Screening of Third Country Transactions Act 2023 – draft guidance published

Ireland's Screening of Third Country Transactions Act (the Act) was signed into law by the President of Ireland on 31 October 2023. The Act requires commencement by Ministerial Order which is expected to occur during Q2, 2024.

This legislation introduces a foreign direct investment screening mechanism into Ireland for the first time, as contemplated by EU Regulation 2019/452 (the EU Regulation). The EU Regulation established a cooperation mechanism through which EU Member States and the European Commission can exchange information and raise specific concerns about foreign investment on security or public order grounds. Once commenced, the Act will empower the Minister for Enterprise, Trade and Employment (the Minister) to scrutinise a range of transactions where a non-EEA (EU plus Norway, Iceland and Liechtenstein) or non-Swiss undertaking (a third country undertaking) acquires control of, or a prescribed share in, a relevant Irish asset or undertaking.

The focus of the Act is on national security and public order only (not competition or other public interests). The Act is intended to enable the Minister to review investments in certain strategic sectors, technologies and assets that could undermine the State's security or public order, and to provide protection from “potentially hostile investments”.

As promised, the Department of Enterprise, Trade and Employment (DETE) has now published draft guidance on its approach to the inward investment screening for stakeholders and investors (the Guidance). Among other things the Guidance expands on the focus for screening under the Act, what will be needed for mandatory notification of transactions, specific categories of affected activity and assets (including critical infrastructure, critical technologies and dual-use items, critical inputs, sensitive information and freedom and pluralism of the media) and certain technical issues regarding transaction structuring.

Significantly for deal-makers, the Guidance reiterates that while the Act provides for a 90-day screening process (subject to extension by 45 days “in exceptional circumstances” and to a ‘stop the clock’ provision where further information is required) it is envisaged that in practice many notified transactions will be cleared more quickly than this if the evidence supports such an outcome. The Guidance states that “screening reviews [will be] completed in as short a time frame as possible” and notes that “foreign investment remains key to Ireland's economic growth and development” and that accordingly “it is anticipated that only a small number of investments” are likely to pose a threat to security and public order.

The Guidance further indicates that the DETE intends to “operate the screening mechanism system in as efficient a manner as possible, to minimise the burden on investors and companies and to facilitate low-risk, legitimate investment”. What these assurances mean in practice remains to be seen.

Helpfully, the DETE has also published a draft notification form, which illustrates the level of detail required in an inward investment screening notification and makes for interesting reading.

Next steps

The Act is expected to come into force during Q2, 2024. The draft Guidance and notification form are not yet final, but are expected to be finalised during the coming weeks before the Act goes into operation.

Those currently conducting relevant transactions which raise potential public order or security concerns should familiarise themselves with the draft Guidance and notification form. Those anticipating completion in the coming months of notifiable transactions should factor the requirements of the Act into their deals. Notifiable transactions that are completed within ten days of the commencement of the Act are required to be notified within 30 days of the transaction being completed.

For a reminder of the key provisions of the Act, please refer to our previous publication.

If you have any questions on the legislation, please contact a member of the EU, Competition & Procurement team,  Michelle McLoughlin, Knowledge Consultant, Liam Murphy, Senior Knowledge Lawyer,  Anne O’Neill, Senior Knowledge Executive or any other member of ALG’s Corporate and M&A team.

Date published: 20 February 2024