Safeguarding Slovenian strategic assets against unwanted foreign investors – Part 2
The Act Determining the Intervention Measures to Mitigate and Remedy the Consequences of the COVID-19 Epidemic (Official Gazette of the Republic of Slovenia, No. 80/20, “ZIUOOPE”) stipulates that the MGRT has up to two months to decide whether to approve a foreign investment, determine the conditions for its implementation or prohibit / cancel it (retroactively). That said, in practice the MGRT has set an internal 14-day deadline for issuing a decision which is much more sensible and investor-friendly. However, the Foreign Direct Investment Screening Commission (hereinafter: Commission) only commenced work in the second half of August, by which time there was already a backlog of foreign direct investment notifications. The Commission will first have to clear the backlog of “old” notifications before it can start issuing up-to-date notification decisions, generally twice a month.
It is vital that investors have an opportunity to address a question or request for an opinion to the Commission before a transaction is completed, if the intended investment is one of the investments referred to in the third paragraph of Article 72 of ZIUOOPE, i.e. investments that pose a threat to the security and public order of the Republic of Slovenia. Opinions are issued by one member of the Commission and allow investors to make decisions going forward. If an opinion concludes that the intended investment does not pose a threat to security and public order, then that investment is exempt from the notification procedure.
Where an investor notifies a ere an invesforeign direct investment, the Commission firstly examines whether the intended investment falls under the scope Article 72(3) of ZIUOOPE, i.e. if it is an investment that may affect critical infrastructure (energy, transport, water, health, media, defense and financial infrastructure, etc.), land or real estate that is essential for the use of this critical infrastructure or is located in its vicinity or for other, specifically defined activities. If the investment does not fall under the scope of Article 72(3) it shall be deemed notification exempt. However, where an investment could affect security and public safety, the Commission will examine the facts (especially the ownership structure of the foreign investor and any links the foreign investor may have to illegal activities) before it issues a final decision on (un)fairness of the foreign investment.
It remains unclear whether the Commission has already started screening investments made prior to 1 June 2020. As already discussed, such a retrospective ban on foreign investments could be controversial from the point of view of the prohibition of retroactive application of legal acts from Article 155 of the Constitution of the Republic of Slovenia.
Although Commission permission is not required for the transfer of business shares, stocks or property or registration in the register or land registry, and although notaries also do not check whether an investment is subject to notification, we recommend all parties involved file the appropriate applications/requests with the MGRT and also ensure there is a clause included in the contract underlying the foreign investment stipulating that the notification procedure must be complied with.
Author: Matevž Klobučar, Attorney-at-law
