One year with the Swedish FDI-regime
1 December 2024, marks one year since the Swedish Screening of Foreign Direct Investments Act (the ”FDI Act”) entered into force. As per 29 November 2024, 1,206 investments have been notified under the Swedish regime. In this blog post we will comment on the application of the FDI Act and provide statistics on its use.
Substantive Scope
The duty to notify applies to investments in targeted sectors, irrespective of the investors’ nationality. About 45 % of the 1,206 notified investments since 1 December 2023 were domestic, about 35 % from outside the EU/EEA and 20 % from within EU/EEA. While the obligation to notify does not depend on the nationality of the investor, only investments made by non-EU investors may be prohibited. This means that a majority of the cases handled by the screening authority, the Inspectorate for Strategic Products (the “ISP”), have been mere formalities.
Not all investments in targeted sectors are notifiable. This requires that the investor gets some form of influence in the target. This may be the case if the investor, by acquisition of shares, directly or indirectly, holds voting rights equal to or exceeding any of the thresholds of 10, 20, 30, 50, 65 or 90%, or otherwise acquires a direct or indirect influence on the management of the target. The mandatory notification also applies to intra-group reorganisations if the other conditions are met.
The sectors covered are essential services, security-sensitive activities, raw materials, activities involving processing of sensitive personal or location data, activities related to emerging technologies and other strategically important technologies, dual-use items (software and technology that can be used for both civilian and military purposes) and military equipment.
The most common sector triggering notification is essential services. About 800 of the notified investments involve essential services. Based on statistics from the ISP, these most often include activities related to the supply of electricity, gas, heating, cooling, and fuel, followed by activities in property management and activities within manufacturing.
Timeline
Approval must be granted by the ISP before closing of the investment. The process follows a two-step procedure. First, ISP must decide within 25 business days of a complete notification whether to take no action or to initiate screening of the investment. On average, the ISP takes about 19 business days upon receipt of a complete notification to make this decision.
If the ISP decides to initiate screening, it must, within three months from its decision, either prohibit or authorise the investment. If there are special circumstances, the ISP may issue a decision within six months. So far, when the ISP has initiated a screening, the average time to decision has been about 88 days upon decision to initiate screening.
Perhaps due to the great number of notifications received by the ISP, the authority often needs a number of days or weeks to assess whether the notification is complete and often finds that it needs additional information or documentation to assess the investment, thereby postponing the starting date of the screening process.
Prohibition and Sanctions
Only investments from third country investors (outside the EU) may be prohibited by the ISP in case the investment affect national security, public order or public security in Sweden.
A prohibition invalidates the investment, requiring the investment to be reversed, if already completed. For investments on a regulated market, the investor may instead be required to divest what has been acquired. If it is sufficient to combine an approval with conditions, the investment may not be prohibited.
As per 29 November 2024, no investments have been prohibited. However, 24 investments have been subject to screening. Of these, 11 have been authorised without conditions, 5 have been authorised with conditions and 8 are still pending or the notification have been withdrawn.
ISP may impose a sanction charge of up to SEK 100 million (approximately EUR 10 million) on an investor who, for example, fails to notify the ISP despite an obligation to do so, implements an investment before the ISP has issued a final decision or has implemented an investment in contravention of a prohibition.
Concluding remarks
The number of notified investments in Sweden is relatively high compared to other jurisdictions. This can probably be explained by the broad scope of the Swedish FDI Act (which has even been further broadened due to the extended scope of essential services in September 2024) in combination with the tendency for investors to notify investments as a precautionary measure in case of uncertainty regarding the Act’s applicability.
As we move into the second year of the FDI Act, further developments are anticipated. We will continue to closely monitor these changes and their implications.