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Screening of Foreign Direct Investments - New Obligations From 1 March 2023

Screening of Foreign Direct Investments - New Obligations From 1 March 2023

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The Slovak Republic was one of the last countries in the region to adopt the Foreign Direct Investment Screening Act, which introduces a comprehensive mechanism for screening foreign investments for the purpose of protecting security and public order based on Regulation (EU) 2019/452.

Foreign investments in which a foreign investor from third countries outside the EU directly or indirectly acquires a target entity or part thereof, exercises effective participation in the target entity or increases it, exercises control in the target entity, or acquires ownership or other rights to substantial assets of the target entity are subject to screening. So-called critical foreign investments will be subject to mandatory screening.

These are investments in the areas of production, research, development or maintenance of military technology or military material, dual-use products, biotechnology, security, periodical publication publishers, etc. In the case of a critical foreign investment, it is necessary to submit a request for screening before it is carried out and screening must not be carried out until the decision on its permission is issued. In the case of non-critical foreign investments, it is possible to apply for screening voluntarily.

The motivation for voluntary requests for screening should be a certain legal certainty, since with specific exceptions re-initiating the procedure for screening an investment with the same parameters in the future by official authority is, in principle, not admissible. In the case of transactions with an international element from a third country, it will always be necessary to examine in detail whether they may be subject to mandatory screening or consider requesting a voluntary review.

By Petra Markova, Counsel, Eversheds Sutherland