Croatian Parliament unanimously adopts FDI Act

As previously reported, the Croatian Ministry published the final text of the FDI Screening Act, implementing the screening mechanism under Regulation (EU) 2019/452 (the "EU FDI Screening Regulation") (see our previous Legal Insight here). While the public consultation generated several proposals aimed at enhancing legal certainty – particularly regarding transitional implementation, review timelines and constraints on retroactive screening – these suggestions were not ultimately incorporated. The final Act introduces only limited textual refinements and, in substance, largely preserves the approach set out in the original draft.

Key definitions

Foreign investor

• any natural person who is not a citizen of Croatia or another EU or EEA Member State (including dual nationals who also hold third‑country citizenship) and stateless persons;
• any legal person organised under the laws of a third country (including trusts and similar foreign legal forms);
  
  
• any investment migration intermediary (as regulated by Regulation (EU) 2024/1624 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing);
  
  
• any legal person established in Croatia or another EU or EEA Member State that is directly or indirectly controlled by a foreign investor or by a public body of a third country; and
  
  
• any subsidiary or branch in Croatia or another EU or EEA Member State that is directly or indirectly controlled by a foreign investor or by a public authority of a third country (including downstream subsidiaries or branches and companies effectively controlled or influenced by them).

Foreign investment

      Any direct or indirect investment in an obliged entity through which a foreign investor acquires, increases or decreases a qualified holding, or obtains control over that entity. Under the Act, "control" is broadly defined to include both direct and indirect means of exercising a decisive influence over an obliged entity. This influence is not limited to share ownership but may also arise from rights, agreements or other arrangements that enable significant influence over management or key decisions.

• Obliged entity: Any company (i) registered, (ii) with permanent establishment, or (iii) to be incorporated (i.e. a greenfield investment) in Croatia in connection with the foreign investment and whose activities may affect national or EU security or public order.
  
  
• Qualifying holding: Direct or indirect acquisition of at least 10 % of shares, voting rights or property rights in the obliged entity.
  
  

Identification of obliged entities

The obligation to notify foreign investments is linked to the identification of obliged entities by the competent authorities, i.e. the Act operates on a designation principle. Each authority, acting within its respective sector, will be responsible for identifying the entities subject to obligations under the FDI Act within six months of the Act's entry into force.

The criteria for determining an obliged entity will be based on the National Classification of Activities (analogous to NACE). The authorities will also be responsible for maintaining and regularly updating a register of obliged entities, which must be submitted periodically to the Ministry of Finance.

Once an entity has been designated as an "obliged" entity, the competent authority is required to inform it of its obligations under the FDI Act within eight days. The register of obliged entities will not be made publicly available.

Initiation of the screening procedure

• The foreign investor and/or the obliged entity must notify the Ministry of Finance before completing a foreign investment that meets the qualifying holding or control thresholds.
  
  
• Notification is also required for all types of concessions, public-private partnerships and certain other arrangements where a foreign investor is involved.
  
  
• The Ministry of Finance may at the proposal of any member of the FDI Committee initiate screening ex officio in the following cases: (i) unreported foreign investments; (ii) on the basis of a negative risk assessment; (iii) when information or indications suggest that the investor or obliged entity is acting against the purpose of the FDI Act; (iv) when there is suspicion or evidence that a request to reduce a qualified holding was used to conceal an acquisition, or increase or decrease a qualified holding as part of joint coordinated actions; (v) when a National Contact Point receives a complaint or opinion from the EU Commission or Member States; (vi) when the FDI Committee analysis identifies risks of negative impacts arising from foreign investments; and (vii) in other cases where actions contrary to the purpose of the FDI Act are suspected.

For the moment, the administrative implementation of the ex officio review mechanism remains unclear. The Ministry of Finance has broad discretion to "call in" foreign investments for screening, while the FDI Act does not provide any possibility for a voluntary (ex ante) notification. This leaves investors without a tool to obtain upfront legal certainty and exposed to the risk of a later-stage ex officio intervention.

Formal course of the screening procedure

• Upon receiving the notification, the Ministry of Finance will carry out an administrative review of the application to verify its completeness and eligibility within 30 days of submission (can be extended to 60 days in certain cases).
  
  
• Complete notifications will be forwarded to the FDI Committee and National Contact Point (to activate the cooperation mechanism under the EU FDI Screening Regulation).
  
  
• The FDI Committee will have to prepare and adopt an opinion on the investment's impact on security and public order within 90 days of receiving a complete notification (can be extended by 30 days if additional information or checks are needed), which will serve as a basis for the final decision issued by the Ministry of Finance.
  
  
• The final decision on the FDI will be issued within an overall limit of 120 days from the filing of a complete notification, or 150 days in exceptional cases.
  
  

Control mechanisms

Control bodies, including commercial courts, the Central Depository and Clearing Company, concession grantors and the competition authority, are tasked with preventing the completion of foreign investments without prior approval.

Enforcement and sanctions

Upon finding a violation, the Ministry of Finance may revoke approval and order divestment within nine months (exceptionally extendable upon reasoned request). During divestment, the investor's related rights are restricted. This remedy also applies to failures to notify. Administrative court review is available before the High Administrative Court of Croatia.

Entry into force and implications for ongoing and past transactions

The FDI Act will enter into force eight days after its publication in the Official Gazette, which is expected in early November.

Once the FDI Act enters into force, competent authorities will have to identify obliged entities within six months. In addition, the Minister of Finance will be required to prepare an implementing regulation specifying the exact content of the notification and the supporting documents within 90 days, while the FDI Committee must be established within 30 days of the Act's entry into force.

Once an entity is informed that it qualifies as an obliged entity under the FDI Act, any foreign investment involving it must be reported to the Ministry of Finance before it takes effect. In practical terms, any transaction signed but not yet closed at the time an obliged entity is identified would fall under the standstill obligation set out in the Act.

The Act will also apply to investments made before its entry into force. Such retroactive screenings must be carried out by the authority within three years from the date the Act enters into force.

The explanatory note accompanying the proposal of the FDI Act specifies that retroactive screening applies only to foreign investments found to have a negative impact on national security and public order in Croatia, as well as on the security and public order of the European Union.  However, the FDI Act itself does not specify the temporal scope for how far back retroactive reviews may reach, provides no procedural guidance on how such reviews are to be conducted and does not define the criteria for assessing a negative impact on national security and public order.

Conclusion

The new FDI Screening Act closes Croatia's long‑standing FDI control gap, aligns the regime with the EU screening architecture and introduces procedures and enforceable tools for sensitive transactions. Expect a transitional period of legal and deal uncertainty during implementation. The six‑month designation period for obliged entities, the forthcoming implementing regulation and the stand‑up of the FDI Committee and cooperation channels will introduce timing and execution risk for signings and closings – particularly given the standstill obligation once an entity is designated. The open‑ended ex officio call‑in power – without a parallel pathway for voluntary pre‑notification route – exposes investors and targets to retroactive scrutiny, complicating risk allocation, interim covenants and conditionality in deal documents. Looking ahead, a further overhaul is likely once the EU recast of the FDI Screening Regulation is tabled and adopted. Croatia will then need to recalibrate scope, process and cooperation mechanics to ensure consistency with the revised EU framework and enhance predictability. In the interim, parties should price in longer timelines, robust information rights, flexible remedies and deal structures resilient to potential ex officio intervention and retroactive review.