Philip Andrews (McCann Fitzgerald LLP) authored this publication

Ireland's proposed new law on the screening of foreign direct investments, the Screening of Third Country Transactions Bill 2022 (the TCTB), scheduled to be adopted in Q1 2023 and entered into force soon after, will for the first time "…provide the Government with powers to protect security or public order from hostile actors using ownership of, or influence over, businesses and assets to harm the State."

The TCTB, to give effect to Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019, will require pre-notification to and prior approval of the Irish Minister of Enterprise, Trade & Employment on a wide array of transactions. Importantly, the TCTB will also have retrospective effect, allowing the Minister to review transactions that were completed in the 15 months prior to the law's entry into force.

Recent updates

Ireland contemplated changes to its FDI regime, which were adopted in early 2023.

Who files

The TCTB is generally applicable to an acquisition of control (broadly defined) of an Irish business by an investor (or "persons connected with" such an investor) from anywhere other than an EU Member State, a member of the EEA, or Switzerland.

The obligation to notify applies to all parties to a notifiable transaction, meaning both buyer and seller. An exception applies for a "party to a transaction ... where it is not aware of the transaction," even if it is unclear when such an exception might apply or how it might be demonstrated.

Of note, the TCTB explicitly provides for a process to permit one notifying party consent to another party notifying on its behalf and thereby relieve that party of its notification obligation.

Types of deals reviewed

The TCTB covers any transaction, acquisition, agreement or other economic activity involving change of control of an asset in Ireland or the acquisition of all or part of any interest in an Irish company. Such transactions must be pre-notified and cleared by the Minister if they meet all of the following criteria:

• A third-country investor (as described below), or a person connected with such investor, is a party to the transaction
• The transaction "directly or indirectly" relates to, or impacts upon, one or more of the relevant matters (as described below)
• The value of the transaction is equal to or greater than an amount to be specified by the Minister (or, in the absence of specification, €2 million) and
• The transaction relates to an Irish asset, business or firm

A transaction that results in the acquisition of shares or voting rights in an undertaking (as opposed to a change of control of an asset) is not notifiable unless: (i) all of the above criteria are satisfied; and (ii) the percentage of shares or voting rights held by the person in the undertaking changes from:

• 25 percent or less to more than 25 percent; or
• 50 percent or less to more than 50 percent

Reflecting Article 4(1) of Regulation (EU) 2019/452, the TCTB applies to transactions that "relate to, or impact upon, one or more of the following matters:"

• Critical infrastructure, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure and sensitive facilities, including the land/real estate necessary for the use of such infrastructure
• Critical technologies and dual-use items including AI, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, 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 and
• The freedom and pluralism of the media

In addition, the TCTB gives the Minister sua sponte powers to instigate review of a foreign investment if the transaction might impact security or public order. These "not notifiable" transactions are not subject to mandatory approval, but can be called in by the Minister if he or she has "reasonable grounds" for believing that the transaction affects or would likely pose a risk to the security or public order of the state.

Scope of the review

In reviewing a transaction, the Minister will assess whether the transaction affects, or would be likely to affect, the security or public order of Ireland, with regard to the following factors:

• Whether a party to the transaction is controlled by a government of a third country and the extent to which such control is inconsistent with the policies and objectives of Ireland
• The extent to which a party to the transaction is already involved in activities relevant to the security or public order of Ireland
• Whether a party to the transaction has previously taken actions affecting the security or public order of Ireland
• Whether there is a serious risk of a party to the transaction engaging in illegal or criminal activities
• Whether the transaction presents, or is likely to present, a person with an opportunity to undertake actions that are disruptive or destructive to persons in Ireland; improve their access to sensitive undertakings, assets, people or data; or undertaking espionage affecting or relevant to the interests of Ireland
• Whether the transaction would likely have a negative impact in Ireland on the stability, reliability, continuity or safety of the relevant matters (as set out above)
• Whether the transaction would result in persons acquiring access to information, data, systems, technologies or assets that are of general importance to the security or public order of Ireland
• Comments of EU Member States and the opinion of the European Commission and
• The extent to which the transaction affects, or is likely to affect, the security or public order of another EU Member State or the European Union

The Minister is required to take into account written submissions made by the parties to the transaction and to consult with an "advisory panel," comprising civil servants drawn from a number of key government departments, as well as other government ministers.

Powers of the Minister

If the Minister finds that a transaction affects, or would be likely to affect, the security or public order of the state, the Minister will be empowered to direct the parties:

• Not to complete the transaction, or such parts of the transaction as the Minister may specify
• Not to complete the transaction, or such parts of the transaction as the Minister may specify, before or after such date or dates as the Minister may specify
• To sell or divest itself of any matter, including businesses, assets (tangible or intangible), shares, real property or intellectual property
• To modify or constrain its conduct or practice in specified ways
• To cease a specified conduct or practice
• To prevent the flow of competitively sensitive information between undertakings or within divisions, units, departments or other organizational units within an undertaking
• To report to the Minister, on such terms as the Minister may specify, on the parties' compliance with conditions imposed or
• To pay to the Minister, or such other person as the Minister may specify, such amounts as the Minister may specify in order to meet the reasonable costs associated with monitoring compliance with conditions imposed by the Minister

The Minister will also have power to review non-notified transactions retrospectively up to five years from the completion of the transaction or six months from when the Minister becomes aware of the transaction, whichever is later.

Review process timeline

Review timetable & suspensory effect

The TCTB requires the Minister to issue a written "screening notice" to the parties "as soon as practicable" following the commencement of a review. The screening notice summarizes the reasons for which the transaction is being reviewed and provides the parties the option to submit written submissions.

The effect of issuance of a screening notice is that the notified deal cannot be completed and the parties cannot take action furthering the transaction until the Minister makes a screening decision approving the transaction.

It follows that deals that manifestly do not risk raising national security or public order concerns can be completed without prior approval of the Minister, although risk is on the parties in this case.

A "screening decision" must be adopted by the Minister within 90 calendar days of receipt of a filing (in the case of a notified transaction) or issuance of a screening notice (where a transaction has not been notified but the Minister exercises the power to "call in" a transaction for review), although this 90-day period can be extended to 135 calendar days effectively on election of the Minister.

Where the transaction has already been completed (e.g., a non-notified transaction), the Minister may direct the parties to the transaction to take such actions as the Minister may specify for the purpose of protecting the security or public order of Ireland (including divestment of the business, shares, assets, property or intellectual property in question).

The Minister may, at any time following the commencement of a review, issue a "notice for information" where further information is considered necessary. The issuing of a notice for information suspends the review timetable, starting from the date on which the notice is issued until the date on which the Minister confirms that the relevant party has provided all of the requested information.

Penalties for non-compliance

The TCTB will make it a criminal offense to:

• Fail to notify a notifiable transaction as required under the Bill
• Complete the transaction, or take any action for the purpose of completing or furthering the transaction until the Minister makes a screening decision approving the transaction, where a screening notice has been issued with respect to a transaction
• Complete the transaction other than in accordance with the conditions, where a transaction is subject to a conditional screening decision
• Complete the transaction, or take any action for the purpose of completing or furthering the transaction, where the Minister makes a screening decision blocking a transaction
• Fail to comply with a notice for information
• Provide the Minister with information that the party knows is false in a material respect, or is reckless as to whether it is false in a material respect

Criminal penalties for non-compliance on any of these grounds may apply to companies and individuals, and include fines of up to €4 million and/or a term of imprisonment of up to five years (for conviction on indictment).

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