On 20 May 2020 the Luxembourg Parliament has submitted a bill introducing a screening mechanism of foreign investments in Luxembourg
Purpose of the bill
Screening of foreign investments which undermine or have a harmful impact on the security and public order or essential national or European interests.
Brief summary of the bill
Who does it apply to?
It applies to “Investors” which is defined as being:
- any natural person who is a national of a country that is not a member of the European Union or the European Economic Area;
- any undertaking established outside the territory of the European Union or the European Economic Area;
- any undertaking established in the territory of the European Union or the European Space Agency.
What does it cover?
It covers “foreign investment”, which is qualified as being the acquisition by the investor of a significant influence ( holding directly or indirectly at least 10% of the shares or voting rights) in a company, part of a company, or a group of companies established in Luxembourg.
Obligation of prior notification (based on a non-exhaustive list of information to be provided, as set out in the EU Regulation 2019/452 of the EU Parliament and EU Counsel of 19 March 2019, establishing the framework for the screening of foreign investments) by the investor who wishes to make a foreign investment.
The screening is based on a pre-evaluation procedure (where comments received from other EU members States or EU Commission can be taken into consideration) and an authorisation/refusal delivered by the Minister of Economy based on a specific procedure.
Criteria taken into account in the pre-evaluation phase of the screening
The bill sets out a non-exhaustive list of criteria which the Ministry of Economy can take into consideration, when assessing the investment, which can be divided into two types:
- "Objective criteria": relating to activities that may be negatively impacted by the foreign investment; (i.e Critical infrastructures and technologies, supply of essential inputs);
- "Subjective criteria" relating to the person of the foreign investor (ie:fact the that investor is directly or indirectly controlled by a government).
Violation of these measures is to result in administrative sanctions (fines, suspension of voting rights, etc.) and criminal sanctions (important fines and imprisonment of up to 10 years).
This bill is at a very early stage of the legislative process therefore the adoption of a law is not foreseeable in the near future.