We use cookies to collect and analyse information on site performance and usage to improve and customise your experience, where applicable. View our Cookies Policy. Click Accept and continue to use our website or Manage to review and update your preferences.


Strictly necessary cookies

Cookie name Duration Cookie purpose
ASP.NET_SessionId Session This cookie holds the current session id (OPPassessment only)
.ASPXANONYMOUS 2 Months Authentication to the site
LSI 1 Year To remember cookie preference for Law Society websites (www.lawsociety.ie, www.legalvacancies.ie, www.gazette.ie)
FTGServer 1 Hour Website content ( /CSS , /JS, /img )
_ga 2 Years Google Analytics
_gat Session Google Analytics
_git 1 Day Google Analytics
AptifyCSRFCookie Session Aptify CSRF Cookie
CSRFDefenseInDepthToken Session Aptify defence cookie
EB5Cookie Session Aptify eb5 login cookie

Functional cookies

Cookie name Duration Cookie purpose
Zendesk Local Storage Online Support
platform.twitter.com Local Storage Integrated Twitter feed

Marketing cookies

Cookie name Duration Cookie purpose
fr 3 Months Facebook Advertising - Used for Facebook Marketing
_fbp 3 months Used for facebook Marketing
Investment screening and foreign direct investment

11 Mar 2022 / EU Print

What’s the 411 on FDI?

The forthcoming Investment Screening Bill will introduce the State’s first investment screening regime for foreign direct investment, writes Tara Kelly.

Until recently, there was no formal cooperation among member states and the European Commission regarding foreign direct investment (FDI) into the EU. The EU Screening Regulation (operative since 11 October 2020) formalises such member-state cooperation and prompts the introduction of domestic screening regimes.

Regulation (EU) 2019/452 was adopted in response to increasing numbers of foreign investors, often with foreign government backing and direction. It facilitates member states sharing information on FDI into the EU and sets out certain key elements to be reflected in any national FDI screening regime.

The regulation does not require member states to adopt an investment-screening procedure. However, there has been a notable increase in the number of EU member states that have adopted a screening mechanism since the regulation was first tabled by the commission in 2017.

Ireland is among a minority of EU member states that does not currently conduct any screening of foreign investment. The impending Investment Screening Bill will give effect to the Screening Regulation and proposes to introduce a domestic screening regime.

The Government started preparation of the bill in July 2020, following a public consultation in May. The most recent Legislative Programme (autumn 2021) noted that the bill is priority legislation for the term, and that pre-legislative scrutiny had been waived to expedite the transposition. It is expected that the bill will likely be published in early 2022.

Security and public order

The Screening Regulation was adopted in response to concerns that certain FDI could pose a risk to security or public order in member states – for example, where foreign investors purchase or invest in strategic European companies.

The primary source of concern relates to foreign acquisitions of high-tech companies with significant intellectual property rights, EU citizen and business data sets, and key infrastructure or public utilities. Definitions are broad and include:

  • Critical infrastructure, such as communications, utilities, technology, financial services and real estate,
  • Critical technologies, including AI, robotics, semi-conductors, cyber-security, aerospace, nuclear energy and nano/biotechnology, and
  • Access to sensitive information.

To facilitate enhanced scrutiny of foreign investment into the EU, the regulation introduced a cooperation procedure, which is already in effect, whereby member states are required to share information regarding FDI into their home territories and comply with information requests from other member states or the European Commission.

The newly established Investment Screening Unit within the Department of Business, Enterprise and Innovation (DBEI) acts as the contact point for member states and the European Commission.

Once enacted, the forth-coming bill will empower the minister to respond to threats to Ireland’s security and public order posed by types of foreign investment and to prevent or mitigate such threats. The minister will be able to assess, investigate, authorise, condition, prohibit or unwind foreign investments from outside the EU, based on a range of security and public-order criteria.

It is anticipated that the bill will create an investment screening regulator and/or significantly enhance the Investment Screening Unit’s powers to assist the minister with the investment-screening function. It is expected that the relevant regulator will likely have the power to block or clear (subject to certain conditions) FDI into Ireland.

At this stage, it is unclear if the bill will regulate investments that have the potential to affect ‘security’ and ‘public order’ broadly, or whether it will identify specific sectors of focus. For example, Britain’s National Security and Investment Act identifies 17 key sectors, such as energy, transport, communications, defence and artificial intelligence.

Early indications suggest that the Irish bill will reflect the fact that only a small number of investments could potentially pose a risk to Ireland’s security and public order. The bill is not anticipated to stymie foreign investment, but it is likely to have concrete implications for deal timelines.

Careful balance

The contribution of FDI to the Irish economy is far-reaching. It is estimated that 20% of all private-sector employment in the State is directly or indirectly attributable to FDI. Given the importance of FDI, the bill will need to carefully balance the longstanding strategy of promoting and maintaining Ireland as an attractive place for inward investment, with Ireland’s interest in fending off potential threats to public order and national security.

Early indications suggest that the proposed investment screening regime will not have a significant impact on Ireland’s attractiveness as a location for inward investment. The public consultation documentation published by the DBEI notes that a screening mechanism “could not lessen Ireland’s attractiveness to inward foreign direct investment, which has been a hugely important part of the growth of the Irish economy over many years”. Against this backdrop, the new regime will not pose a significant execution risk to qualifying investments.

It remains to be seen the exact form the Irish regime will take, though several responses to the DBEI’s consultation are in favour of a regime that would operate similarly to the Irish merger-control regime, particularly in terms of review timelines.

If that is the case, the bill (once enacted) is likely to have a concrete effect on the deal timelines for qualifying investments. If the bill establishes a mandatory and suspensory regime similar to the existing merger-control regime, investors will be legally required to obtain approval for qualifying investments prior to completion of the transaction.

Therefore, foreign investment notification and clearance may become a standard condition precedent in transaction documentation, where the foreign investment review process will need to be factored into the timeline to completion and the longstop date.  

Read and print a PDF of this article here.

Tara Kelly
Tara Kelly is a partner at Mason Hayes & Curran.