Irish third country investment screening regime takes effect

Neil Keenan and Sarah Hope of Pinsent Masons were commenting after the Screening of Third Country Transactions Act 2023 (39 pages/ 547 KB) commenced on 6 January. The landmark legislation is aimed at bolstering Ireland’s national security and public order by scrutinising foreign investments. The Act introduced a comprehensive screening mechanism for third country investments – investments from countries outside of the European Economic Area (EEA) and Switzerland – ensuring that Ireland remains a secure and attractive destination for inward investment.

There is now a filing and notification requirement for many acquisitions and investments by parties from outside of the EEA and Switzerland or by entities which are controlled outside of those jurisdictions. This includes acquisitions or investments from Northern Ireland, Great Britain and the US. Transactions must be cleared by the minister for enterprise. trade and employment.

Notifiable transactions are those with a cumulative value, including the value of any related transactions, of at least €2 million and that result in levels of control of the particular Irish entity or asset increasing from less than 25% to over 25% or from less than 50% to over 50%.  The transaction must also relate to or impact on one or more “sensitive and strategic activities”, as set out in the legislation. These activities include critical infrastructure such as energy, transport, water, health and defence as well as critical technologies and “dual use” items such as artificial intelligence (AI), cybersecurity and biotechnologies. Transactions that impact on supply of critical inputs, access to sensitive information and freedom and pluralism of the media are also caught.

Keenan said: “As the categories of activities are so widely cast, our expectation is that the vast majority of investments and acquisitions by non-EEA or Swiss entities, or entities controlled outside those jurisdictions, and which exceed the financial and control thresholds will be notified.”

The initial notification will result in a “screening notice” from the minister or a notification to the parties that the transaction does not fulfil the mandatory notification criteria.

The acquisition of greenfield assets, such as land without buildings or a newly formed joint venture, should not be notifiable. The acquisition of assets such as intellectual property and certain types of property assets and the creation of a fully functioning joint venture may be notifiable, however.

The Department of Enterprise, Trade and Employment has published detailed guidance for stakeholders (48-page / 1.68MB PDF) and investors as well as the relevant notification form to clarify the notification procedure.

A notification should be made at least 10 days prior to a transaction completing. This will include information on the parties, the NACE (the categorisation of the economic activity of the target or asset) and the transaction value. The notification will be kept confidential and will not be published to the public. For transactions which complete within 10 days of 6 January 2025, the notification can be made within 30 days of the transaction completing. However, this runs the risk of a transaction having to be unwound if it is prohibited.

A “screening notice” will be issued as soon as possible and that will set out whether the transaction is to be reviewed for full investment screening. The transaction must be “paused” while the minister undertakes the review. “There are some exceptional circumstances where a transaction can be screened without a screening notice being issued but this would be expected to occur very infrequently,” said Hope.

If a notification is determined not to fall within the mandatory regime, the department will issue a letter to the parties confirming that mandatory notification does not apply. The minister does however have a discretionary power to subsequently review a transaction. There is a 90-day period for the review to be conducted with some possibilities to extend that period.  The screening process can take up to 135 days in more complex cases.  Requests for further information will “stop the clock” until those requests are responded to.

The minister can either allow the transaction to proceed, prohibit the transaction or allow the transaction to proceed subject to conditions. There are provisions for parties to make written submissions to the minister and there is also a right of appeal to an independent adjudicator or to appeal to the courts on a point of law only.

The Act also provides the minister with “call in” powers which will allow notifiable transactions which have not been notified to be scrutinised as well as non-notifiable transactions where there are reasonable grounds for believing the transaction affects or would be likely to affect national security and public order. The expectation is that these call in powers would be used very infrequently and only in exceptional circumstances.

It is a criminal offence to complete or take steps to complete a notifiable transaction prior to the minister issuing a clearance decision or to complete a conditional decision other than in accordance with the conditions outlined.

These new notification and screening requirements are in addition to the separate requirement to notify certain Irish mergers to the Competition and Consumer Protection Commission.