TerraLex Guide to Foreign Direct Investment - NEW

As Ireland is a member of the European Union, Foreign Direct Investment (“FDI”) is regulated at both a national and supranational level. The domestic rules governing FDI screening are set out in the Screening of Third Country Transactions Act, 2023 (the “Act”). The Act was introduced on foot of Regulation (EU) 2019/452 of the European Parliament and of the Council (the “EU Regulation”), which sets out the framework for the screening of FDI into the European Union.

The Department of Enterprise, Trade and Employment (the “Department”) is responsible for the implementation of Ireland’s FDI screening regime. Notifications are submitted for consideration and approval by the Minister for Enterprise, Trade and Employment (the “Minister”).

Formal notifications are submitted via the IIS Online Portal, which can be accessed through the Department’s website.

Informal queries regarding FDI screening requirements in Ireland may be submitted to the Department via email at [email protected].

A notification will be required where all of the following four conditions are met:

• there is an acquisition or change in control of an Irish-Based Asset or Irish Undertaking;
• the acquiring party is a Third Country Undertaking or a person connected with such an undertaking and that same undertaking does not already control all the parties to the transaction ;
• the transaction relates to or impacts on an Identified Area; and
• the transaction value is equal to or greater than €2,000,000.

Condition (a) - Acquisition or Change in Control of an Irish based Asset or Undertaking An undertaking has control over an Irish-based asset where it has ownership of, or a right to use all or part of the relevant asset.

An undertaking has control over an Irish undertaking where it can exercise ‘decisive influence’ over its business activities. What constitutes ‘decisive influence’ is further discussed below.

An acquisition of control occurs where the acquiring party gains the ability to exercise control over the relevant asset or undertaking for the first time, or to a greater extent.

A change in control occurs where a third country undertaking’s percentage of shares or voting rights increases from:

• 25% or less to more than 25%; or
• 50% or less to more than 50%.

An Irish-based asset means either (i) a physical asset that is located within Ireland or (ii) and intangible assets that is owned or otherwise controlled by an undertaking within Ireland.

An “Irish undertaking” is an undertaking constituted or otherwise governed by the laws of Ireland, or whose principal place of business is located within Ireland.

Condition (b) - Third country undertaking or person connected with such an undertaking:

• A ‘third country’ is all jurisdictions outside of:
• Ireland;
• The European Union;
• The European Economic Area; and
• Switzerland.

Foreign investors are referred to as ‘third country undertakings’ within the Act, and are defined as:

• third country nationals – being natural persons ordinarily resident in a third country;
• any unincorporated group or partnership of natural persons where at least one of the members / partners is ordinarily resident within a third country;
• undertakings constituted or otherwise governed by the laws of a third country; and
• undertakings controlled by at least one director, partner, member or other person who is ordinarily resident in a third country.

This condition will be met where either the direct investor or the ultimate parent entity is a third country undertaking.

An acquiring party will be treated as a person connected with a ‘third country undertaking’ if they are:

• the spouse, civil partner, parent, sibling or child of an individual ordinarily resident in a third country (“Connected Relations”).
• act as trustee of any trust established for the benefit of:
  • a person ordinarily resident in a third country;
  • the Connected Relations of an individual ordinarily resident in a third country; or
  • an undertaking controlled by an individual ordinarily resident in a third country;
• are in partnership with an individual ordinarily resident in a third country.

Where the acquiring party is a body corporate, it will be considered a person connected with a third country undertaking if:

• it is controlled by the third country undertaking; or
• controlled by an undertaking that is itself controlled by a third country undertaking.

Condition (c) – Impact on an Identified Area The definition given to ‘identified area’ for the purposes of FDI screening is taken from Article 4(1) of Regulation (EU) 2019/452, and comprises the following:

• critical infrastructure (physical or virtual);
• critical technologies and ‘dual use’ items;
• supply of critical inputs;
• access to, or ability to control sensitive information; and
• freedom and pluralism of the media.

Guidance published by the Inward Investment Screening Unit of the Department elaborates on what these areas cover and relevant considerations to be applied in assessing whether a transaction impacts or relates to these identified areas.

Condition (d) – the transaction value is over €2,000,000 This is not limited to the consideration payable by the acquiring party for the Irish-based asset or undertaking, but the cumulative value of the transaction. Related transactions between the parties, to include transactions between any of the parties and a connected person of the other party within the past 12 months are taken into account in assessing whether this condition is met.

Exempted transactions Intra-group transactions where the same undertaking already directly or indirectly controls all the parties to the transaction falls outside the scope of the FDI regime.

The substantive test to be applied in reviewing a transaction is whether it affects, or would be likely to affect, the security or public order of the State. In applying that test the Minister must have regard to the following factors:

• Government Control and Influence - Whether a party to the transaction is controlled by a third country government (including state bodies or armed forces) and the extent to which such control is inconsistent with State policies and objectives.
• Current Security Involvement - The extent to which a party is already involved in activities relevant to the security or public order of the State.
• Historical Actions - Whether a party has previously taken actions affecting the security or public order of the State.
• Criminal Risk Assessment - Whether there is a serious risk of a party engaging in illegal or criminal activities.
• Opportunity for Harmful Activities - The Minister must consider whether the transaction presents opportunities for: (i) disruptive or destructive actions against persons in the State; (ii) improved access to sensitive undertakings, assets, people or data in the State; (iii) espionage affecting State interests.
• Impact on Critical Infrastructure - Whether the transaction would negatively impact the stability, reliability, continuity or safety of matters referred to in article 4(1) of the EU Regulation.
• Access to Sensitive Information - Whether the transaction would result in access to information, data, systems, technologies or assets of general importance to State security or public order.
• EU and International Considerations - Comments from Member States and European Commission opinions under the EU Regulation.
• Effects on other Member States' or the EU's security or public order.
• Impact on projects or programmes of Union interest.

A notification must be filed not less than 10 days before the transaction is due to complete. A filing may be submitted a soon as a “good faith intention” exists on the part of both parties to complete the transaction (for example a heads of agreement).

No.

Applicants will be required to provide extensive information, to include:

• name and details of the acquiring party (e.g. ultimate beneficial owner (where applicable), country of registration, area of economic activity, and jurisdictions where the acquirer conducts business);
• all relevant details of the target undertaking / asset (e.g. turnover, employees, areas of economic activity, business operations, and jurisdictions where the target entity conducts business);
• sector of operation or relevance of the asset / target entity;
• cumulative value of the transaction;
• impact on projects of EU interest;
• planned date of completion;
• details on the source of funding;
• background to the acquisition, business strategy behind the acquisition, and continuity planning post-acquisition;
• details of other legal entities within the corporate group of the acquirer;
• details of other legal entities within the corporate group of the target entity (where applicable).

All parties to a notifiable transaction are required to submit a notification; however, the parties may agree that one party will submit a joint notification by one party specifying the date it intends to submit a notification and the other party(ies) confirming before that date that they agree to the information contained in the notification.

Failure to submit a filing is an offence punishable by a fine of up to €5,000 and/or a term of imprisonment not exceeding 6 months on summary conviction (non-jury district court trial) or by fines of up to €4,000,000 and/or a term of imprisonment not exceeding 5 years for convictions on indictment (jury trial before the Circuit or Central Criminal Courts). Where the offence is committed by a body corporate, any director, manager, secretary or other office of that body corporate will be liable where they consented or connived in the commission of the offence or were wilfully negligent to its commission.

A notifiable transaction cannot be implemented until the Minister has issued a ‘screening decision’ authorising its implementation or a letter confirming that they do not intend to issue a screening notice. Failure to comply with this obligation is an offence that is subject to the same penalties as failure to notify but does not otherwise invalidate the transaction.

Where the Minister has reasonable grounds to believe:

• the transaction has, or is likely to have an effect on security and public order within the State; and
• the transaction will result in a third country undertaking, or a connected person of such an entity acquiring control of an Irish asset or Irish undertaking,

they may initiate the FDI screening process for a transaction which otherwise does not meet the four conditions for a mandatory notification.

Following review of the relevant notification, the Minister will issue a ‘screening decision’. Under this ‘screening decision’, the Minister can:

• approve the transaction;
• approve the transaction, subject to compliance with specified conditions; or
• prohibit the parties from completing the transaction.

The Minister can require the parties:

• not to complete specified parts of the transaction;
• not to complete the transaction, or such parts of the transaction, until a particular date;
• to sell any matter, including business, assets, shares, real property or intellectual property;
• to cease, alter or restrict certain conduct or practices;
• to prevent the sharing of sensitive information between undertakings, or between specific divisions or units within undertakings;
• to report to the Minister on compliance with any conditions imposed under the screening decision; and
• to pay to the Minister, or any other such person as the Minister directs, a specified amount to cover the costs associated with monitoring compliance with the relevant conditions.

A party who fails to comply with conditions imposed by the Minister under a screening decision is guilty of an offence, and will potentially be subject to the penalties outlined above in response to question 9.

The Act provides for the appointment of an adjudicator by the Minister, who will be responsible for the hearing of appeals against: (i) screening decisions issued by the Minister; and (ii) decisions of the Minister not to provide reasons in relation to a screening decision.

Where a party wishes to appeal the decision of the Minister, they will be required to submit notice of their intention to appeal within 30 days of receipt of the relevant screening decision.

The decision of the adjudicator is final save for a limited right of appeal to the High Court on a point of law.

The steps and timeline of the Irish FDI screening process is as follows:

• Submission of the notification.
• Issue of Screening Notice by the Department - If the transaction is found not to be notifiable, the Department will issue a letter confirming that the transaction may proceed without screening approval. There is no timeline for the issue of this notice or letter.
• Review - The review period is 90 days from the issuance of the screening notice. This period can be extended up to 135 days at the option of the Minister, to allow for further assessment of the potential risks posed by the transaction. If the Minister issues a request for further information, this will suspend the timeline until 10 days following confirmation of receipt by the Minister of the requested information. Response to information requests must be provided within 30 days.
• Issuance of the Screening Decision/Deemed Approval If a screening decision is not received by the parties on expiry of the prescribed review period, they may proceed with the completion of the transaction.

Generally, commercially sensitive information and personal data are protected from disclosure and information that could create a risk to State security or public order is exempt from disclosure. Annual reports by the Minister to the Oireachtas (the Irish Parliament) on the operation of the FDI regime must exclude commercially sensitive information, personal data, and information that could risk State security.

In relation to appeals, the Act contains extensive provisions for the handling of "relevant material" that relates to State security or public order. Adjudicators may direct that sensitive material be redacted, summarized, or withheld entirely from appellants if disclosure would create security risks. Information provided on oath to adjudicators regarding sensitive material cannot be disclosed without express Ministerial authorization.

Appeals before adjudicators are generally held in private, excluding all persons except parties, legal representatives, necessary staff, and relevant witnesses. Strict confidentiality obligations apply to information obtained during private appeal proceedings. Similar confidentiality protections extend to High Court proceedings on appeal. For particularly sensitive matters, the Minister may designate that only specially cleared "approved legal representatives" can represent parties in proceedings.

While individual transactions remain confidential, the Minister must publish anonymized annual reports containing aggregated statistics on notifications, reviews, and sectoral trends.

Media mergers are subject to mandatory notification to the Competition and Consumer Protection Commission and the Minister for Culture, Communications and Sport. Certain acquisitions and changes of control in relation to regulated investment firms are also subject to Central Bank approval.