The Screening of Third Country Transactions Act 2023

Impact on Ireland's M&A Landscape

On January 6, 2025, the Screening of Third Country Transactions Act 2023 (the FDI Screening Act) came into force in Ireland. The FDI Screening Act was designed to implement the European Union's Foreign Direct Investment (FDI) Screening Regulation 2019/452 (the Regulation) within Ireland’s legal framework.

The FDI Screening Act establishes an inward investment screening mechanism in Ireland and gives the Minister for Enterprise, Trade and Employment (the Minister) the power to assess, investigate, authorise, mitigate or prohibit qualifying foreign investments into Irish assets and businesses in sensitive sectors based on various security criteria. In short, transactions coming within the scope of the FDI Screening Act require pre-completion approval by the Minister or may be subject to the Minister's "call-in" power of review.

While this new FDI screening mechanism needs to be considered in tandem with other foreign investment regimes including Irish and international merger control regimes, we outline in this article some of the key requirements and potential impacts on qualifying foreign investors and M&A transactions now that the FDI Screening Act is in force.

What are the key provisions of the FDI Screening Act?

The new regime under the FDI Screening Act provides for a mandatory and discretionary element to notification to the Department of Enterprise, Trade and Employment (Department). It focuses on transactions involving investors from "third countries" i.e. countries outside the European Economic Area (EEA) and Switzerland.

Mandatory notification 

Mandatory notification applies to transactions that meet all of the criteria set out in section 9(1)(a) –(d) of the FDI Screening Act. These include that:

• a third country undertaking or a connected person is a party to the transaction;
• the transaction is of a value of at least €2 million;
• the transaction involves the acquisition of control of an asset or undertaking in Ireland, or more than 25% or 50% of shares or voting rights is being acquired; and
• the transaction relates to or impacts critical infrastructure, critical technologies or dual use items, critical inputs including natural resources, access to sensitive data and/or media.

Discretionary "call-in" power
In addition to the mandatory regime, the FDI Screening Act provides the Minister with a discretionary “call-in” power to initiate screening of any transactions:

• which the Minister deems on reasonable grounds may pose a risk to security or public order; or 
• in respect of which a third country undertaking acquires or changes the extent to which it controls an asset or undertaking. 

If the Minister issues a "screening notice", completion of the deal must be suspended pending ministerial review and approval, which can extend the review timetable by 90 days (which can be extended to 135 days). Transactions that are mandatorily notifiable but are not notified, may be "called-in" for review for a period of the later of five years from completion or six months from the date the Minister first becomes aware of the transaction. Transactions that are not mandatorily notifiable, can be "called-in" for review by the Minister for a period of 15 months post completion.

It should be noted that all parties to a notifiable transaction have the obligation to notify, which needs to be done at least 10 calendar days before completion. Parties can agree for one party to make the notification. The Department's guidance on the FDI Screening Act expects that that the purchaser will lead the notification process.

How will the new regime impact M&A transactions?

The introduction of the FDI Screening Act brings potentially significant implications for third country investors seeking to do business in Ireland which has flow on effects for M&A deals and advisers, including as follows:

• Deal timetable: Dealmakers now need to start assessing whether the FDI Screening Act applies to their transaction, and where mandatory notification requirements apply, to factor in a period for review and adjust deal timing accordingly. 
• Screening Process: where a transaction does not trigger mandatory notification, advisers will need to consider the likelihood of the transaction being retrospectively "called-in" for review by the Minister.
• Transaction documents: Parties to transactions involving third country investors will need to consider incorporating into transaction documents FDI screening related pre-conditions, warranties and longstop dates.
• Impact on Strategic Sectors: third country investments in sectors such as energy, defence, and telecommunications are now subject to greater scrutiny. 
• Penalties: Dealmakers and their advisers need to be aware of the potential for substantial criminal penalties to apply for a failure to notify a notifiable transaction and/or to comply with or provide materially false information in response to a notice of information (on summary conviction, a fine of up to €5million and/or 6 months imprisonment). Further, it may not be possible to complete the transaction by virtue of it being prohibited, delayed or FDI conditions being unacceptable.

If you need assistance navigating the new regime or wish to discuss the above, please contact Yvonne O'Byrne or your usual contact in Beauchamps.