Introduction
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.
Scope of the Act
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:
- an individual or partnership ordinarily resident in
- a corporate entity governed by the laws of or controlled by a person from
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.
Transactions that are notifiable
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:
an Investor:
- acquiring control of an Irish Target
- changing the voting rights that it holds in an undertaking from:
i) 25 per cent or less to more than 25 per cent
ii) 50 per cent or less to more than 50 per cent
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:
- physical or virtual critical infrastructure (including energy, transport, water, communications, health, media, data processing/storage, financial infrastructure)
- critical technologies (including AI, robotics, cybersecurity, semiconductors)
- supply of critical inputs (including food security, energy, raw materials)
- access to sensitive information (including personal data or the ability to control such information)
- freedom and pluralism of the media.
In the Act, a person shall be regarded as exercising control of:
- an asset, where that person has ownership of, or the right to use, all or part of the asset
- an undertaking, where that person can exercise decisive influence over the activities of the undertaking by any means.
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:
- have reasonable grounds for believing that the transaction affects, or would be likely to affect, the security or public order of the State
- the transaction has resulted in an Investor having control, or effective management, of an Irish Target.
Notification requirements
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.
Implications for failing to make a notification
Failure to comply with the Act can be an offence and may result in significant fines, imprisonment or both.
Other relevant information
The Act also provides for a number of other important matters, such as
- the establishment of a panel of experts to advise the Minister on screening decisions
- a right of appeal against screening decisions through an adjudication process.
Conclusion
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.
Find out more
If you have any questions on this legislation and want to find out more, please contact Paddy Quinlan.
