Full FDI Screening Regime Adopted In Slovakia

• Published date: 16 December 2022
• Subject Matter: Government, Public Sector, Inward/ Foreign Investment
• Law Firm: Schoenherr Attorneys at Law
• Author: Mr Michal Lučivjansk' and Maria Gabriella Manzone

Since 1 March 2021, Slovakia had a limited FDI regime applicable only to critical infrastructure. However, right after it was adopted, the government started preparing comprehensive legislation that would apply not only to selected industries but to all foreign investments in general (in line with FDI regimes in other EU Member States). After many drafts and lengthy negotiations, this new regime was finally adopted in late November 2022.

Exactly two years since the applicability of the old FDI regime, the new regime will be in place as of 1 March 2023 and will also apply to deals signed before 1 March 2023 but not closed before this date.

Transactions subject to FDI screening

The notification obligation is triggered if a foreign investor, i.e. mainly a non-EU individual or entity, intends to carry out a direct or indirect investment in a Slovak target. An EU seated entity also qualifies as a foreign investor if it is controlled, financed or acts in concert with a non-EU individual or entity, a public authority of a third country or an entity with an equity participation of a third country.

Such an investment can be:

• the acquisition of a target's business (asset deal);
• the acquisition of a participation in a target (share deal) meaning at least 25 % shareholding/voting rights for a non-critical investment or 10 % for a critical investment;
• the increase of a participation in a target, the relevant thresholds being 50 % for a non-critical investment, and 20 %, 33 % or 50 % for a critical investment or
• the acquisition of control over a target by other means (e.g by controlling the composition of corporate bodies).

Interestingly, the law suggests that creation of a pledge can also qualify as a foreign investment if the pledge gives the pledgee (qualifying as a foreign investor) rights in relation to the business decisions of a target. Thus, in case of financing transactions (especially syndicate lending) it would be necessary to address the potential FDI implications.

Screening regimes

Under the new law there will be three screening regimes:

• Compulsory screening - in the case of critical investments. A standstill obligation applies and FDI approval must be obtained before closing.
• Voluntary screening - for non-critical investments. At first there is only a consultation procedure. The notification must be submitted before closing but closing can take place even if the FDI proceedings have not finished yet.
• Ex officio screening - for all foreign investments...