The ISP is showcasing its ability to safeguard Sweden’s strategic interests by blocking a foreign direct investment and imposing fines for failure to notify on time

On 17 December 2024, the Swedish Inspectorate of Strategic Products (the “ISP”) prohibited an investment under the Swedish Screening of Foreign Direct Investments Act (2023:560) (the ”FDI Act”). Only a few weeks later, the agency imposed an administrative fine on a Swedish investor for notifying an investment after it had been completed. This is the first time the authority blocks an investment and imposes fines under the FDI Act. Both decisions show that the ISP is ready to act decisively.

Background

The FDI Act entered into force on 1 December 2023. Since then, investments in targeted sectors exceeding certain thresholds are subject to mandatory notification to the ISP, irrespective of the nationality of the investor. For investors from outside the EU, the ISP may initiate an in-depth review and decide whether to approve or prohibit the investment. An approval may be subject to conditions. For further information on the application of the FDI Act during its first year in force, read our blog post here.

The prohibited investment

On 17 December 2024, the ISP adopted its first prohibition decision against a foreign investment. The investor in question, a China-based company, Shanghai Putailai New Energy Technology Co. Ltd., sought to establish an anode factory for batteries in Sweden through its subsidiary Putailai (Singapore) Pte . Ltd. The investment was covered by the FDI Act and thus subject to mandatory filing.

Putailai (Singapore) Pte . Ltd notified the investment on 9 February 2024, but the notification was not considered complete until 3 May 2024, whereby the initial screening period of 25 working days commenced. On 12 June 2024, the ISP decided to initiate an in-depth review of the investment, triggering an additional three-month screening period. The ISP later availed itself of the possibility under the FDI Act to extend the screening period by yet an additional three-month period.

During the in-depth review, the ISP informed the parties that the investment would only be approved subject to conditions. Although the exact conditions remain confidential, one requirement was that the new business must have Swedish nationals in key roles, i.e. the board members and the CEO must be Swedish. According to a press release, the investor was unable to fulfil the conditions within the given time frame, prompting the ISP to issue a decision prohibiting the investment. The investor has now appealed the decision to the Swedish Government, which is the final decision-making authority. While decisions by the ISP on orders or administrative fines are appealed to the Administrative Court of Stockholm, decisions on prohibitions and conditional authorisations are appealed to the Government.* This shows that the material assessment of investments under the FDI Act is political rather than legal.

The first administrative fine for omission to notify

Another recent decision of the ISP is a reminder of the importance of notifying upcoming investments to the agency. Here, a Swedish company had failed to notify an investment to the ISP that was made a few weeks after the FDI Act had entered into force. It later notified the investment to the ISP, which prompted the agency to impose an administrative fine of SEK 200,000 (approximately EUR 20 000) for failure to notify prior to completion. This is the first administrative fine imposed under the FDI Act, but it will most certainly not be the last.

Concluding remarks

These decisions signal that the ISP is becoming increasingly assertive and comfortable exercising its authority under the FDI Act. By imposing a SEK 200,000 fine for failure to notify and by blocking a greenfield investment for failure to meet the conditions set by the ISP, the agency is showcasing its ability to safeguard Sweden’s strategic interests.

The Government’s upcoming decision on the appeal will pave the way for how foreign investments are assessed in the future and clarify the boundaries of the FDI Act. Investors should take note: Swedish FDI scrutiny is here to stay, and the ISP is ready to act decisively. At Delphi, we will continue to monitor and analyse these developments to keep you informed.

* See Section 39 of the FDI Act.