3 things to know about Ireland’s new investment screening law
In late June 2022 the Minister for Enterprise, Trade and Employment, Leo Varadkar, received government approval to publish a new law which will allow Ireland to screen investments from non-EU countries for the first time, in order to protect Ireland’s critical technology and infrastructure from potentially hostile investments or acquisitions. The new law comes two years after Ireland Israel Business, in conjunction with Cyber Ireland, held a special cyber security event to promote bilateral cooperation between the two countries in protecting critical national infrastructure. A key takeaway emphasised by most of the esteemed speakers was that Ireland should be doing a whole lot more to protect its critical national infrastructure from foreign threats and interference. What will the new law mean for investments in Ireland? Here are 3 things we think you should know:
1. What is this new law all about?
The new law, which approved the Screening of Third Country Transactions Bill from July 2020 allows the Minister for Enterprise, Trade and Employment to evaluate whether a non-EU investment poses a threat to Ireland’s security or public order. In short, it empowers the Minister to investigate, set conditions to or completely halt any such Non-EU investment or transaction, if they deem it necessary for Ireland’s safety. Ireland is among the very few Member States that were yet to officially conduct such screenings, despite attracting foreign investments for many years. It is estimated that 20% of all private sector employment in Ireland is attributable to Foreign Direct Investments, which makes Ireland’s economy very vulnerable to potential threats from foreign powers. In the press release following the approval of the law, the Minister was quoted saying that post-pandemic increased global competition for investments makes screening more important than ever and this law tries to provide an additional layer of protection to its key infrastructures.
2. What is the problem the law tries to solve?
This screening law comes as a domestic adoption of a similar EU Regulation from 2020. Both respond to growing concerns raised globally as to risks which foreign investments or acquisitions may pose to a state’s sovereignty, security or public order (especially so if such a deal is made with an entity that’s controlled by a foreign government). In an era of a global instability, with an alarming number of cyber-attacks, wars and large scale international conflicts, the need for any country to have up to date and efficient safeguards cannot be underrated. Adequate security must be provided to critical and strategic technologies, key infrastructures, public utilities or databases containing personal information of citizens and protect them from any harm or exploitation.
3. Will every non-EU investment have to go through an assessment?
In short – No. The law sets specific criteria and thresholds to decide which non-EU transaction will require screening. A few examples to such criteria are ownership, transaction value threshold (currently set at minimum €2 million), fields or technologies identified by the law as ‘sensitive’ or ‘critical’ etc. Investments that can expect to be screened include transaction regarding the Irish health services, electricity grid, military infrastructure, ports and airports and others. By refusing to cooperate one might face fines of up to €4 million or imprisonment. It’s worth noting that the new mechanism includes an appeal system.
What should a potential investor in Ireland take into account in light of this law?
Notwithstanding the above, we do not anticipate that the introduction of this new screening mechanism will block or halt a large number of foreign investments into Ireland, nor will it detract from Ireland’s attractiveness to foreign investments. At the moment it is not yet clear whether and how exactly the new regime will work. Another question is how it will apply to already-executed transactions or deals that have yet to be completed. However, we estimate that the final version of this regime will be less onerous or limiting than their local equivalents (e.g. UK’s National Security and Investment Act).
If you are a non-EU potential investor currently negotiating or contemplating a transaction in potentially sensitive Irish economic industries, we would suggest you incorporate appropriate provisions and remedies into any relevant contract to reflect and adapt to this new development. The new regime might require adding more stages to a deal or cause delays. It might include anything between active reporting duty on the contracting parties’ side to the Ministry and acquiring of a prior written consent to a slow phasing-in process or even a general halt until a retrospective examination will take place.
The content of this article is provided for information purposes only and does not constitute legal or other advice.