Notification of foreign direct investments under the new rules
Under the previous rules, there was a requirement for any natural or legal person who is a national of or has a registered office in an EU Member State, the European Economic Area, Switzerland or third countries to notify direct foreign investments. The ZSInv addresses this shortcoming by now considering only individuals who are citizens of a third country or legal entities with a registered office in a third country as foreign investors, excluding citizens or legal entities from the EU.
The amendment to the ZSInv also clarifies that the following qualify as FDI: direct or indirect acquisition of at least 10% of ownership or voting rights; and, in the case of new companies, the acquisition on incorporation of an equal share of capital or voting rights. The provision is now more transparent and no longer provides broad examples of mandatory notification scenarios that were unlikely to have been implemented in practice. The same applies to the determination of cases where an FDI may affect the security or public order of the Republic of Slovenia. It is now clearly established that security or public order may be affected if the target or the acquired company actually and predominantly carries out activities in one of the critical sectors, and no longer if it can affect these critical sectors. Compared to the previous regime, real estate close to defence, electoral or financial infrastructure and other sensitive facilities, health, medical and pharmaceutical technology, and medical and protective equipment are no longer considered critical sectors.
There has also been an overhaul of the notification screening process. At the preliminary stage, the Commission first examines whether (i) the person qualifies as a foreign investor, (ii) the notified transaction qualifies as an FDI, and (iii) the activity of the target or acquired company concerns critical sectors as mentioned above. If the Commission finds that any of these conditions are not met, it will issue an opinion on foot of which the Ministry (and no longer the Commission) will issue a decision, most likely declaring a lack of jurisdiction. However, if the Commission finds that all three procedural conditions are met, it proceeds to a substantive assessment of the criteria with regard to the possible impact on the security or public order of the Republic of Slovenia. In this regard, ZSInv introduces three novel criteria indicating that public policy and security could potentially be impacted if the acquisition threshold is surpassed or if a market share of 20% or more is held in a critical activity sector.
Should the Commission find that the FDI has no or negligible impact on public order and security in the Republic of Slovenia, it will issue a new opinion, upon which the Ministry will issue a decision clearing the FDI. However, if the FDI is liable to affect security or public order, the Commission shall, in its opinion, move for a review (new Article 31(6) of ZSInv). On foot of the latter, the Ministry issues a decision initiating the review. During the review process, the Ministry, rather than the Commission, determines through a decision whether to clear, clear conditionally, or prohibit the FDI. There is no legal remedy against a decision to initiate a review; however, an administrative-law action may be brought against the final decision. The review procedure may be excessively long as the expert group will have two years to deliver its opinion on whether the FDI impacts the security and public order of the Republic of Slovenia and propose a final decision to the Minister.
Author: Matevž Klobučar, Attorney-at-Law
