Ireland’s first piece of investment screening legislation has been signed into law by the President. The Screening of Third Country Transactions Act 2023 (the Act) will introduce the State’s first investment screening regime, which will be implemented alongside Regulation (EU) 2019/452 (the EU Screening Regulation). The Act will enable the Minister for Enterprise, Trade and Employment to review certain transactions that may present risks to the security or public order of the State. The Act will be implemented by way of Ministerial Order, which is anticipated to occur in Q2 2024.
Key aspects of the new regime to be aware of are:
Mandatory and suspensory: as expected, like the existing Irish merger control regime, the Act creates a mandatory and suspensory notification regime for transactions meeting certain criteria. These include:
Investors outside the Single Market: unlike the UK’s National Security and Investment Act 2021, the regime is not intended to apply to purely domestic transactions - it applies where an undertaking of a ‘third country’ i.e. a non-EU/EFTA country, or a person connected with such an undertaking:
- Acquires control of an asset or undertaking in the State, or
- Changes the percentage of shares or voting rights in an undertaking in the State above 25% or 50%
Low financial threshold: a cumulative ‘value of transaction’ and related transactions threshold of at least €2 million in a period of 12 months before the date of the transaction applies.
Broad categories of sensitive and strategic activities: transactions must relate to, or impact on, one or more of the following matters referred to in the EU Screening Regulation.
- Critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such 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 such information, or
- The freedom and pluralism of the media.
Asset acquisitions: the object of the transaction may be an asset, provided there is a change in control of the asset.
Internal reorganisations carved out: a transaction is not required to be notified if the same undertaking, directly or indirectly, controls all the parties to the transaction.
Target must be ‘in the State’: an asset is ‘in the State’ when it is physically located in the State or, in the case of an intangible asset, owned, controlled or otherwise in the possession of an undertaking in the State. An undertaking is ‘in the State’ when it is constituted or otherwise governed by the laws of the State, or has its principal place of business in the State.
Multi-party obligation to notify: the notification obligation rests on all parties to a transaction meeting the relevant criteria, unless they are not aware of the transaction. Second and subsequent parties will be deemed to have complied where they are informed by the first party of its intention to notify on a particular date and the information it intends to provide, and the second party(ies) agree in writing before the notification is provided to the Minister.
“Call in” powers: similar to the recently amended Irish merger control regime, the Minister may “call in” for review notifiable transactions that are not notified, referred to in the Act as ‘non-notified transactions’. Similarly, transactions that are not notifiable may be called in for review, where the Minister has reasonable grounds for believing the transaction affects, or would be likely to affect, the security or public order of the State.
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 non-notified notifiable transactions, the Minister will be required to exercise the power before the later of 5 years from completion or 6 months from the Minister becoming aware of the transaction.
Retrospective application: the Minister cannot review any transaction that completed more than 15 months before the commencement of the relevant provisions of the Act.
No voluntary regime: the Act does not provide for voluntary notifications.
Deadline to notify: notification must be made not less than 10 days prior to completion. Parties to a notifiable transaction that is initiated, but not completed, before the commencement of the relevant provisions of the Act, will be deemed to have complied with the notification obligation if they provide the required information to the Minister no later than 30 days after completion.
Offence of gun-jumping: it is a criminal offence under the Act to complete, or take steps to complete, a non-notified transaction or a notified transaction under review by the Minister prior to the Minister issuing a screening decision clearing the proposed transaction or making it subject to conditions. Where the transaction is subject to a conditional screening decision, it is an offence to complete the transaction other than in accordance with those conditions.
Information requests: as is the case under the existing Irish merger control regime, the Minister may issue a request for further information. Failure to comply with an information request or the provision of false information in response to an information request is a criminal offence under the Act.
Lengthy review timeline: the Minister is required to make a screening decision within 90 days from the date on which the screening notice in relation to the transaction is issued. The 90-day review period may be extended to 135 days 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.
Wide-ranging powers to impose remedies: the Minister may prohibit the transaction, or parts of it, or impose conditions. Conditions can include divestment requirements, behavioural requirements, ring-fencing requirements, and compliance reporting obligations.
Criminal sanctions: persons found guilty of an offence under the Act may be liable, on summary conviction, to a fine not exceeding €5,000 and/or up to 6 months imprisonment or, on conviction on indictment, to a fine not exceeding €4 million and/or up to 5 years imprisonment.
Appeals: 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. The appellant must submit the appeal to the adjudicator within 14 days after providing notice to the Minister. A decision of an adjudicator may be appealed on a point of law to the High Court.
The Act is one of the most significant developments in Irish M&A in recent years and it has the potential to cast a wide net. Although the commencement of the legislation is likely several months away, investors should start thinking now about key questions such as:
- Does the transaction meet the criteria for a mandatory notification?
- Should provision be made in the deal documentation for a potential notification?
- What is the potential impact on the deal timeline of a notification?
- What remedies could be offered to address any public order and/or security concerns?
- If the transaction is not mandatorily notifiable, has already closed, or is likely to close prior to the commencement of the Act, is it at risk of being called-in for review by the Minister?
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 this article is provided for information purposes only and does not constitute legal or other advice.