Ireland's Screening of Third Country Transactions Act 2023 Enters into Force

Introduction 

The Minister for Enterprise, Trade and Employment (the Minister) has confirmed that the Screening of Third Country Transactions Act 2023 (the Act) will come into force on 6 January 2025.

Screening Mechanism 

The Act was developed on foot of the adoption of the EU FDI Screening Regulation (EU Regulation 2019/452) (the FDI Screening Regulation) as a response to the growing concerns among EU Member States about the acquisition of strategic or sensitive European companies or technology by third country actors. The Act establishes an inward investment screening mechanism (the Screening Mechanism) in Ireland and gives the Minister the power to assess, investigate, authorise, mitigate, or prohibit investments based on various security criteria. 

Notifiable Investments and the Minister’s “Call in” Power

The Act provides for the mandatory notification of investments that meet all the criteria set out in Section 9(1)(a)-(d) of the Act. A transaction is notifiable where: 

• a third country undertaking, or a person connected with such an undertaking, acquires control of an asset or undertaking in the State, or increases the percentage of shares or voting rights it holds in an undertaking in the State to more than 25%  (or from less than 50% to more than 50% (Section 9(1)(a));
• the cumulative value of the transaction (and other related transactions between the parties) is equal to or greater than €2,000,000 in the 12 months prior to the date of the transaction (Section 9(1)(b));
• the same undertaking does not control all of the parties involved in the transaction (ie internal restructuring (Section 9(1)(c)); and
• the transaction relates to, or impacts upon, one or more of the matters referred to in Article 4(1)(a) -(e) of the FDI Screening Regulation. In summary, these are as follows:
  • critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
  • critical technologies and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies;
  • supply of critical inputs, including energy or raw materials, as well as food security;
  • access to sensitive information, including personal data, or the ability to control such information; or
  • the freedom and pluralism of the media.

Potential Criminal Sanctions 

Investors that do not adhere to the mandatory notification requirements may be liable to criminal conviction. This is intended to counter deliberate attempts to circumvent the Screening Mechanism, rather than to punish honest mistakes. It is a matter, however, for the parties to a transaction to determine whether their transaction requires a mandatory notification under the Act. 

Minister's Call-In Power 

In addition to the mandatory regime, the Act provides the Minister with a discretionary “call-in” power to initiate screening of other investments which do not require mandatory notification, but which the Minister deems, on reasonable grounds, may pose a risk to security or public order. 

Conclusion

It is anticipated that very few investments, mergers or transactions will be considered to pose a risk to security and public order in Ireland. Consequently, the Act seeks to provide a proportionate response to such risks, without undermining Ireland’s attractiveness to inward FDI more generally.

For more information on the Screening Mechanism introduced by the Act, please contact John Gaffney or your usual contact in Beauchamps.