Authors: Kurt Hyzler, Nina Fauser & Krista Refalo
The NFDI Screening Office (“Office”) was set up in order to implement the provisions of EU Regulation 2019/452 of the 19th of March 2019, establishing a framework for the screening of foreign direct investments into the Union. This Regulation relates particularly to foreign direct investments, or ‘FDIs’ which are likely to affect security or public order and which establish or maintain lasting and direct links between investors from third countries including state entities and undertakings carrying out an economic activity in a Member State. While the Regulation is directly applicable in Malta, the local law in relation to the same has not as yet been published.
While the Regulation came into force on the 10th of April 2019, it will become fully applicable from the 11th of October 2020. This transitional phase (10th April 2019 until 11th October 2020) will ensure that all legislative and administrative arrangements are put in place at Member States’ level and within the Commission before the Regulation becomes fully operational. Despite the transitional phase allowed by the Regulation, the Office in Malta has already been set up and is vetting applications in respect of transactions occurring from 1st April 2020 onwards.
The application notification form is to be filed with the Office only where the Ultimate Beneficial Owner/s, whether existing or new, is/are Non-EU Foreign Investors. In terms of the Regulation, a Non-EU Foreign Investor is defined as a natural person of a third country or an undertaking of a third country, intending to make or having made a foreign direct investment. This notification form is to be completed and submitted to the Office for a preliminary clearance in the following situations:
- a proposed incorporation of any new company in Malta;
- the transfer of shares in Maltese companies;
- the issue of shares by Maltese companies;
- a change in the ultimate beneficial owner/s of an existing Maltese company; and/or
- an acquisition of assets / rights by a foreign investor.
On receipt of the notification form, the Office will assess whether the transaction is (i) a Relative Activity, and (ii) that there is a direct, tangible, and long-lasting nature within the territory of Malta and the Maltese economy. If the Office classifies the activity of the company as per the two points mentioned above, then the Office may request the applicant to provide further information, in line with Article 9 of the Regulation. The Office may also, in such cases, request a full due diligence.
The list of Relative Activities include:
- critical infrastructure, whether physical or virtual – including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
- critical technologies and dual use items (defined as items, including software and technology, which can be used for both civil and military purposes, and shall include all goods which can be used for both non-explosive uses and assisting in any way in the manufacture of nuclear weapons or other nuclear explosive devices) – including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies;
- supply of critical inputs, including energy or raw materials, as well as food security;
- access to sensitive information (“confidential information, including commercially-sensitive information”), including personal data, or the ability to control such information; and
- the freedom and pluralism of the media.
Article 10 of the above-mentioned Regulation provides that the information received by the Office will only be used for the purpose for which it was requested. The Office, Member States as well as the Commission shall ensure that any information is not downgraded or declassified without prior written consent. The Commission’s or other Member States’ opinions/comments relating to a specific FDI will not be disclosed as this would undermine the protection of information relevant for security, possibly defence and military matters, as well as international relations. It could also undermine the commercial interests of a natural or legal person.