Today, a Government appointed Commission proposed significant changes to the Norwegian foreign direct investment (FDI) regime. If adopted, it will apply to a notably higher number of transactions, compared to today.
In recent years there has been an increased focus on how states use investments and acquisitions in ways that threaten national security interests. A number of European countries have established screening mechanisms in response. In Norway, FDI-screening is currently regulated in the Norwegian Security Act – which entered into force in 2019. The Act applies to entities that are considered to be of vital importance to Norway's national security. Each ministry is responsible for selecting these entities within its sector.
The current FDI-regulation is limited in scope as it only applies to the companies specifically made subject the Security Act. For these companies, however, transactions may require regulatory approvals, a process that can both be costly, unpredictable and impact on the timeline of the transaction.
Challenges associated with the current FDI-regime
The Commission highlights several challenges associated with the current regime:
- Relevant cases are not detected systematically or to a sufficient extent.
- There is a lack of transparency regarding which investments may be subject to screening.
- There is a lack of a suitable legal basis for intervening in investments that pose a risk to national security.
- Practicing of the sector principle can prevent uniform processing of investment screening cases.
- The basis for decision-making in investment screening cases is not sufficiently standardized.
- The current investment screening system is not in accordance with international principles.
The proposal for a new FDI-regime
The Commission was tasked with assessing how to better prevent potentially harmful economic activities targeted at businesses outside the scope of the Security Act. The Commission's main recommendations are set out below:
- Norway should implement a targeted and predictable notification system.
- A new regime should be implemented through a separate act on investment screening.
- Companies within "security sensitive sectors" should be subject to a screening process to assess whether the investment may harm Norway's national security interests.
- Sectors defined as sensitive are: Suppliers to important societal functions, critical technology and critical raw materials. There is a need to further define what is critical within these three sectors.
- The Commission also proposes a voluntary notification system for all sectors to provide increased predictability for investments outside the regime, but that may entail a risk to national security interests.
- The Commission propose to distinguish between foreign investors from EEA countries and investors from third countries. In particular security-sensitive sectors, all foreign investors should notify. For other security-sensitive sectors, the reporting duty should be limited to investors from third countries.
- Notified investments should be processed in two phases: In the first phase, the investor should be informed within 25 working days whether the investment has been approved or if further assessments are needed in a second phase.
- The entire assessment process should, as a main rule, not exceed 90 days. After phase two, the investor would receive an answer as to whether the investment has been approved, approved with conditions, or blocked.
- A new screening authority should be established to oversee the implementation and effectuating of the FDI-regime. All cases of investment screening should be processed by this authority.
The Commission estimates that approximately 400 transactions will be subjected to screening if the regime is implemented.
Do not hesitate to contact us for an consultation to safeguard your investments and navigate the complexities of the proposed new Norwegian FDI regime.