The Proposal seeks to tighten the currently applicable screening instruments for investments by non-EEA/non-Swiss investors, by broadening the the scope of foreign investments that need to undergo vetting. It also transposes the requirements under the EU Screening Regulation (see our article). Importantly, it will set in place the mechanism to enable the structured cooperation process between the European Commission (EC) and the Member States foreseen under the EU Screening Regulation.
The key elements of the Proposal are:
- The Proposal introduces a new 10 % share threshold (voting rights) for investment in certain critical sectors, thereby lowering the current 25 % threshold.
This includes (i) defence / defence technology, (ii) critical energy infrastructure, (iii) critical digital infrastructure (in particular 5G infrastructure), (iv) water, (v) systems that enable data sovereignty of the Republic of Austria, and (vi) medicines, vaccines, medical devices and personal protective equipment. For the latter, the 10 % threshold is temporarily introduced until 31 December 2022 in light of the COVID-19 emergency.
- For investments in other sensitive sectors the triggering threshold remains at 25 % and 50 % (voting rights). This includes (other than the above-mentioned) investments in the following areas: (i) critical infrastructure, which is essential for the maintenance of vital societal functions; (ii) critical technologies and dual use items as defined in Regulation (EC) No 428/2009; (iii) supply of critical inputs, including energy or raw materials, as well as food security; (iv) access to sensitive information, including personal data, or the ability to control such information; and (v) the freedom and pluralism of the media.
- Apart from share acquisitions (with a threshold system at 10 %, 25 % and 50 %) the Proposal covers investment that lead to control over an Austrian company. Control is defined by reference to control concept under EU merger control.
- The new triggering thresholds clarify that indirect acquisitions are also covered. This aims to close a loophole in the current system.
- The Proposal foresees an exemption for investments in micro-enterprises (including start-ups). This exemption will carve out foreign investments in undertakings with fewer than 10 employees and an annual turnover or balance sheet below EUR 2m.
- While the notification obligation rests primarily with the acquirer, the Proposal foresees (in subsidiarity) an obligation for the target company to notify.
- A considerable part of the Proposal is devoted to the cooperation mechanism for exchanging information and cooperating with the EC and other EU Member States under the EU Screening Regulation.
The Proposal is now in public consultation (until 12 June) and will then go through the parliamentary law-making process. Under the current schedule the new law is envisaged to enter into force at the latest by 11 October 2020 (deadline to transpose the EU Screening Regulation).