Slovak Republic ' New Foreign Direct Investment Screening Act

• Law Firm: Kinstellar
• Subject Matter: Finance and Banking, Government, Public Sector, Financial Services, Inward/ Foreign Investment
• Author: Mr Roman Oleksik, Dominika Bajz'thov' and Katarína Sowada
• Published date: 25 January 2023

Act No. 497/2022 Coll. on Screening of Foreign Direct Investments (the "FDI Act"), published on 23 December 2022, will have a significant impact on foreign investments in Slovakia, at least in terms of the time needed to complete transactions. The FDI Act takes effect on 1 March 2023. The new rules do not apply to investments completed prior to such date.

01 When must an investment be subject to approval?

Screening under the FDI Act concerns foreign investments made by foreign investors as defined in the FDI Act.

Foreign investments made by foreign investors falling under the category of critical foreign investments can be made only after approval by the Slovak Ministry of Economy ("MoE"). Critical foreign investments are to be determined by the Slovak government in a separate decree.

According to the FDI Act, an investment is made when an agreement covering the investment takes effect. In practice, transactional parties will frequently not be able to avoid the situation where certain clauses in foreign investment contracts take effect before obtaining such approval. In view of the high fines contemplated for the breach of the FDI Act, parties to such transactions should tread cautiously to avoid clauses that could be considered as an early implementation of the contract (similar to "gunjumping" in merger control).

No prior approval is required for foreign investments made by foreign investors that are not deemed to be "critical." However, the MoE can also screen such investments within two years after the date they were made. Such screening may result in a ban on investment, with an obligation to revert it. As a consequence of the risk of having an investment banned, in several cases and for legal certainty investors can choose an optional notification of their investment. This will delay completion of the transaction at least until it is clear that the MoE has not identified any risk of negative effect of their foreign investment and that, as a result, there is no risk that such investment will be banned or approved only conditionally.

02 Definition of "foreign investments made by foreign 02 investors"

The definitions of "foreign investors" and "foreign investments" in the FDI Act go beyond what is contemplated under EU Regulation 2019/452 establishing a framework for the screening of foreign direct investments into the Union. "Foreign investors" thus include not only natural persons that are not nationals of an EU Member State and legal persons without...