The Irish government published the Screening of Third Country Transactions Bill (Bill) on 2 August 2022. The Bill creates a screening procedure for transactions which may present a risk to the security or public order of the State. The Bill will give effect to Regulation 2019/452 which establishes a framework for the screening of foreign direct investments into the EU, particularly investments into critical utilities and infrastructure sectors. It is expected that the Bill will be implemented in early 2023.
NEW NOTIFICATION REGIME
The Bill introduces a new mandatory and suspensory notification regime for transactions involving third country or foreign-controlled undertakings (ie outside the EU, EEA and Switzerland) which meet each of the following criteria:
- a third country undertaking or a connected person is a party to the transaction;
- the value of the transaction is at least €2 million;
- the transaction relates, directly or indirectly, to critical infrastructure, critical technologies, critical inputs, sensitive information or media (see further below); and
- the transaction relates, directly or indirectly, to an asset or undertaking in Ireland.
A third country undertaking is (i) an undertaking constituted or governed by the laws of a third country, (ii) controlled by a third country national or person constituted or governed by the laws of a third country or (iii) a third country national. Similarly, an undertaking is regarded as being in Ireland when it is (i) constituted or governed by the laws of Ireland and (ii) controlled by a person constituted or governed by the laws of Ireland or by a person ordinarily resident in Ireland.
An asset is regarded as being in Ireland if it is physically located in Ireland or, in the case of an intangible asset, owned, controlled or otherwise in the possession of an undertaking in Ireland.
WHAT TYPES OF TRANSACTIONS ARE CAUGHT?
The transaction must either relate to a change in control of an asset in Ireland or the acquisition of, or of any interest in, an undertaking in Ireland. The acquisition of shares or voting rights is only notifiable where shares or voting rights increase from 25% or less to over 25% or from 50% or less to over 50%.
The concept of 'control' is aligned to that under EU and Irish merger control, ie the ability of, directly or indirectly, exercising influence over the activities of an undertaking, for example through voting rights, securities, contracts, the ownership of assets or rights or contracts enabling influence to be exercised over the composition, voting or decisions of the organs of an undertaking.
WHAT ARE CRITICAL INFRASTRUCTURE AND TECHNOLOGIES?
Transactions which directly or indirectly relate to one of the following sectors are caught by the notification obligation:
- critical infrastructure, both physical and virtual, including energy, transport, water, health, communications, 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, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies;
- supply of critical inputs including energy, raw materials and food security;
- access to sensitive information, including personal data, or the ability to control such information;
- freedom and pluralism of the media.
WHAT ARE THE NOTIFICATION REQUIREMENTS?
A qualifying transaction must be notified to the Minister for Enterprise, Trade and Employment (Minister) at least 10 days before completion by all parties to a transaction. The notification must include certain prescribed information, including the identities, ownership structure and economic activities of the parties, the value of the transaction, source of funding and details of any sanctions or restrictive financial measures which might be in place against the parties. The Minister can request further information from the parties.
Similar to the EU and Irish merger control process, a standstill obligation applies until the Minister has cleared the transaction. This means that the parties cannot complete, or take steps to complete, a transaction until clearance from the Minister has been obtained.
Failure to notify the Minister is a criminal offence with fines of up to €4 million and/or 5 years imprisonment. In addition, if the Minister is not notified of qualifying transaction, he may still review it within five years of completion date.
WHAT IS THE REVIEW PROCESS?
The Minister has 90 days from the date of notification to issue a screening decision (or, where the transaction has been called-in (see below) within 90 days from the date on which the Minister issues a screening notice). This review period can be extended to 135 days. In addition, the Minister may issue a request for further information during the review, in which case the review period is paused and resumes on the date that the notice is complied with.
During the review process, the Minister will determine whether the transaction affects, or would be likely to affect, the security or public order of Ireland. In doing so, the Minister must consider a number of issues, including:
- whether a party to the transaction is controlled by the government of a third country;
- the extent to which a party is already involved in activities relevant to, or has previously taken action affecting, the security or public order of Ireland;
- whether there is a serious risk that a party engages in illegal or criminal activities;
- whether the transaction would allow a person to engage in disruptive or destructive activities, to improve access to sensitive undertakings, assets, people or date in the State or to undertake espionage;
- whether the transaction would likely have a negative impact on the stability, reliability, continuity or safety of critical infrastructure or technologies in the State;
- whether a person acquires access to information, data, systems, technologies or assets of general importance to the security or public order of Ireland;
- whether the transaction affects the security or public order of another Member State.
If the Minister concludes that a transaction affects, or would be likely to affect, the security or public order of Ireland, he can:
a. prohibit the parties from completing the transaction, or parts of it;
b. make completion of the transaction subject to conditions, for example divestments, behavioural commitments, protection of competitively sensitive information and compliance reporting; or
c. where the transaction has already been completed, prohibit the parties from taking such action as the Minister may specify to protect the security or public order of Ireland.
CAN THE MINISTER 'CALL IN' TRANSACTIONS?
The Minister may 'call in' non-notifiable transactions for a period of 15 months post completion where he has reasonable grounds for believing that the transaction affects, or would be likely to affect, security or public order in Ireland. In addition, the Minister has the power to review notifiable transactions which have not been notified before the later of 5 years from completion or 6 months from the Minister becoming aware of the transaction.
CAN THE DECISION BE APPEALED?
If one of the parties wishes to appeal the screening decision of the Minister, it must notify the Minister in writing within 30 days of being notified of the decision. The appeal must then be submitted to an adjudicator, from a panel of adjudicators appointed by the Minister (comprising judges and other senior lawyers). A party can appeal the decision of an adjudicator to the High Court on a point of law within 30 days.
COMMENT
The new Bill is likely to have a significant impact on corporate transactions in Ireland, due to the low financial threshold and the wide range of sectors covered. It is important to note that both the UK and the US are considered to be third countries and transactions involving undertakings or nationals from these countries may therefore be subject to the new regime.
Businesses need to take account of the notification requirement and the long review period when considering transactions in Ireland. The obligation to make a filing will require the transaction to be conditional on approval from the Minister and the long review period provided for in the Bill will need to be built into the transaction timeline.
For more information in relation to any of the above please contact our Head of EU, Competition & Procurement Dorit McCann or your usual contact in Beauchamps.