The Irish Government has published the long-awaited Screening of Third Country Transactions Bill 2022 (the Bill). The Bill will introduce the State’s first investment screening regime, which will be implemented alongside Regulation (EU) 2019/452 (the EU Screening Regulation). The Bill will enable the Minister for Enterprise, Trade and Employment to review certain transactions that may present risks to security or public order of the State. Once the Bill is signed into law it will be implemented by way of Ministerial Order, which is anticipated to occur in early 2023.
Key features
Key aspects of the new regime to be aware of are:
Mandatory and suspensory: as expected, like the existing Irish merger control regime, the Bill creates a mandatory and suspensory notification regime for transactions meeting certain criteria. These include:
- Investors outside the Single Market: unlike the UK’s National Security and Investment Act 2021, the regime does not apply to domestic investors - it applies only where an undertaking of a ‘third country’ (i.e., a non-EU/EFTA country), or a person connected with such an undertaking, is a party to the transaction.
- Low financial threshold: a ‘value of transaction’ threshold of at least €2 million applies.
- Broad categories of sensitive and strategic activities: transactions must directly or indirectly relate to, or impact on, one or more of the following matters referred to in the EU Screening Regulation.
- Critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, 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, 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, including personal data, or the ability to control such information, or
- The freedom and pluralism of the media.
- Minority acquisitions: acquisitions of shares or voting rights in an undertaking will be caught where the percentage of shares or voting rights changes:
- From 25% or less to more than 25%, or
- From 50% or less to more than 50%.
Asset acquisitions: the object of the transaction may be an asset, provided there is a change in control of the asset.
Target must be ‘in the State’: an asset is ‘in the State’ when it is physically located in the State or, in the case of an intangible asset, owned, controlled or otherwise in the possession of an undertaking in the State. An undertaking is ‘in the State’ when it, or the undertaking controlling it, is incorporated or otherwise governed by the laws of the State or is controlled by a person ordinarily resident in the State.
Multi-party obligation to notify: the notification obligation rests on all parties to a transaction meeting the relevant criteria, unless they are not aware of the transaction. Second and subsequent parties will be deemed to have complied where they are informed by the first party of its intention to notify on a particular date and the information it intends to provide, and the second party(ies) agree in writing before the notification is provided to the Minister.
“Call in” powers: similar to the recently amended Irish merger control regime, the Minister may “call in” for review notifiable transactions that are not notified (referred to in the Bill as ‘non-notified transactions’) and transactions that are not notifiable, where the Minister has reasonable grounds for believing the transaction affects, or would be likely to affect, the security or public order of the State. The Minister must exercise this power within 15 months of the transaction being completed in the case of transactions that are not notifiable. In the case of non-notified transactions, the Minister will be required to exercise the power before the later of 5 years from completion or 6 months from the Minister becoming aware of the transaction.
Retrospective application: the Minister cannot review any transaction that completed more than 15 months before the commencement of the relevant provisions of the Bill.
No voluntary regime: the Bill does not provide for voluntary notifications.
Deadline to notify: notification must be made not less than 10 days prior to completion. Parties to a notifiable transaction that is initiated, but not completed, before the commencement of the relevant provisions of the Bill, will be deemed to have complied with the notification obligation if they provide the required information to the Minister before the later of 30 days after (i) completion or (ii) the coming into force of the relevant provisions of the Bill.
Offense of gun-jumping: it is a criminal offense under the Bill to complete, or take steps to complete, a non-notified transaction or a notified transaction under review by the Minister prior to the Minister issuing a screening decision clearing the proposed transaction or making it subject to conditions. Where the transaction is subject to a conditional screening decision, it is an offense to complete the transaction other than in accordance with those conditions.
Information requests: as is the case under the existing Irish merger control regime, the Minister may issue a request for further information. Failure to comply with an information request or the provision of false information in response to an information request is a criminal offense under the Bill.
Lengthy review timeline: the Minister is required to make a screening decision within 90 days from the date of notification, or, in the case of a transaction that is called-in, 90 days from the date on which the Minister issues a screening notice. The 90-day review period may be extended to 135 days at the discretion of the Minister. The review period is suspended by the issuance of a notice of information and resumes on the date that the notice is complied with.
Wide-ranging powers to impose remedies: the Minister may prohibit the transaction, or parts of it, or impose conditions. Conditions can include divestment requirements, behavioral requirements, ring-fencing requirements, and compliance reporting obligations.
Criminal sanctions: persons found guilty of an offense under the Bill may be liable, on summary conviction, to a fine not exceeding €2,500 and/or up to 6 months imprisonment or, on conviction on indictment, to a fine not exceeding €4 million and/or up to 5 years imprisonment.
Appeals: parties to a transaction may appeal a screening decision to an independent adjudicator and must notify the Minister that they are appealing no later than 30 days after being notified of the screening decision. The appellant must submit the appeal to the adjudicator within 14 days after providing notice to the Minister. A decision of an adjudicator may be appealed on a point of law to the High Court.
Conclusion
The Bill is one of the most significant developments in Irish M&A in recent years and it has the potential to cast a wide net. Although the enactment and commencement of the legislation is likely several months away, investors should start thinking now about key questions such as:
- Does the transaction meet the criteria for a mandatory notification?
- Should provision by made in the deal documentation for a potential notification?
- What is the potential impact on the deal timeline of a notification?
- What remedies could be offered to address any public order and/or security concerns?
- If the transaction is not mandatorily notifiable, has already closed, or is likely to close prior to commencement of the Act, is it at risk of being called-in for review by the Minister?
Early engagement on these and other questions is advisable. Please get in touch with a member of our Competition & Antitrust team for more information.
The content of this article is provided for information purposes only and does not constitute legal or other advice.