Background
The Swedish Foreign Direct Investment Act (2023:560) (the FDI Act) came into force on 1 December 2023. The FDI Act provides the framework for the Inspectorate for Strategic Products (sw. Inspektionen för Strategiska Produkter) (ISP) to review and, where applicable, prohibit investments in Swedish businesses, where the target conducts “activities worth protecting”. The FDI Act aims to safeguard Swedish security, as well as public safety and public order, and applies in parallel with the Swedish Protective Security Act (2018:585).
It should be noted that the scope of the FDI Act is wide, and the filing obligation also applies to investors from Sweden and other EU member states. This was included to prevent circumvention of the FDI Act. However, only investments by non-EU (i.e. 3rd country) investors can be prohibited.
As of 21 June 2024, 632 notifications had been lodged for screening. Out of those, the ISP had initiated in-depth investigations in 16 cases. As of that date, however, no investment had been prohibited.
Activities worth protecting
The Act covers “activities worth protecting”. The activities are grouped into seven categories:
- essential services: this category covers activities in numerous industries, including infrastructure, energy, health, food supply chains, public transport and construction. The full scope of the category is delineated in a regulation of the Swedish Civil Contingencies Agency (MSB),
- activities sensitive from a national security perspective: this includes military activities, airports, power plants and electronic communication. These activities may be subject to parallel review under the Swedish Protective Security Act,
- inputs and raw materials critical to Sweden and the EU, including prospecting, extracting, refining and sales. A list of the inputs and raw materials currently covered is available in annex I to the Swedish FDI Ordinance (2023:624),
- processing of sensitive personal or location data: this category covers activities, the principal purpose of which is processing sensitive personal or location data, via goods or services. Whether the business will be considered an activity worth protecting will be assessed on the facts, but will include, for example, providers of cloud services and data brokers,
- emerging technologies and other strategic technologies: technology in fields such as nuclear power extraction, electronics, avionics, software, aerospace and extraction of materials,
- dual-use products: products with both civil and military areas of use, including software and technology. The list of products is available in Annex I to EU Regulation 2021/821,
- military equipment: covers activities in relation to manufacturing, research, development, supply and technical support of such equipment.
Investment: A broad notion
Provided that the target of the investment is involved in an activity worth protecting, the thresholds triggering a notification under the FDI Act are very low.
Where for example the investment is made in a company, a notification is required;
- each time an investment triggers any of the voting rights thresholds, which are set at 10, 20, 30, 50, 65 and 90 percent,
- an investment results in the acquisition of 10 percent in a greenfield investment, or
- where control or influence is obtained in any other manner, for example if an investor gains board seats or veto rights.
The regime also covers investments in other business forms, e.g. partnerships, trusts, and economic associations. Swedish branches of foreign entities are not covered.
Internal restructurings that do not result in a change in the ultimate control of the entity are also captured.
The FDI Act applies to all investments in scope irrespective of the investor’s nationality or country of residence. Moreover, investments in a foreign company with a Swedish subsidiary, which conducts activities worth protecting, are covered, which makes the regime applicable to indirect investments. However, only investments from 3rd country investors may be prohibited by the ISP.
The screening of the investments is done from a security policy point of view, without any legal or economic assessment. The focus of the screening is the nature and scope of the activity and the circumstances surrounding the investor. An investment may be prohibited if it is necessary to prevent adverse effects on Swedish security, or public safety or public order.
Procedure
There is no filing fee. The filing obligation lies with the investor, but the target has an obligation to inform the investor of the need to file.
A filing may at the earliest be submitted when the investment can be shown to be imminent and must at the latest be submitted before closing. The investment may not be completed until approval has been obtained (stand-still obligation). Where an investor has an obligation to file, but fails to do so, ISP may draw up a notification form ex officio.
The deadline to decide whether to clear an investment or to start an in-depth investigation is 25 working days (Phase I) from the submission of a complete notification. In the in-depth investigation (Phase II), the ISP has three months to decide whether to prohibit or clear the investment. This time limit can be prolonged to six months, subject to special reasons. A final clearance may be subject to conditions.
The investment will be rendered void where a prohibition decision is issued. In addition, failure to comply with the obligations of the Act may result in fines of up to SEK 100 million.
Decisions on certain procedural issues, such as requests for information and imposition of sanctions, may be appealed to the Administrative Court of Stockholm. A decision to prohibit the investment, or to clear it subject to conditions, may be appealed to the Swedish government.
Voluntary consultations
For foreign investments where a mandatory filing is not required, the Ministry has the power to initiate a screening on its own (ex officio) if it considers the transaction has a potential to endanger national security, internal order or public order. The Ministry may initiate such screening up to five years after completion of a transaction. The only way to avoid such a screening is to conduct a voluntary “consultation” process.
Malin Perrson, Partner
Jennie Bark Jones, Counsel
Lucas Cyrén, Associate
