Under Maltese law, foreign direct investments in these relevant areas must be notified to the National Foreign Direct Investment Screening Office, which office may determine that the transaction must be subject to further review (screening).
Fenech & Fenech Advocates has built a dedicated team that coordinates FDI filings. The firm is thus able to assist across the whole process, from collating the necessary information, to submitting notifications and advising clients in the event that the transaction is subject to screening.
What is an FDI?
An FDI is defined in the Act as an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links in order to carry on an economic activity in Malta, including investments which enable effective participation in the management or control of a company carrying out an economic activity and any investments made pursuant to a public procurement process.
What is the National FDI Screening Office?
The National Foreign Direct Investment Screening Office (the “Screening Office”) is the office that has been set up in Malta in terms of the Act specifically for the purpose of screening FDIs coming from a third country (non-EU), on grounds of security and public order.
When is the Act triggered?
In terms of Article 4 of the Act, the Act shall apply to FDIs made or planned to be made in Malta and to all persons involved in an FDI. More specifically, the applicability of the Act is initially triggered when an FDI is made or is to be made in Malta by: - A foreign investor, which is defined in the Act as a natural person or undertaking of a third country intending to make or having made an FDI in Malta. In turn, an “undertaking of a third country” is defined under the Act as an undertaking constituted or otherwise organised under the laws of a third country; or - Any undertaking, organisation, foundation or other entity wherein at least 10% of its share is owned by a foreign investor and/or where the beneficial owner of the foreign investor is a third country national or an undertaking of a third country and, or which has any direct or indirect controlling interest by a foreign investor. In sum therefore, FDI obligations may be triggered under the Act whether the FDI is made: - directly by a foreign investor (i.e a non-EU national or a non-EU undertaking); or - indirectly by any undertaking, organisation, foundation or other entity wherein at least 10% of its share is owned by a foreign investor as defined above.
When does the obligation to notify an FDI to the Screening Office kick in, and who has the obligation to notify?
Once the applicability of the Act is established (as detailed above), the obligation to notify an FDI to the Screening Office would arise in the following instances: i. where the investment planned to be carried out in the future affects either: a. any of the following activities: - Critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure; - Critical technologies and dual use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies; - Supply to critical inputs including energy or raw materials as well as food security; - Access to sensitive information including personal data, or the ability to control such information; or - Freedom and pluralism of the media. OR b. any of the following factors: - Whether the foreign investor is directly or indirectly controlled by government (including state bodies or armed forces) of a third country, including through ownership structure or significant funding; - Whether the foreign investor has already been involved in activities affecting security or public order in a Member State; or - Whether there is a serious risk that the foreign investor engages in illegal or criminal activities. ii. where, having carried out an investment in Malta, there is a plan to change the business activity of the foreign investor which would affect any of the above-stated factors or activities; iii. where, having carried out an investment in Malta which affects any of the above-stated factors or activities, the ownership structure of the investor changes such that at least 10% is owned by foreign investors; or iv. where, having carried out an investment, the direct or indirect controlling interest of the company or the group company changes and passes onto a foreign investor. If any of the above conditions is met, the obligation to notify the Screening Office is triggered. In terms of the Act, the obligation to notify rests with the foreign investor and all persons involved in the FDI.
Once the notification requirement is triggered, what information is to be submitted to the Screening Office?
In terms of the notification form, the information to be submitted to the Screening Office shall include: - the ownership structure of foreign investor and of undertaking in which the FDI is planned to be made or has been made including information on the ultimate investor and/or beneficial owner and participation of the capital; - the approximate value of the FDI; - the products, services and business operations of the foreign invetsor and of the undertaking in which the FDI is planned or completed; - the jurisdictions including the Member States in which the foreign investor and undertaking in which FDI is planned or completed, conduct relevant business operations; - the funding of the FDI and its source; - the date when FDI is planned to be completed or has been completed; and - any other information the Screening Office may reasonably require in the performance of its functions.
How is the notification form submitted?
The notification form is to be submitted online at https://applicationform.nfdismalta.com/.
What are the timing considerations concerning FDI notification and the screening process?
Within 5 working days from the receipt of the relevant notification, the Screening Office shall determine whether the FDI shall be subject to screening. The Screening Office shall then notify the foreign investor of its decision to screen the FDI or otherwise, within an additional 5 working days from that decision. Where the Screening Office concludes that the FDI shall be subject to screening, the cooperation mechanism is triggered and the Screening Office shall within 60 calendar days from the date of its decision, determine whether the FDI may affect security or Maltese public order. It should be noted that this time period can be extended by the Screening Office where necessary. Where the Screening Office concludes that the FDI does not affect the security or public order of Malta, it shall inform the foreign investor within 5 working days from the date of its decision.
What are the consequences in terms of the Act in the event that the FDI is found to affect the security or public order of Malta?
Where the Screening Office concludes that the FDI affects the security or public order of Malta, it may condition, prohibit or unwind such an investment, and shall inform the foreign investor in writing of its decision, which shall include a reasoned justification. If the FDI is conditioned, prohibited or unwound pursuant to a decision of the Screening Office, the foreign investor and any other person, undertaking, organisation, foundation or other entity having an interest in the said investment shall not be entitled to any form of compensation or reimbursement, for whatsoever reason.
What are the consequences in terms of the Act in the event of failure to notify an FDI to the Screening Office?
In principle and in terms of Article 11 of the Act, foreign investors and all persons involved in the FDI shall be obliged, prior to carrying out the investment or effecting any changes mentioned in that article, to notify the Screening Office with the investment. In the event that an investment is carried out prior to notification, Article 16 of the Act states that the investment shall automatically be considered to be in violation of the Act, and the Screening Office may at its own discretion, take all the necessary measures to unwind such investment. Moreover, the Screening Office may, by notice served on the offender, impose administrative penalties in a number of instances including for failure to notify an FDI in terms of Article 11 of the Act.