Screening of Third Country Transactions Act 2023

Ireland’s first piece of investment screening legislation is expected to commence in the first week of September 2024. The Screening of Third Country Transactions Act 2023 will introduce Ireland’s first investment screening regime enabling the Minister for Enterprise, Trade and Employment to review transactions meeting certain criteria or that may otherwise present risks to the security or public order of the State.

Key terms and definitions

Some of the key terms include:

  • A “third country”, which is anywhere other than Ireland, the EU Member States, the EEA Member States and Switzerland.
  • A "Third country undertaking” is an entity that is:
    • Constituted or otherwise governed by the laws of a third country
    • Controlled by (a) an undertaking in the first bullet or (b) a director, partner, member or other person, that is a third country national, or
    • A third country national.
  • "Transaction” means any acquisition, agreement or other economic activity resulting in:
    • A change in control of an asset in the State, or
    • The acquisition of all or part of, or of any interest in, an undertaking in the State.
  • "Asset in the State” means an asset:
    • Where it is physically located within the territory of the State, and
    • In the case of an intangible asset, where it is owned, controlled or otherwise in the possession of an undertaking in the State.
  • "Undertaking in the State” means an undertaking that:
    • Is constituted or otherwise governed by the laws of the State, or
    • Has its principal place of business in the State.

When must a transaction be notified to the Minister?

The following four criteria must be met for a transaction to be notifiable:

  • A third country undertaking, or a person connected with a third country undertaking, as a result of the transaction:
    • Acquires control of an asset or undertaking in the State, or
    • Changes the percentage of shares or voting rights it holds in an undertaking in the State from 25% or less to more than 25%, or from 50% or less to more than 50%
  • The cumulative value of the transaction and each transaction between the parties to the transaction, or connected persons, in the 12-month period before the transaction, is at least €2 million
  • The transaction is not an internal reorganisation where the same undertaking directly or indirectly controls all the parties to the transaction, and
  • The transaction relates to, or impacts on, one or more of the matters referred to in Article 4(1) of the EU Regulation on screening of foreign direct investment for possible security and public order risks. Namely, critical infrastructure, critical technologies and dual use items, the supply of critical inputs, access to sensitive information, and freedom and pluralism of the media.

What sectors in Ireland will be affected by the Screening of Third Country Transactions Act 2023?

The Act applies to a transaction that directly, or indirectly relates to, or impacts on, any of the following matters specified in the EU Screening Regulation:

  • Critical infrastructure, whether physical or virtual. This includes energy, transport, water, health, communications, media, data processing or storage. It also includes:
    • Aerospace, defence, electoral or financial infrastructure, and
    • Sensitive facilities, as well as land and real estate crucial for the use of this infrastructure.
  • Critical technologies and dual use items including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies.
  • Supply of critical inputs, including energy or raw materials, as well as food security.
  • Access to sensitive information, including personal data, or the ability to control that information, or
  • The freedom and pluralism of the media.

Which parties to the transaction are obliged to notify?

The notification obligation rests on all parties to a transaction which meets the relevant criteria under Article 9(1) of the Act, unless they are not aware of the transaction. Second and subsequent parties to a transaction will be deemed to have complied where they are informed by the first party to the transaction of its intention to notify the Minister on a particular date and the information it intends to provide. The second party(ies) must then agree in writing before the notification is provided to the Minister.

How does the review and approval process work?

A transaction satisfying the mandatory criteria must be notified to the Minister prior to completion of the transaction. Once a notification is made, the Minister will issue a Screening Notice to confirm that he is accepting jurisdiction over the transaction. The Minister is required to make a screening decision within 90 days of the Screening Notice. The 90 days may be extended to 135 calendar days, by way of an ‘Extension Notice’, at the discretion of the Minister.

The review period is suspended by the issuance of a ‘Notice of Information’ and resumes on the date that the notice is complied with. The Minister decides if the transaction affects, or would be likely to affect, the security or public order of Ireland. This is referred to as a ‘Screening Decision’. The Minister is assisted by an Advisory Panel.

After having assessed a notification, the Minister issues a 'Screening Decision':

  • Authorising, including on the basis of remedies
  • Imposing conditions, eg with divestments, behavioural remedies, or
  • Prohibiting the transaction.

The Screening Decision is made based on security and public order criteria. These criteria include, among others, whether a party to the transaction is controlled by a third country government and the extent to which that control “is inconsistent with the policies and objectives” of Ireland.

Parties to a transaction may appeal a Screening Decision to an independent adjudicator and must notify the Minister that they are appealing no later than 30 days after being notified of the screening decision. This is referred to as an ‘Intent to Appeal’. The applicant must submit the appeal to the adjudicator within 14 days after providing notice to the Minister, or a ‘Notice of Appeal’. A decision of an adjudicator may be appealed on a point of law to the High Court.

Can the Minister review a transaction even if it has not been notified or does not require to be notified?

Yes, if the Minister has reasonable grounds for believing that a transaction affects, or would be likely to affect, the security or public order of Ireland. This ‘call in’ power applies whether or not a transaction has been completed.

The Minister must exercise the ‘call in’ power within 15 months of the transaction being completed in the case of transactions that are not notifiable. In the case of notifiable transactions which have not been notified, the Minister will be required to exercise the power within five years from completion or six months from the Minister becoming aware of the transaction.

The Minister cannot review any transaction that completed more than 15 months before the commencement of the Act.

What are the penalties for non-compliance?

A person found guilty of an offence under the Act may be liable to a fine not exceeding €5,000 and/or up to 6 months imprisonment. Alternatively, following conviction on indictment, they may be liable to a fine not exceeding €4 million and/or up to 5 years imprisonment.

Alignment with international standards

  • FDI screening regimes are becoming increasingly common across the EU following the implementation of the EU Screening Regulation. This requires co-operation and information sharing on FDI. However, it does not specifically oblige Member States to have a screening mechanism. So far, 21 Member States have notified investment screening mechanisms to the European Commission.
  • The Act has similar effects to the UK's National Security and Investment Act 2021 (NSIA). Similar to the Irish Act, the UK Government retains a five-year ‘call in’ power to investigate non-notifiable transactions that may give rise to national security concerns.
  • However, unlike the NSIA, the Irish Act is not intended to apply to purely domestic transactions and does not have a voluntary notification regime.

Early engagement on these and other questions is advisable. Please get in touch with a member of our Competition & Antitrust team for more information.

The content of these articles are provided for information purposes only and does not constitute legal or other advice.