed to protect Ireland's security and public order by allowing the Minister for Enterprise, Trade and Employment (the Minister) to review certain transactions involving foreign investment.
The Act applies to transactions involving a third country investor and an Irish undertaking or asset (an Irish Target). A third country investor (Investor) is:
any jurisdiction other than: (1) a member state of the European Union; (2) a member state of the European Economic Area; or (3) Switzerland.
Persons connected to Investors who undertake relevant transactions will also be subjected to the provisions of the Act as if they were an Investor. A person is connected to an Investor if they are: (1) the Investor's spouse, civil partner, parent, sibling, child; (2) a trustee of any trust where the beneficiary is the Investor, the Investor's spouse, civil partner, parent, sibling, or child, or an entity controlled by the Investor; or (3) in partnership with the Investor.
The Act applies to a wide range of transactions, including, without limitation, acquisitions of controlling interests, minority investments, and joint ventures. A transaction will be notifiable to the Minister if it involves each of the criteria set out below:
a transaction (or a series of transactions within a 12-month period) with a cumulative value exceeding €2,000,000.
a transaction involving an Irish Target that operates in, without limitation, any of the following sectors:
In the Act, a person shall be regarded as exercising control of:
The Act also provides for a lookback period of 15 months, meaning that certain transactions that may be completed before the Act comes into effect may also be notifiable to the Minister. The Minister may trigger this where they:
Parties to a relevant transaction must notify the Minister at least ten days prior to the proposed completion date. The Act sets out the information that must be provided to the Minister. This usually means in practice that the parties will make the notification on signing of transaction documents and await a decision prior to completion, with a standstill obligation in place until such decision is issued. While not set out in the Act, the nature of the information that must be provided to the Minister effectively requires the notification to be a joint notification. The transaction can then either be prohibited, authorised, or authorised subject to certain conditions. The Minister is required to make a decision within 90 days of receiving the notification; however, this 90-day period can be extended to 135 days at the option of the Minister.
Failure to comply with the Act can be an offence and may result in significant fines, imprisonment or both.
The Act also provides for a number of other important matters, such as
The Screening of Third Country Transactions Act 2023 is a significant piece of legislation that will have a major impact on foreign investment in Ireland. The Act is designed to protect Ireland's security and public order and imposes new obligations on businesses and investors engaging in transactions involving third country investors.
If you have any questions on this legislation and want to find out more, please contact Paddy Quinlan.