Screening Inward Investment

2023 Act

Screening of the Third Country Transactions Act 2023 provides the Government with powers to protect security or public order from hostile actors using ownership of, or influence over, businesses and assets to harm the State. It empowers the Minister to respond to threats to Ireland’s security or public order posed by particular types of foreign investment, and to prevent or mitigate such threats. It allows the Minister to assess, investigate, authorise, condition, or prohibit third country investments based on a range of security and public order criteria

The Act includes provisions to ensure that Ireland can, to the extent possible, fulfil its’ reporting and cooperating obligations as set out in Regulation (EU) 2019/452. It defines the nature, scale and type of investments that will undergo investment screening and sets out the factors to be considered when applying screening to transactions.

The 2023 Act establishes an Investment Screening Advisory Panel to inform and assist the Minister in relation to the screening of specific foreign transactions. It provides the necessary powers to the Minister to obtain the data from investors that is required to screen transactions. It also sets out an appeals process to ensure transparency and certainty for investors, to the degree possible, whilst maintaining security and public order.

It sets out the penalties that may apply to those investors/ investees failing to fulfil all of the criteria required for an investment undergoing screening, or investors that breach Ministerial orders arising as a result of the screening process.

The Act is designed to prevent circumvention of the provisions of the Act by investors using family members to acquire control over assets or undertakings. It defines the various relationships that comprise a “connected person” and elaborates on the concept of connected persons in the context of their role in an undertaking.

A report on screening activity will be laid before each House of the Oireachtas every 12 months. The Minister may prescribe regulations in relation to the functioning of any part of the Act.

The offences and penalties are set out various points throughout the Act and relate to the provision of false information, failure to notify, failure to comply with a Minister’s screening decision, and breaches of confidentiality relating to appeals process.

Notifiable Transactions

Third-country transactions, in designated sectors or involving sensitive and strategic activities, where a change in control over an asset or undertaking occurs will need to be notified. Notification is further limited to transactions with a value equal to or greater than €2,000,000. The Act defines the nature of control of an undertaking that requires mandatory notification (i.e., when an investor acquires more than 25 percent or 50 percent of an undertaking).

The Act sets out the process for notification, outlining the information that should be included by the transaction parties as part of the notification process. This information is required so that the Minister can properly assess the transaction to determine the associated risk, and potential impact on security and public order. Notification should occur at least 10 days prior to a transaction being completed. The Act addresses the responsibilities of the various parties to the transaction – in general, where a party is unaware of a transaction, no notification is required.

Where a party to a transaction fails to notify a transaction that requires mandatory notification, the transaction cannot legally be put into effect. The failure to notify a transaction, or the submission of false information as part of a notification constitutes an offence.

There are provisions for notification responsibilities of all parties to a transaction. There is a process for one party to make a transaction to inform other relevant parties of their intent to notify the Minister. The second party is to confirm their satisfaction with the information being supplied as part of the notification process.

Instances where one party supplies information to the Minister that differs from that agreed to by the other parties to the transaction are also addressed. There are timelines for notification of transactions which are initiated before the legislation comes into effect, but which conclude after the commencement of the legislation. A second party cannot frustrate a transaction by refusing to engage with the notification process.

Review of Transactions

There are requirements for the Minister to review transactions – both notified and non-notifiable transactions – where the Minister believes that they might impact security or public order. The Ministers have the authority to review transactions other than those which are the subject of a mandatory notification.

This is a safety net allowing the Minister to review transactions which pose a threat to the security or public order of the State but which either did not require mandatory notification or which should have been notified but were not due to deliberate attempts to circumvent the provisions of the Act.

There is a limited retrospective period within which a Minister can review transactions: in relation to non-notified transactions, a 5-year time limit is provided; in relation to non-notifiable transactions, a 15-month time limit applies. The Minister may only utilise their screening authority within these defined time limits in order to provide as much certainty to the enterprise sector as possible, whilst simultaneously minimising the scope for circumvention.

The Act sets out the factors that the Minister shall consider when reviewing the threat to security or public order posed by a particular transaction. The primary purpose of the Act and main considerations for screening are outlined: The purpose is to consider the impact of an investment on security or public order. Greater detail on the factors to be considered when reviewing a transaction is set out.

In reviewing a transaction, the Minister must consider whether an investor is controlled by a third country government; the extent to which parties to the transaction are involved in activities related to security or public order; any evidence of criminality amongst the parties to the investment; the likelihood of the transaction resulting in actions that are disruptive or destructive to people, assets or undertakings in the State; the views of the European Commission and other EU Member States (as required under the EU Regulation); and the views of the Investment Screening Advisory Panel.

The Minister has the power to consult with other Government Ministers or with other relevant parties to inform the review process. The Minister is also provided with an option to enter into discussions with the parties to the transaction to mitigate any concerns about the impact of the transaction on security and public order, and the Minister may also consider certain relevant written submissions.

Screening

There are requirements for the Minister to issue a formal “screening notice” to the parties to a notified transaction, ensuring that all parties are fully informed that screening has commenced. There is clarity around the screening timeline, and it sets out the types of information that may be included in the screening notice.

Qualification of Obligation to Issue Screening Notice in Exceptional Circumstances provides the Minister with a degree of discretion to determine whether the issuing of a screening notice, or the inclusion of certain information in such a notice might pose a security risk. Details on the calculation of the timeline within which a screening review must be conducted in the rare instances where the Minister determines that a screening notice should not be issued.

The Minister is to inform the parties of a screening decision. This requires that this be done in writing, and that this be done within 90 days of a screening notice being issued. This period can be extended by an additional 45 days if required, and it is envisaged that this would only occur in complex cases where risks to security or public order are perceived.

The failure to make such a decision within 90 days results in the transaction automatically being permitted to proceed. The information that must be provided by the Minister to the parties (i.e., reasons for a screening decision) is also defined and there are provisions to limit this right, if required on security and public order grounds.

A transaction subject to a screening notice cannot be put into effect until the screening review has been completed. A party who fails to comply with this provision and proceeds to complete a transaction under review will be guilty of an offence.

Decision

There are various decisions that are available to the Minister in relation to the outcome of a screening review. Once it is determined that a transaction impacts upon security or public order, it requires parties to the transaction to comply with the Minister’s direction. Where a determination has been made, the parties cannot complete the transaction, other than in accordance with the Minister’s direction.

Where there is a finding that a transaction poses a threat to security or public order, the Minister may allow the transaction to proceed subject to certain conditions being fulfilled. Alternatively, where mitigation measures are insufficient, the Minister may prohibit the transaction. Examples of the types of mitigation conditions that might be imposed are provided. Failure to comply with a Ministerial screening decision is an offence.

There Minister may determine that additional information is required from any of the parties to the transaction, in order to inform the screening process. The timeline (30 days) for compliance with this process is also defined and measures to ensure that any information provided is submitted in a timely fashion are set out. The information submitted must be complete and accurate.

Offences relating to the provision of false information or failure to comply with an information request are defined. The issue of legal privilege is addressed. There are timelines in relation to a request for additional information. A notice of information issued by the Minister suspends the screening timeline. The timeline restarts within 10 days of the Minister receiving the requested information, so long as they are satisfied with the response.

There is a process to certify that the Minister’s request has been responded to in a satisfactory manner. There is a provision to address the situation where a request is not fully satisfied.

Parties to a transaction which is being screened have the right to make written submissions to the Minister, within a timeline.

Appeals

There are adjudicators who hear the initial appeal against a Minister’s screening decision. The Minister may appoint adjudicators to a panel. The Act outlines the qualification criteria for such appointments. The independence and gender balance of adjudicators is set out. The Minister may revoke an adjudicators appointment. The terms under which such a revocation can occur (e.g., illness, misconduct) are outlined.

The Minister will prescribe rules in relation to how appeals should operate. Examples of the types of rules that the Minister may prescribe are set out.  The Minister will also provide the necessary administrative support to ensure that adjudicators can fulfil their functions.

The decision of the Minister in relation to a transaction may be appealed. Appellants must notify the Minister that they intend to submit an appeal in respect of a screening decision or in respect of a Minister’s decision not to provide full disclosure of their reasons for making a screening decision. The notification ust be made within 30 days of a party being informed of the Minister’s screening decision.

Once they have been made aware that an appeal has been filed, they will appoint an adjudicator to hear the appeal and will notify the appellant with details of the designated adjudicator and set out the means by which an appellant may make their appeal. The appellant has a further 14 days to file their appeal. An appellant must state the grounds under which an appeal to the adjudicator is being made, and they must provide all of the documents and evidence on which they intend to rely.

The Minister is the respondent to such an appeal. It must also state the grounds upon which they intend to respond to the appeal, as well as the evidence upon which they will rely. A party to an appeal is not entitled to make written submissions to the adjudicator, other that submissions relating to the grounds stated for the appeal or relating to the evidence provided under previous sections.

Procedure

Where appropriate, the adjudicator may permit written submissions, over and above the evidence referenced above. The adjudicator may also refuse to consider submissions, documents or evidence deemed irrelevant. An appeal to the adjudicator does not suspend the screening decision being appealed.

Appeals to the adjudicator may be determined without an oral hearing unless it is determined that such a hearing is necessary. There are rules requiring attendance and for cross-examination under oath. There are time limits within which submissions may be made. Failure to comply with the direction of an adjudicator is an offence.

The adjudicator may allow the appeal and remit it to the Minister to reconsider within a defined period, or they may affirm the Minister’s decision. This decision must be notified to the parties as soon as practicable and is final, other than via an appeal to the High Court.

Security Considerations

The Minister (or an official of the Minister) provides sensitive evidence to the adjudicator in a manner that protects national security. There is provision for the sharing of redacted or summarised information with the parties to the appeal, where appropriate. The adjudicator is still able to take all relevant material into consideration in making their decision, regardless of whether the material has been provided to the appellant, and the adjudicator retains powers to determine what can be safely shared. A process to facilitate the provision of information on oath or affirmation is outlined, and such evidence is not to be disclosed publicly.

The Minister may determine that an appeal to the adjudicator can be held in public if it does not create a risk to the security or public order of the State. Otherwise, appeals will be held other than in public. Those who may attend a hearing held otherwise than in public include the parties to the transaction, legal representatives, and witnesses.

The Minister may permit appeals to be held in public so long as this does not create a risk to the security or public order of the State. The decision to hold an appeal otherwise than in public extends to subsequent appeals against the decision of the adjudicator and applications to suspend the effect of a screening decision), unless the Minister determines that such treatment is no longer required

There is confidentiality around certain types of information obtained by a party via the appeal process. Certain information may be shared with them. There are criminal offences relating to the disclosure of such information.

The Minister may approve or designate certain legal representatives in sensitive cases. The Minister’s decision in this regard must be shared with the parties as soon as practicable. Other conditions in relation to approved legal representatives include the requirement to publish a list of approved people on a website maintained on behalf of the Minister.

Appeal Against Decision of Adjudicator

Parties to a transaction have a right of appeal against the finding of the adjudicator. This may be made, by leave of the High Court, to that court on a point of law, within 30 days of the adjudicator’s finding. The Minister also has the right to appeal against an outcome from the adjudication process. Such an appeal should be determined as expeditiously as possible. The decision of the High Court is final.

The High Court may suspend a screening decision until such time as the appeal is determined. Otherwise, the lodging of an appeal does not suspend the initial effect of a screening decision.

There are limitations on the sharing of evidence (i.e., summaries or redacted material may be provided where it is affirmed that a threat to security or public order could otherwise be compromised). The provision of evidence under oath and rules of non-disclosure are set out.

Parties who may attend an appeal to the High Court are limited to attendance to the judge, necessary court personnel, the parties to the appeal and legal representatives, unless there are grounds not to limit attendance. This also applies to instances where a court other than the High Court deals with an appeal in relation to which leave is granted.

The Advisory Panel

There is an Advisory Panel.  The Advisory Panel may request assistance from experts as appropriate. The Minister may dissolve the panel at any time.

There are rules relating to the frequency of meetings, quorums and meeting procedures that will apply. Consultants and advisers permit the panel to engage such consultants or advisers as it considers necessary for the performance of its functions.