Knowledge November 30, 2023

Foreign Direct Investment Screening Act – new Swedish legislation effective from 1 December 2023

On 1 December 2023, the new Swedish act on foreign direct investments will enter into force, the Foreign Direct Investment Screening Act (“FDI Act”).

The FDI Act establishes a review system for investments in so-called activities worthy of protection (Sw. skyddsvärd verksamhet). While the law primarily targets investments made by investors from outside the European Union, the notification requirement also extends to purely European or Swedish investments in activities worthy of protection. This impacts the timeline of many investments, making it crucial to conduct an early assessment of the application of the FDI Act.

Here is an overview of the key highlights of the FDI Act:

  • The purpose of the new act is to prevent foreign investments in Swedish companies that could adversely affect Sweden’s security, public order or safety.
  • The FDI Act applies to investments in activities worthy of protection conducted by limited companies, European companies, or trading partnerships, or by such an economic association or foundation domiciled in Sweden. Investments in parts of a business, such as asset transfers, are also covered.
  • Investors are obliged to notify the Swedish Inspectorate of Strategic Products (“ISP”) before the transaction is completed. A stand-still applies, meaning that the investment cannot be completed before it has been approved.
  • Companies engaging in activities worthy of protection must conduct thorough investigations to determine if an investment is notifiable, as they are obliged to inform a potential investor of its obligation to notify ISP.
  • The FDI Act has a very broad scope, affecting a wide range of activities, including those in the following areas:

i. Essential services (Sw. Samhällsviktig verksamhet) – a broadly defined category encompassing diverse activities. Notably, these sectors include for example energy, life sciences, healthcare, education and finance.
ii. Security-sensitive (Sw. Säkerhetskänslig verksamhet) activities as defined under the Protective Security Act (Sw. Säkerhetsskyddslagen).
iii. Activities involving critical raw materials, metals, or minerals of strategic significance to Sweden’s supply chain.
iv. Extensive processing of sensitive personal data or location data in or through a product or service.
v. Military equipment.
vi. Dual-use items.
vii. Research or provision of products or technology in emerging technologies or other strategically important technologies or activities.

Overall, this means that a wide range of activities are covered, and a specific assessment must be made in each individual case. 

  • Many different types of investments where the investor gains influence over a protected activity are covered by the FDI Act. For example, if the investor, through the investment, would hold voting rights equal to or exceeding 10, 20, 30, 50, 65, and 90 percent; a new establishment of a company that will conduct protected activities; or an investment that grants the investor direct or indirect influence over the management of such a company that operates or will operate protected activities.
  • Notification is required for each investment where the above thresholds are exceeded (regardless of whether notification has previously been conducted). There are no exceptions for intra-group transactions.
  • A prohibition can only be applied to investments where an investor is based outside the European Union, through direct or indirect ownership or control, whether wholly or partially, identified via ownership structure, significant financing, or other means. This means that Swedish investments and investments involving only investors within the European Union are typically processed by the ISP within 25 working days. The time limit is calculated from when a complete notification has been submitted to the authority.
  • If the ISP chooses to initiate a screening of the investment, the time limit is extended by three months, which can be extended with an additional three months.
  • Violation of, among other things, the obligation to notify an investment can result in administrative fines up to SEK 100 million.
  • A prohibition against an investment also means that any legal act that constitutes part of the investment, or is intended to implement the investment, becomes invalid.

In summary, the FDI Act will mean that many investments will be subject to mandatory notification to the ISP, which must be considered when establishing a timetable and during the general risk assessment. Furthermore, the FDI Act will operate in parallel with, for example, merger control under the Swedish Competition Act and the Protective Security Act.

Please feel free to contact us for further discussions and guidance on these matters.


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