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The Danish FDI regulation has been amended with effect as of 1 July 2023, broadening the scope and changing the application process.
Since the summer of 2021, the Danish Investment Screening Act has been in force in Denmark. Certain foreign investors, intending to invest in a Danish company (including establishing a Danish company) or to enter into a certain business relations (special economic agreement), are obliged to apply for and obtain an approval from the Danish Business Authority, prior to completing the investment/agreement.
The Danish Parliament has today resolved the first amendment to the Danish Investment Screening Act broadening the scope of the Act and changing the application process. These changes are implemented due to the initial experiences gained in the past two years as well as considerations made in relation to the preparation of the North Sea Energy Island.
Screening of contracts regarding establishments, joint ownership and operations of the North Sea Energy Island
The Danish Investment Screening Act has – until today - comprised screenings of
- Investments (directly or indirectly) in a Danish company made by foreign investors within one of the particular sensitive sectors.
- Special financial agreements entered into by a foreign investor within one of the particular sensitive sectors
- Investments in a Danish company and special financial agreements outside of the particular sensitive sectors, but which can still pose a threat to the national security and public order in Denmark.
With the amendment of the Danish Investment Screening Act, the scope of the Act now additionally covers contracts regarding establishments, joint ownership and operations of the North Sea Energy Island if the contracts are entered into in accordance with the Act on planning and construction an energy island in the North Sea. Consequently, when a party has won a tender, that party must apply for and obtain an authorization prior to entering into the contract. This applies regardless of the party’s nationality and corporate form – entailing that also Danish citizens and consortiums will have to obtain authorization.
In addition hereto, the Danish Minister of Climate, Energy and Utilities may decide that all participants in a tender must apply for and obtain an authorization – in order to be part of the tender. According to the explanatory notes to the draft of the Act, this option will be used when the tender material contains sensitive information that – if in the “wrong” hands – can pose a threat to the national security and public order in Denmark.
When applying for an authorization in accordance with the rules regarding the North Sea Energy Island, approvals may be granted subject to screening and authorization of the party’s subcontractors as well. Application on behalf of subcontractors shall be made by the contracting party.
2-phased application process
During the past two years with the Danish Investment Screening Act in force, the business community in Denmark has noted that the current application process in many cases proves too comprehensive. After looking to other EU-countries such as Germany, France and Italy, the Danish Parliament has now amended the application process to meet the concerns of the business community in Denmark.
Going forward, applications will be handled by a 2-phased application process. The intention is that applications concerning non-complicated investments can be resolved quicker.
Phase 1 will require significantly less information than the “old” application form – and will aim to quickly establish whether the investment is comprised by the scope of the Danish Investment Screening Act, or not.
If the Danish Business Authority concludes that an authorization cannot be granted based on the provided information in phase 1, the application will be moved to phase 2.
Phase 2 will require additional information and a filled in EU-notification form.
After phase 2, the Danish Business Authority may either approve the investment, enter into dialogue concerning specific terms that the foreign investor must consent to, or present the matter to the Danish Minster of Industry, Business and Financial affairs. The Danish Minster of Industry, Business and Financial affairs is the only authority who may reject an authorization request.
As part of the amendment of the application process, the deadlines have also been amended. The Danish Business Authority now has 45 days to complete phase 1 and 125 days to complete phase 2 – both deadlines are however without legal effect.
If you have any questions regarding the Danish FDI regulation, please do not hesitate to reach out to Tina Aae Jeppesen.
Summary
When the Danish Investment Screening Act was first introduced, many were concerned by the broad scope of the Act. Now the scope has been broadened even further to include contracts relating to the North Sea Energy Island. The North Sea Energy Island is expected to be critical infrastructure, and consequently the Danish Parliament has found it necessary to include this in the scope of the Act. The amendment of the Danish Investment Screening Act also meets some of the concerns many have had regarding the application process, which is positive, as a great number of applications can be resolved quicker.