Investment Screening: Insights from recent EU and UK experience

The Screening of Third Country Transactions Act 2023 (the Act), which puts an inward investment screening mechanism in place in Ireland, is expected to commence operation in Q4 of 2024. 

As we await the commencement of the Act, recent reports of the European Commission and the UK Government on the operation of EU Member State and UK inward investment screening regimes provide valuable comparative insights.  

Fourth Annual Report on the screening of foreign direct investments into the EU

This report, which is based on reports by the 27 EU Member States and other sources, covers the operation of FDI screening in the EU, and developments in national screening mechanisms in 2023 notes that: 

• Germany and Spain were the main destinations for foreign acquisitions, with 19% and 17% of the total amount of deals in 2023, respectively. Ireland accounted for 7.6% of the total amount.
• Manufacturing, with a 26% share of foreign acquisitions, surpassed ICT (with a 23% share) as the main sector of dealmaking activity.
• 56% of all authorisation requests submitted by the transaction parties to the national authorities and examined by the national authorities at their own initiative were formally screened.
• Most transactions where a decision was reported were authorised without any conditions (85%). In 10% of cases, mitigating measures were imposed. The share of transactions blocked by EU Member States remained around 1%. 

UK National Security and Investment Act 2021: Annual Report 2023-24

This report, which covers the year from 1 April 2023 to 31 March 2024 and is the third annual report on the operation of the National Security and Investment Act 2021, notes that:

• The Government received 906 notifications, the Government accepted 876 notifications and reviewed 847 notifications, of which 95.6% were notified that there would be no further action.
• The highest proportion of all notifications related to the defence area of the economy (48%), followed by critical suppliers to government (19%) and military and dual use (17%).
• The Government issued 41 call-in notices, of which 22 related to a mandatory notification, 15 related to a voluntary notification, and 4 were in relation to non-notified acquisitions.
• Of the 41 acquisitions called in, the highest proportion (34%) were associated with the defence area of the economy and 29% with military and dual use.
• No call-in notices were issued in connection with a retrospective validation application.
• The Government issued 33 final notifications (which included 10 withdrawn notifications) and 5 final orders and varied 2 other final orders during the reporting period.
• Of the 5 final orders, 3 were following a mandatory notification, 1 following a voluntary notification, and another was a non-notified acquisition. 4 were associated with acquisitions in the defence area of the economy.

Conclusion

It remains to be seen if the EU and UK experience will be reflected in the experience under the Act once it comes into operation. Nonetheless, it seems likely that most notified transactions under the Act will require no action or be cleared with or without conditions. This likelihood should not blind parties, however, to the requirement to notify mandatorily notifiable transactions or the risk of the Irish Government using its power under the Act to exercise to call in transactions. 

For more information on investment screening in Ireland, please contact John Gaffney or your usual contact in Beauchamps LLP.