Slovenia first introduced an FDI regime in 2020, when the Slovenian Parliament adopted the Act Determining the Intervention Measures to Mitigate and Remedy the Consequences of the COVID-19 Epidemic. With the beginning of July 2023, a new FDI regime came into effect, bringing significant changes to the scope and procedures. The FDI provisions are now included in the Slovenian Investment Promotion Act, which inter alia also regulates available investment incentives, conditions, criteria and granting procedure.
Foreign Investor & Foreign Direct Investment
A foreign investor is defined as an individual that holds a third-country citizenship (this includes individuals with dual citizenships even when they hold a citizenship of one of the EU member states) or a legal entity established in a third country that intends to make a direct foreign investment in Slovenia or has already done so. EU citizens and legal entities established in EU Member States are no longer included in the definition.
The Investment Promotion Act also explicitly addresses the issue of indirect investors and details that a third-country national or a legal entity established in a third country, that holds, directly or indirectly, at least 10 per cent of the capital or voting rights in a legal entity established in an EU member state and intends to make a direct foreign investment in the Republic of Slovenia, or has already made such an investment, shall also be considered a foreign investor.
A direct foreign investment is an investment made by a foreign investor with the purpose to establish or maintain permanent and direct or indirect links between the foreign investor and a company established in the Republic of Slovenia. Please note that both the first acquisition as well as any subsequent acquisition of at least 10 per cent participation in the capital or voting rights must be notified.
Notification Requirement
Notification of the foreign direct investment needs to be submitted to the Slovenian Ministry of the Economy within 15 days after:
- the conclusion of any agreement by which a foreign investor acquires at least 10 per cent of the capital or voting rights in a legal entity established in the Republic of Slovenia or from the publication of a takeover offer;
- the incorporation of a company in Slovenia (a foreign direct investment in this sense is any investment in tangible and intangible assets related to the setting-up of a new establishment).
The obligation to notify is limited to investments that concern any of the following activities:
- 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 as defined in Point 1 of Article 2 of Council Regulation (EC) No 428/2009 (15), 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;
- the freedom and pluralism of the media;
- projects and programmes in the interest of the EU as listed in Annex 1 of Regulation 2019/452/EU.
The interpretation of the above categories is rather broad.
Documents and information submitted must be in Slovenian language and the notification shall include, among other things, the corporate name and seat of the foreign investor and the target company, their annual turnover, their ownership structure, the value of the foreign direct investment and the source of funding, products, services and business activities of the foreign Investor and the target company, description of the foreign direct investment and the date when it is planned to be completed or has been completed. The notification shall also include a statement with respect to the parameters relevant for the assessment of the direct foreign investment, which includes whether the foreign investor is controlled by any government, has been engaged in any illegal or criminal activities and whether certain takeover or market share thresholds have been reached.
The fine for not notifying a direct foreign investment may reach up to EUR 250,000 for small companies and up to EUR 500,000 for medium and large companies. The fine can be also imposed on a responsible person of a legal entity and can be as high as EUR 10,000. The amount of the fine for a self-employed person can reach up to EUR 150,000 and for individuals up to EUR 5,000.
Ministry’s Review
The Ministry of the Economy decides whether direct foreign investment represents a threat to security or public order of the Republic of Slovenia and consequently approves the investment, sets conditions for its implementation or prohibits it.
The decision-making process is twofold: Firstly, a special commission makes a preliminary review of the notification and issues an opinion about it. Based on this opinion, the Ministry either adopts a non-objection decision or opens a formal review (Phase II) proceeding.
The Ministry mal impose conditions for the implementation of a foreign direct investment when the identified impact on the security or public order can be mitigated or prevented. The conditions for implementation shall be imposed for a fixed period not exceeding 10 years and may include, in particular:
- a prohibition on the sale of copyrights and related rights owned by the target company or the acquired company or the newly created company to natural or legal persons from third countries,
- a prohibition on the sale of certain tangible and intangible fixed assets acquired through direct foreign investment,
- a prohibition on business cooperation with a legal or natural person affecting public policy or security in any of the Member States, where this has been established either by a Member State or by the European Commission,
- an obligation to reduce the shareholding in the target company or in the acquired company or in a newly created company,
- an undertaking that certain parts of the target company or the acquired company or the newly created company will remain in the Republic of Slovenia,
- an obligation to transfer certain sensitive activities from the target company or the acquired company or the newly created company in the Republic of Slovenia to another legal entity established in the Republic of Slovenia,
- prohibition of certain practices on the market of the Republic of Slovenia,
- the obligation to carry on the original business of the target company or the acquired company or the newly created company in the Republic of Slovenia,
- the obligation to provide goods and services from the original activity of the target company or the acquired company.
With the prohibition decision, the Ministry may impose measures on the foreign investor to prevent unacceptable effects on security or public order, particularly the disposal of the acquired shares.
For Phase I proceedings, a general administrative deadline of two months for the Ministry to deliver its decision should apply. In case a Phase II proceedings is initiated, the special commission has up to two years to issue its opinion and the Ministry additional two months to issue a decision. In all cases, the timeframe is only a guideline and if the decision is not issued within the respective timeframe, there is no presumption of approval.
The Ministry also has the possibility to screen the investment within two years after the conclusion of the merger agreement, from the publication of the takeover offer or from the establishment of a company in Slovenia, in case it learns that a foreign investor is engaged in activities, which have affected or are likely to affect the security or public order of a member state of the EU or is engaged in illegal or criminal activities. Such ex officio screening may take place in case the Ministry has previously reviewed the transaction under the FDI regime or not. The Ministry may also annul its previous decision.
The foreign investor may file a lawsuit in administrative dispute if it decides to challenge the decision of the Ministry (however no legal remedies are available against the opinion of the special commission).
Eva Škufca
