Belgium takes important step in introducing Foreign Direct Investment screening

On 1 June 2022, Belgium’s Federal and various Regional governments entered into a draft cooperation agreement to introduce a mechanism for screening Foreign Direct Investments (“FDI”). Although this agreement is not the final step in the legislative process, it nevertheless marks an important step towards introducing such a screening mechanism.

European initiative

In March 2020, following EU Regulation 2019/452, the Commission called upon EU Member States to introduce a screening system for FDI, with the purpose being for the Member States to protect their “crown jewel” companies from being taken over by foreign companies.

However, it has taken the various Belgian governments until now to advance this matter, as the governments could not agree on which government (federal, regions or communities) should have the last word in case of investments resorting under the competence of different governments. Therefore, Belgium is currently one of the few Member States still having to adopt a screening mechanism, but with this draft cooperation agreement it has finally taken an important step in that direction.

Interfederal Screening Committee

The screening of investments falling within the scope of the system will be performed by an Interfederal Screening Committee (“ISC”), which will be composed of representatives from both the Federal government and the governments of the different Regions and Communities. In that way, the ISC can function as a one-stop-shop for all notifications. The FDI screening consists of a prior notification of the intended transaction to the ISC, which must then approve the transaction before the intended transaction can be implemented. Failure to respect the notification mechanism may lead to administrative fines of up to 10% or 30% of the value of the investment, depending on the nature of the violation.

Broad scope of application

According to the draft cooperation agreement, non-EU investments that represent between 10% or 25% of a company’s shares – depending on the company’s activities – would have to be notified, such as:

• Acquisitions of 10% or more of the voting rights in Belgian entities active in the defence, energy and cybersecurity sectors, provided that the turnover of the Belgian target exceeds EUR 100 million;
• Acquisitions of more than 25% of the voting rights in Belgian entities active in technologies of strategic interest in the biotech sector provided that the turnover of the Belgian target exceeds EUR 25 million;
• Acquisitions of more than 25% of the voting rights in Belgian entities, irrespective of their size or turnover, that are involved in a broad range of activities, such as:
  • Critical infrastructure related to, for example, energy, water, transportation, health, communications, media, data processing or storage, aerospace, and defence;
  • Technologies and raw materials that have essential importance for the country’s safety, defence and public security, military equipment and technologies of strategic importance (e.g. artificial intelligence, semiconductors, robotics, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies);
  • The 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;
  • Private security;
  • Freedom and pluralism of the media.

Next steps

The screening mechanism described above is still only in draft form. This draft cooperation agreement has now been submitted to the Council of State for its advice, after which the draft cooperation agreement will have to be approved by the different governments. The final system is supposed to enter into force on 1 January 2023. However, current investors should carefully watch developments in this matter, as the screening system – although it will not be applied retroactively – is likely to apply to any FDI that has not yet closed at the time the rules enter into force. We will of course keep you updated about the major developments in this important topic.

Written by

• Carmen Verdonck

  Partner

• Beatrijs Gielen

  Counsel