Swedish FDI regime closer to introduction

Sweden’s regime for the review of foreign direct investments (FDI) has come one step closer to introduction. On March 16 2023, the Government referred a regulation proposal for consideration to the Council on Legislation. According to the proposal, the Inspectorate for Strategic Products (ISP) will be given the mandate to review foreign direct investments that may harm Sweden’s security or public order and public security in Sweden and, if necessary, prohibit them. The new regulation is proposed to enter into force on December 1 2023, and will apply to transactions closed after this date.

The proposed regulation will cover investments in Swedish companies (limited companies, partnerships, unincorporated partnerships, sole traders, economic associations, and foundations or trusts based in Sweden) that conduct activities worthy of protection, if the investment grants the investor a certain influence in, or constitutes an acquisition of, the activity worthy of protection. According to the proposal, activities worthy of protection include:

• Essential services,
• Security-sensitive activities,
• Activities relating to critical raw materials or inputs,
• Activities relating to the processing of sensitive personal data or location data, and
• Activities relating to strategically protectable products and technologies.

The broad and somewhat vague framework that is proposed to determine the application of the regulation has the effect that a large number of Swedish companies may be covered by the review mechanism.

Those who wish to invest in a company covered by the proposed regulation will have to notify the investment to the ISP. Simultaneously, Swedish companies covered by the regulation will have an obligation to inform potential investors of this obligation to notify. In case of deviations from the regulation’s mandatory and suspensory obligations, the ISP will have the right to issue sanction fees of up to SEK 100 million.

The Government’s proposal is based on an EU regulation (2019/452) and further motivated by an increased need to protect Swedish security interests. Within the EU, 18 out of 27 Member States currently have an FDI regime in place. These include the EU’s larger economies Germany and France, as well as Sweden’s Nordic neighbours Denmark and Finland. After the regulation proposal has been considered by the Council on Legislation, the Government is expected to submit a final proposal to the Riksdag, after which the Riksdag will vote on the proposal. If a majority in the Riksdag votes in favour of the proposal, the new legislation is issued.

Setterwalls monitors the developments on an ongoing basis, and you are welcome to contact us for further information on how the proposal may come to affect your business.