On 15 July 2020 the Austrian Parliament adopted a new FDI screening act (Investitionskontrollgesetz, "ICA"), following the trend to tighten the regulatory framework for foreign investment screening (read more here: Austrian government proposes new FDI screening act). The ICA will enter into force after publication in the Federal Law Gazette. It largely transposes the requirements under the EU FDI Screening Regulation (read more here: A new regulation on FDI screening in Europe).
Under the ICA a (mandatory) filing requirement is triggered if:
- a foreign investor, i.e. non-EU, non-EEA, non-Swiss individual/entity, intends to carry out an investment (directly/indirectly) in an Austrian undertaking. This includes
- the acquisition of shares reaching/exceeding 10 %, 25 % and 50 % (voting rights);
- the acquisition of control; and
- the acquisition of essential/all assets of an undertaking (asset deals),
- the undertaking is active in a sector listed in an Annex to the ICA, and
- the undertaking is Austrian, i.e. has its seat or its central administration in Austria (local nexus).
No approval is required for an investment in an undertaking with i) fewer than 10 employees and ii) an annual turnover or balance sheet total of less than EUR 2m (start-up exception).
The 10 % share threshold (voting rights) applies for investments in certain highly sensitive sectors. These sectors are listed (exhaustively) in Part I of the Annex and include:
- defence equipment / defence technology;
- critical energy infrastructure;
- critical digital infrastructure (in particular 5G infrastructure);
- systems that enable data sovereignty of the Republic of Austria; and
- research and development in the fields of pharmaceuticals, vaccines, medical devices and personal protective equipment. For this sector, the 10 % threshold is temporarily introduced until 31 December 2022 in light of the COVID-19 crisis.
For investments in other sensitive sectors relevant for public order and/or security the triggering threshold remains at 25 % and 50 % (voting rights). Part II of the Annex contains a non-exhaustive list of these sectors, including:
- critical infrastructure such as energy, information technology, transport, health, food, telecommunications, etc.;
- critical technologies and dual use items as defined in Regulation (EC) No 428/2009; these include artificial intelligence, robotics, cybersecurity, quantum and nuclear technology, nano and biotechnology, etc.;
- supply of critical resources, including energy or raw materials, as well as food security, medicines, vaccines, medical devices and personal protective equipment, etc.;
- access to sensitive information, including personal data, or the ability to control such information; and
- the freedom and pluralism of the media.
Other relevant key elements of the ICA are:
- Indirect acquisitions are covered, contrary to the situation under the (former) Foreign Trade Act 2011 (Außenwirtschaftsgesetz).
- While the notification obligation rests primarily with the acquirer, the ICA foresees (in subsidiarity) a reporting obligation for the target company. In addition, the Authority can assume jurisdiction ex officio if it becomes aware of a transaction subject to approval that has not been notified.
- The ICA foresees the possibility of requesting a non-jurisdiction letter (Unbedenklichkeitsbescheinigung) confirming that an investment is not subject to the approval requirement.
- Timing: The one-month Phase I period only starts after a 35-day period within which the EU Commission and/or Member States can comment on the transaction (under the EU Screening Regulation).
- A considerable part of the ICA is devoted to the cooperation mechanism for exchanging information and cooperating with the EU Commission and other EU Member States under the EU Screening Regulation.
The ICA is expected to considerably extend the scope of the old regime under the Foreign Trade Act (Außenwirtschaftsgesetz). A broad range of investments will therefore need to undergo a screening process. This is in line with the general trend of FDI screening instruments being tightened/enacted across the EU fuelled by concerns of buyouts of critical European infrastructure by foreign investors due to the COVID-19 pandemic.
By Volker Weiss, Partner, and Constantin Fladerer, Associate, Schoenherr