TerraLex Guide to Foreign Direct Investment - NEW

Foreign Direct Investment (“FDI”) in Latvia is regulated at both a national and European Union (EU) level.

Main national law governing FDI screening is the National Security Law ("NSL") and the Cabinet of Ministers Regulations No.311 "Procedure for preventing threats to commercial companies, associations and foundations important to national security" ("Cabinet Regulations 311").

Latvia also participates in the EU cooperation mechanism under Regulation (EU) 2019/452, meaning Latvian screening authorities exchange information with other EU Member States and the European Commission in relevant cross-border cases.

In Latvia, the responsible authority for review of FDI filings is the Ministry of Economics, while decisions regarding FDI filings are ultimately adopted by the Cabinet of Ministers of the Republic of Latvia.

There is no formal pre-notification procedure.

Informal consultations with the competent ministry are possible and used in practice. It is also possible to obtain a written reply from the ministry, as well as a reply binding upon the ministry within the administrative procedure (so-called "statement of one's rights").

The FDI regime applies to certain transactions that involve “companies important to national security” and companies that own or operate critical infrastructure.

Companies important to national security The list of companies important to national security is publicly available in the Latvian Register of Enterprises. Companies falling under this qualification must self-register. The list of companies that own or operate critical infrastructure is not publicly available.

The companies operating in the following sectors are affected:

• Telecom and media (based on market power and territorial coverage)
• Energy (above certain thresholds)
• Forest and agricultural land
• Defence (strategic and dual used goods)
• Voter data and critical infrastructure data processing

Notifiable transactions The following transactions involving companies important to national security trigger FDI clearance:

• Acquisition above >10% shareholding
• Gaining “decisive influence”. A company has decisive influence over another entity if any of the following apply: (i) It holds a majority of voting rights; (ii) It has the right to appoint or remove most members of the management or supervisory board; (iii) It has appointed most board members during the financial year using its shareholder rights; (iv) It controls the majority of voting rights through an agreement with other shareholders.
• Change in the ultimate beneficial shareholder
• Asset transfer in key sector (asset transfer as “transfer of undertaking”)
• Loans from non-EU/NATO/EFTA/OECD entities and nationals.

The FDI screening regime aims to prevent such influence in a company important to national security that threatens or potentially threatens national security.

When deciding on the filing, the Cabinet of Ministers assesses the proportionality of any restriction on individual rights against national security interests, considers the opinion of the state security authority, and ensures compliance with the principle of legitimate expectation.

Under Latvian FDI rules, citizens of and companies registered in the Russian Federation or Belarus are prohibited from acquiring above 10% holding and “decisive influence” in companies important to national security, as well as may not own or operate critical infrastructure.

As a general rule, the regime provides for pre-closing filing, with the exception of change of UBO.

In case of change of the UBO, the filing must me made within five (5) business days after the change took place. In practice, some applicants file pre-emptively.

There is no filing fee.

Information required for Latvian FDI filing is prescribed by the Cabinet Regulations 311.

The filing must include the following key elements:

• Party identification: full details of the Latvian entity and the foreign investor, including business activity, annual turnover, source of transaction financing, and ownership/control structure;
• Ownership & Governance: A schematic representation of the Latvian entity’s ownership and control structure before and after the transaction, along with information on share capital, voting rights, and governance arrangements;
• Transaction details: Basis for acquiring significant participation or decisive influence; where applicable, description of transferred business or assets, loan agreements, and supporting financial statements;
• Indication of whether the transaction is subject to review in other EU Member States or falls under the EU Merger Regulation.

Supporting corporate and identification documents are required and must be legalized.

The company important to national security must submit the notification in case of change of UBO, prior to transferring its assets (“transfer of undertaking”) or obtaining a loan.

Investor (acquiring party) is responsible for filing in case of acquisition of shares or gaining decisive influence.

Failure to receive the approval from the Cabinet of Ministers for a notifiable transaction result in the transaction being null and void in the territory of Latvia.

Unapproved parties cannot be included in the list of shareholders or exercise voting rights. The Cabinet of Ministers may also decide on forced divestment, an exit of a party from a company or an order to terminate the loan agreement.

Yes, when the notification is made pre-closing, the parties must wait for the decision of the Cabinet of Ministers. The consequences are same as in case of failure to make a filing (nullity of the transaction, restrictions on exercise of voter rights and potentially a forced divestment or forced exit).

The NSL does not provide for review of transactions that do not meet criteria for mandatory filing.

The Cabinet of Ministers may either approve or prohibit the transaction. In case of loans, the Cabinet of Ministers may impose restrictions on the loans. If the Cabinet of Ministers fails to adopt any decision within legal timeframe, the transaction is deemed approved by virtue of law.

The Cabinet of Ministers may impose a restriction on a transaction that involves receiving a loan from non-EU/NATO/EFTA/OECD entities and nationals to prevent national security risks.

Yes. The decision of the Cabinet of Ministers may be appealed in administrative procedure to the Administrative District Court. The judgement of the Administrative District Court may be appealed by submitting a cassation complaint.

When a transaction requires pre-notification (acquisition of shares, gaining decisive influence, transfer of undertaking, loan), the parties must suspend the transaction before receiving the decision of the Cabinet of Ministers.

In case of a change of ultimate beneficial owner, the company important to national security must notify the Cabinet of Ministers within five business days after the change by submitting a filing. In practice, some parties file pre-emptively.

The deadline for adopting the decision is one month after submission of a complete filing. The Cabinet of Ministers may prolong this term to up to four months. In practice, the Cabinet usually does prolong the term and issues the decision within 2-2.5 months from the filing.

Latvian FDI filings and proceedings are non-public. The ministry may, however, share information with other government institutions and with the European Commission under the EU FDI cooperation mechanism.

Confidential information submitted is protected under the Latvian Trade Secret Protection Law.

In Latvia, there are restrictions on acquisition of land and even more strict regulations on acquiring agricultural land in rural areas.