Bulgaria Closes The Gap: New FDI Screening Regime Enters Into Force

• Published date: 19 March 2024
• Subject Matter: Government, Public Sector, Inward/ Foreign Investment
• Law Firm: Schoenherr Attorneys at Law
• Author: Mr Ilko Stoyanov and Ema Stoyanova

As reported, last month the Bulgarian parliament adopted the final text of a bill to amend the Investment Promotion Act, implementing the screening mechanism outlined in Regulation (EU) 2019/452 (the "EU FDI Screening Regulation") (see here for our previous Legal Insight).

Following its promulgation last Friday, the act entered into force on 12 March 2024.

As we previously noted, the act largely rests on the concepts of the EU FDI Screening Regulation, albeit with several distinctive features.

Under the newly adopted act, prior screening is required for any foreign direct investment that (i) directly or indirectly originates from a non-EU controlled investor (including those from the USA and UK) and (ii) targets any of the industries listed under Article 4, para 1 of the EU FDI Screening Regulation (i.e. critical infrastructure, critical technologies, supply of critical inputs, access to sensitive information, and freedom and pluralism of the media), when the investment:

• involves the acquisition of at least 10 % of the capital of an enterprise operating in Bulgaria; or
• exceeds EUR 2m (or its equivalent in BGN), including greenfield investments.

By way of exception, the regime allows for discretionary screening of certain investments that do not meet the above criteria, particularly when they could impact security or public order. Furthermore, specific foreign direct investments (involving investors from Russia or Belarus, or individuals engaged in certain activities related to, among others, the production of petroleum-based products concerning critical infrastructure) are subject to screening under the act regardless of the aforementioned conditions.

Finally, foreign direct investments, which would otherwise fall within the scope of the new regime, are subject to screening regardless of the investment thresholds (EUR 2m and 10 %) in case of direct or indirect non-EU state participation in the foreign investor, including significant financing. As an exception to this rule, certain states (including the USA, the UK, Canada, Australia, New Zealand, Japan, South Korea, the UAE, Saudi Arabia and other "low-risk" states as determined by the Council of Ministers) are treated as EU states for the purposes of this additional screening "trigger".

Any foreign direct investments subject to screening under the act are to be approved by the newly created Inter-ministerial Council for Screening of Foreign Direct Investments (the "FDI Screening Council") in charge of...