11/10/21

Luxembourg - one step closer to the screening of foreign direct investments

On 15 September 2021, the Luxembourg minister for foreign and European affairs tabled a bill (no 7885) "establishing a national screening mechanism for foreign direct investments likely to affect security or public order" (the “Bill”). The purpose of the Bill is to implement Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (the “Regulation”).

The Bill will affect investors outside the European Economic Area that wish to invest in a Luxembourg entity conducting activities on the Luxembourg territory regarded as critical in various sectors (e.g. energy, health, defence, finance, telecoms, data, media, etc.). The investors concerned will be required to provide certain information to the competent authorities, namely the minister for the economy and the finance minister, prior to the proposed investment. In order to comply with the Regulation, the Bill provides for the following: 

  • a prior notification process and screening procedure;
  • enforcement in the event of non-compliance with the prior notification obligation or the screening decision. 

The Bill also provides for the establishment of a national contact point to ensure the cooperation foreseen by the Regulation and an inter-ministerial committee to assist and advise the designated ministers. In addition, it contains provisions on authority to process, collect and provide information, including personal data. 

Prior notification process and screening procedure 

The Bill introduces a national screening mechanism for foreign direct investments, in the form of an ex ante procedure subject to inter-ministerial supervision. 

The first step consists of a mandatory notification by the foreign investor to the minister for the economy of its intention to make an investment in critical infrastructure falling within the scope of the Bill (see Article 2 of the Bill). Based on the explanatory notes to the Bill, this notification does not have suspensive effect, meaning the investor may proceed with the preliminary stages of the proposed investment at its own risk. 

The competent authorities will then perform a preliminary analysis, on a case-by-case basis, which may lead to a screening procedure to assess whether the investment is likely to affect security or public order. If a screening procedure is initiated, it should not exceed 60 calendar days, although this period is suspended if additional information is requested, until the receipt thereof. 

At the end of the procedure, a decision will be taken to either prohibit or allow the investment (if necessary subject to certain conditions) (see Article 10 of the Bill). It should be noted that if the screening procedure is initiated, the investors concerned may not proceed with the investment until a positive a decision is issued. 

Enforcement measures

The Bill provides for specific enforcement measures and sanctions where a prior notification is not made or the screening decision is not respected. In particular, the competent authorities can order the foreign investor to modify the transaction or to restore the previous situation or they can decide to withdraw the authorisation. They can also impose a fine of up to EUR 1,000,000 on natural persons and EUR 5,000,000 on legal entities (see Article 11 of the Bill); this decision may be appealed to the administrative court within one month following notification thereof (see Article 12 of the Bill).

Margaretha Wilkenhuysen | Partner 

Romain Sabatier | Partner 

Yoanna Stefanova | Partner 

Antoine Pétronin | Associate 

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