João Marques Mendes and Joana Campelo (PLMJ Advogados, SP, RL) authored this publication

In Portugal, the Council of Ministers has the power to oppose acquisitions of infrastructure or strategic assets by non-EU or non-EEA natural or legal persons. The Council of Ministers may do so in order to guarantee public security, and only in exceptional circumstances and via a reasoned decision. Those transactions that may be opposed are those that are considered to jeopardize national defense and security, or the security of the country's supply in services fundamental to the national interest.

Specifically, according to the Portuguese FDI Law (DL 138/2014), the Portuguese government may oppose investments (i) made by residents outside the EU or the EEA or by legal entities directly or indirectly controlled by residents outside the EU or EEA; (ii) that directly or indirectly allow direct or indirect control (iii) over strategic assets, which are defined as key infrastructures or assets related to defense and national security or to the provision of essential services in the energy, transport or communications sectors. The definition of direct or indirect control under the FDI Law is identical to that definition under EU and Portuguese competition law.

The Portuguese FDI Law does not require mandatory notification of any transaction, but the prospective purchaser may, on a voluntary basis, request an ex ante confirmation that an opposition decision will not be issued. From our experience, confirmation ex ante is rarely requested, and, to date, we are not aware of any transactions blocked under this framework.

Who files

The Portuguese FDI Law does not require mandatory notification of any transaction. Nonetheless, the prospective purchaser may, on a voluntary basis, request an ex ante confirmation that an opposition decision will not be issued. There is no official form for this request, but it must include the full description of the terms of the envisaged transaction. If the government does not initiate an assessment procedure within 30 business days counted from the date of the request, a non-opposition decision is deemed to have been issued.

If no confirmation is requested ex ante, a review of the transaction can be initiated by the government ex officio within 30 business days from the conclusion of the transaction or from the date it becomes publicly known.

Types of deals reviewed

Under the Portuguese FDI Law, the Portuguese government has the power to review any transaction that allows control over strategic assets, which are defined as the key infrastructures and assets related to defense and national security or to the provision of essential services in the energy, transport or communications sectors. There is no financial threshold for investments to be able to be screened under the Portuguese FDI Law.

There is no definition of "strategic assets related to defense and national security or to the provision of essential services in the energy, transport or communications sectors," which creates some uncertainty on the possibility of screening of transactions in these sectors.

Scope of the review

The review will focus on the nature of the business to be acquired and the parties involved in the transaction.

In the event a transaction is subject to FDI screening (based on the three requirements referred to above), the criteria that will guide whether the government opposes the transaction include, among other factors, the track record of the buyer and the country in which the buyer is domiciled or to which it is in some way linked. The Portuguese FDI Law gives examples of some situations where it will assume a threat to the defense, national security of security of supply of essential services exists. According to the law, transactions that result, directly or indirectly, in the acquisition of control, directly or indirectly, by a person or persons from countries outside the European Union are likely to jeopardize national defense and security, when:

• There are serious indications, based on objective elements, of the existence of links between the buyer and third countries that do not recognize or respect the fundamental principles of the democratic rule of law, which represent a risk to the international community as a result of the nature of their alliances or who maintain relations with criminal or terrorist organizations or with persons linked to such organizations, taking into account the official positions of the European Union in these matters
• The buyer has, in the past, used the controlling position held over other assets to create serious difficulties for the regular provision of essential public services in the country in which they were located, as well as neighboring countries, or does not guarantee the main allocation of the assets, as well as their reversal at the end of the corresponding concessions, when they exist, namely taking into account the lack of adequate contractual provisions for this purpose
• The transaction results in a change in the destination of strategic assets

If an opposition decision is issued, all legal acts and transactions relating to the transaction in question shall be deemed null and void, including those relating to economic exploitation or the exercise of rights over the assets or over the entities that control them.

Review process timeline

According to the procedure set out in Portuguese law, the process can take approximately 100 business days from the conclusion of the transaction or from the date it becomes publicly known. Specifically, the following procedural steps and timelines shall apply:

• The review of the transaction shall be initiated within 30 business days from the conclusion of the transaction or from the date it becomes publicly known or upon application for an ex ante confirmation
• Investors are notified to present the relevant information and documents about the transaction to the government member responsible for the area in which the strategic asset in question is included, within ten business days (the FDI Law does not provide for a specific deadline, and therefore the subsidiary administrative deadline shall apply)
• The Council of Ministers, upon proposal of the member of the government responsible for the area in which the strategic asset in question is included, may decide to oppose the transaction until up to 60 business days from the complete delivery of the information referred to in the previous number (the absence of a decision within the same deadline counts as a non-opposition decision)

This procedure can take longer to the extent Regulation (EU) no. 2019/452 leads to the intervention of other Member States or the European Commission.

Any opposition decision is subject to judicial review by the administrative courts (the challenge of the opposition decision does not have a suspensive effect on the same).

How foreign investors can protect themselves

Investors can request an ex ante confirmation of whether a transaction will be subject to screening under the FDI regime. Investors shall consider, in their risk assessment of the likeability of screening, the sectors in which the target develops its activity, the essentiality of services provided by the target, its market share or on the impact of the transaction, among other factors.

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2023 White & Case LLP}