In July 2020, as part of the implementation of EU Regulation 2019/452 (‘the Regulation), the Maltese Government announced the establishment of a National Office for Foreign Direct Investment Screening (‘the Office’). The Regulation requires member states to establish a framework for the screening of foreign direct investment made into the European Union. Although the Regulation came into force in April 2020, it became fully applicable in Malta and other EU member states on the 11th October 2020. Just last week, the Maltese Government proceeded to publish Act LX of 2020, which implements the provisions of the Regulation, entitled the National Foreign Direct Investment Screening Office Act (‘the Act’).
The Act provides for the establishment of the Office and “for the exercise by or on behalf of that Office of regulatory functions regarding the screening mechanism of foreign direct investments in Malta on grounds of security or public order, and to make provisions with respect to matters ancillary thereto or connected therewith”.
The Act defines ‘foreign direct investment’ as “an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links in order to carry on an economic activity in Malta, including investments which enable effective participation in the management or control of a company carrying out an economic activity and any investments made pursuant to a public procurement process.” Furthermore, the Act defines ‘foreign investor’ as “a natural person or an undertaking of a third country intending to make or having made a foreign direct investment in Malta.” In terms of Article 11 of the Act, foreign investors and all persons involved in a foreign direct investment shall be required to formally notify the Office of such investment and provide certain details relating to the investment as requested by the Office. Such a notification would be required in the following circumstances:
- In the case of an investment that affects any of the factors or activities mentioned in Schedule 1 of the Act is planned to be carried out in the future.
- Where, having carried out an investment in Malta, a foreign investor plans to change the business activity to one which affects ay of the factors or activities mentioned in Schedule 1 of the Act.
- Where, having carried out an investment in Malta which affects any of the factors or activities mentioned in Schedule 1 of the Act, the ownership structure of the investor changes such that at least 10% is owned by foreign investors.
- Where, having carried out an investment, the direct or indirect controlling interest of the company or the group company changes and passes onto a foreign investor.
The activities listed in Schedule 1 of the Act mentioned above are the following:
- 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 by point 1 of Article 2 of Council Regulation (EC) No. 428/2009(15) (definition states that such items include software and technology, which can be used for both civil and military purposes, and include all goods which can be used for both non-explosive uses and assisting in any way in the manufacture of nuclear weapons or other nuclear explosive devices), including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, 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; and
- the freedom and pluralism of the media.
The factors to be considered mentioned in Schedule 1 of the Act are:
- whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding;
- whether the foreign investor has already been involved in activities affecting security or public order in a member state; or
- whether there is a serious risk that the foreign investor engages in illegal or criminal activities.
Article 11 of the Act also provides a non-exhaustive list of the information to be provided to the Office, including the ownership structure of the foreign investor in which the foreign direct investment is planned to be made or has been made and the approximate value of the foreign direct investment.
Upon receipt of the abovementioned notification, the Office shall determine whether the foreign direct investment shall be subject to screening. If the Office concludes that the foreign direct investment shall not be subject to screening, it shall inform the foreign investor within 10 working days from the receipt of the notification. On the other hand, if the Office decides that the foreign direct investment shall be subject to screening, it shall inform the foreign investor of the decision within 5 working days and a decision of whether the foreign direct investment may affect the security or public order of Malta shall be communicated to the foreign investor within 60 calendar days from the date on which the decision was taken to subject the foreign direct investment to screening.
Finally, it should be noted that the Act imposes a number of administrative penalties for the failure of complying with the provisions of this Act including the failure of formally notifying the Office as per Article 11 of the Act.
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