1. Introduction

A foreign direct investment screening (FDIS) regime will enter into force in Belgium on 1 July 2023.

Following the entry into effect of the FDIS regime, certain investments by non-EU investors in Belgian companies that pertain to a list of activities will be subject to prior FDIS notification and review and cannot be implemented before a clearance decision has been obtained.

The procedure consists of a notification, followed by a high-level assessment. If risks are identified, an in-depth screening phase will be initiated. The notification and review procedure is organized by an FDIS screening commission, which combines the decisions of the different (federal and regional) governments. In case the identified risks are substantial and cannot be remediated through commitments, the investment can be prohibited.

For agreements signed on, or after, 1 July 2023, foreign (non-EU) investors should verify whether the type of investment in combination with the activities of the Belgian entity (see below list of targeted activities) would lead to a Belgian FDIS notification. Parties wishing to sell to non-EU investors also have an interest in verifying whether the transaction would fall under the FDIS regime.

Note that the Belgian FDIS regime also applies when foreign investors invest in a non-Belgian company that controls a Belgian entity active in one of the targeted sectors or activities of the FDIS regime. 

Foreign investors and their counterparties should ideally take this into account when negotiating their investment contracts (e.g., including a condition precedent for FDIS) and when assessing the timing of their transaction.

Investment agreements signed before 1 July 2023 are not subject to the mandatory notification, irrespective of whether closing takes place after the entry into effect of the regime.

2. Who would need to notify a transaction for FDIS in Belgium?

Only investments by non-EU investors are subject to the Belgian FDIS regime. The notification must be made by the investor, or its representatives.

Non-EU investors should be understood as follows:

A physical person having its primary residence outside the EU, or

An undertaking (including States, state agencies, public and private companies, associations and foundations, etc.):

• with its registered seat or main activities outside the EU, or
• (one of) the ultimate beneficial owners (UBO’s) have their primary residence outside the EU.

Ultimate beneficial owners include, inter alia, physical persons directly or indirectly owning 25% of the voting rights or exercising control through other means (e.g., a shareholders' agreement) or, in the absence of such persons, the physical persons holding senior management positions.

There are no exceptions to the “non-EU” definition; consequently Swiss, Norwegian, or UK investors are foreign investors.

3. Which type of transactions require a FDIS notification?

The notification requirement applies to agreements signed on or after 1 July 2023.

There is a notification obligation as from signing of the agreement, draft agreements in near as final version can also be notified.  Agreements signed before 1 July 2023 do not fall under the notification obligation, irrespective of whether closing takes place at later date.

Transactions covered by the FDIS regime include investments

• in Belgian legal entities; and
• in foreign (non-Belgian, i.e., both EU and non-EU) legal entities controlling Belgian legal entities.

Direct investments to be understood as:

• investments aimed at establishing or maintaining lasting direct relations between the foreign investor and the Belgian undertaking (or the undertaking controlling the Belgian undertaking) including, without limitation, investments which allow an effective participation in the management or control of the relevant undertaking; and
• which could have detrimental outcomes for the strategic interests, national security, or public order of Belgium or its regions.

Investments aimed at establishing new economic activities (greenfield investments) without acquiring existing economic activities, do not fall under the FDIS regime.

According to the Guidance Notice, intra-group corporate restructurings by non-EU parent companies are not excluded and would also fall under the FDIS regime provided the thresholds are exceeded, even if it would not alter the pre-existing ultimate foreign control or ownership of the Belgian activities.

Similarly, according to the Guidance Notice, an increase of an existing equity stake to a stake above the threshold would also fall under the FDIS regime (e.g., increase of 20% to 25%).

FDIS notification is required when the intended investment would result in a direct or indirect, active or passive, acquisition of:

A) 25% or more of the voting rights in a Belgian entity (or an entity controlling a Belgian entity), the activities of the Belgian entity concerning (see further detail below):

• critical infrastructure (both physical and virtual)
• technologies and raw materials of essential importance
• supply of critical inputs
• access to sensitive information
• private security
• freedom and plurality of media

B) 25% or more of the voting rights in a Belgian entity (or an entity controlling a Belgian entity), the activities of the Belgian entity:

• i) being active the biotech sector, and
• ii) having realized a turnover above €25 million in the financial year preceding the investment.

C) 10% or more of the voting rights in a Belgian entity (or an entity controlling a Belgian entity), the activities of the Belgian entity:

• i) being active in the biotech, energy, defense (including dual-use products), cybersecurity and electronic communication or digital infrastructure sectors, and
• ii) having realized a turnover above €100 million in the financial year preceding the investment.

4. Which activities, interests or sectors are targeted by the FDIS regime?

Strategic interests include, inter alia, safeguarding the continuity of vital processes, preventing strategic or sensitive information from falling into foreign hands, and guaranteeing strategic independence.

Acquisition of 25% or more of the voting rights in an entity (irrespective of the amount of its turnover) active in:

• Critical infrastructure (both physical and virtual) for energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure and sensitive facilities, as well as the land and real estate necessary for the use of such infrastructure;
• Technologies and raw materials that are of essential importance to safety, public health safety, defense and public order control, military equipment under the "Common Military List" and national control, dual-use items, artificial intelligence, semiconductors, robotics, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, and nanotechnologies;
• Supply of critical inputs, including energy, raw materials, and food security;
• Access to sensitive information (e.g., relating to Belgium's defense and strategic interests), as well as personal data or the possibility to control such data;
• Private security (e.g., monitoring and protection of persons and goods); and
• Freedom and pluralism of the media (e.g., news outlets, broadcasting services, newspapers, etc.)

Acquisition of 25% or more of the voting rights in an entity active in biotech sector and with a turnover above €25 million.

Acquisition of 10% or more of the voting rights in an entity active in the biotech, energy, defense (including dual-use products), cybersecurity and electronic communication or digital infrastructure sectors and with a turnover above €100 million.

5. Non-implementation obligation (standstill)

Foreign investments which are subject to FDIS notification cannot be implemented prior to obtaining FDIS clearance.

In case of an acquisition of shares in a listed company on the stock exchange, the notification must be done, at the latest, on the date of the acquisition. However, except for any financial rights, all rights attached to such shares will be suspended until the investment has been cleared.

6. How does the review procedure work?

Pre-notification – notification

• Pre-notification is an optional and informal procedure. Parties may wish to have pre-notification contacts with the Secretariat of the Screening Commission to ensure a complete notification.
• The notification details the ownership structure of the foreign investor and the target (including the UBO), the value of the investment and details on the valuation, products, services, and activities of the foreign investor and the target company (including their affiliates), the countries in which relevant activities are carried out, the funding of such investment and its source, and the envisaged date of the completion of the transaction.

The review procedure has 2 phases.

Phase I: Assessment phase

Upon receiving a complete notification, the Screening Commission has 30 calendar days for the assessment.

Following the notification, other EU member states and the European Commission are informed.

The Screening Commission (with representatives of Belgian federal and regional governments) will coordinate a high-level assessment.

Additional information from the parties can be requested, which will suspend the 30-day term.

The following criteria (risk factors) are relevant in the high-level assessment:

• The foreign investor is directly or indirectly controlled by a government, government entity, or armed forces of a third country either through ownership or through substantial financing;
• The foreign investor is, or was, involved in activities that might affect national security or the public order of an EU Member State or a third country; and/or
• There is a serious risk that the foreign investor is, or was, involved in illegal or criminal activities.

Decision at the end of the assessment phase:

• If there are no risk indications, the investment will be approved and parties will be informed.
• If there are indications that any of the risk factors could be concrete and present, the relevant governments and the screening commission will initiate the screening procedure (Phase II).
• If no decision is notified within the 30 calendar days term (term can be extended in case of request for additional information) the investment shall be considered approved in Phase I.

Phase II: Screening phase

• When entering the screening phase, the federal government and/or regional government which has identified a risk will issue a draft opinion within 20 calendar days from notification of the opening the screening procedure. The term can be extended with 2-3 months in case of request by the Security Agency for complex cases.
• The Screening Commission or foreign investor may request an oral hearing within 10 calendar days from opening the screening procedure (which suspends the 20-calendar day term). The foreign investor will have access to the file, including the non-confidential opinions of the screening entities.
• Corrective measures can be proposed and negotiated into binding agreements (this suspends the 20-calendar day term for 1 month, or more upon mutual agreement).

Corrective measures may include behavioral commitments such as safeguards for the exchange of sensitive information, additional security clearance of directors, reporting to Belgian authorities, protection of sensitive technologies/know-how/source codes held by the Belgian entity. It may include assurances regarding the continuity of supply of sensitive products/services and/or corporate or business restrictions on the foreign investor. It may impose additional security protocols, trained personnel, and reporting. The corrective measures may include structural measures such as divestments of business or a reduction of the share acquisition.

• Consequently, each relevant government will issue a provisional decision (on whether approving or not, and, if applicable, subject to which (binding) conditions). The different provisional decisions will be aggregated in a joint decision of all relevant governments by the screening commission.

The final joint decision may approve (in some cases approval can be made subject to the binding agreement for corrective measures) or prohibit the investment.

Joint decisions may be appealed at the Markets Court (specialized chamber of the Brussels Court of Appeal). The Markets Court can annul the decision, in which case the assessment and screening will have to be reinitiated before the Screening Commission.  

Screening ex officio – claw back

The Screening Commission may, at its own initiative, and in the absence of any notification, initiate a screening procedure. Consequently, it may prohibit an investment or impose structural modifications and additional measures.

This is possible for up to 2 years after the foreign investment, which can be increased to up to 5 years in case of bad faith.

The ex officio screening is also possible for agreements signed before the entry into force of the regime on 1 July 2023 (claw back), for a period of up to 2 or 5 years after the foreign investment (the latter in case of bad faith). 

7. Penalties and fines

In case of non-compliance penalties and fines can be imposed on the foreign investor.

An administrative fine of up to 10% (of the value) of the envisaged direct investment can be imposed in case of:

• Lacking or incomplete data in the notification or following a request for information;
• Failing to provide additional information within the requested term;
• A spontaneous but late notification of an investment within 12 months following its completion;
• An ex officio screening by the screening commission within 12 months following completion.

In addition, a foreign investor may be subject to an administrative fine of up to 30% of the value of the envisaged direct investment if:

• The foreign investor fails to comply with the notification obligation (note that in addition to fines, the Screening Commission can open the procedure ex officio, possibly leading to a prohibition decision);
• Inaccurate or misleading information is provided in a notification or a response to a request for information;
• The investor does not comply with the request to cease the completion of the envisaged direct investment or;
• Corrective measures are not implemented within the due term.

Decisions on fines can be appealed before the Markets Court.

8. What should businesses do?

Foreign (non-EU) investors, or parties wishing to sell to such investors, should verify whether the type of investment in combination with the activities of the Belgian entity (see above list of targeted activities) would lead to a Belgian FDIS notification.

Note that the Belgian FDIS regime also applies when foreign investors invest in a non-Belgian company that controls a Belgian entity active in one of the targeted activities and that intra-group restructurings are not exempted from the FDIS regime.

Foreign investors and their counterparties should take this into account when negotiating the investment contracts (e.g., include a condition precedent for FDIS).

Ideally, they should prepare for the necessary information gathering and they should take the impact on timing of the FDIS procedure (standstill obligation) into account for their transaction.

Information, the text of the applicable law, and the (draft) Guidance Notice can be found at: 

• Interfederale Screeningscommissie | FOD Economie (fgov.be)
• Comité de filtrage interfédéral | SPF Economie (fgov.be)

For more information or advice, you can contact our FDIS team:

• Thomas Verstraeten
• Justine Van den Bon