Denmark

• 15/10/2020
• Jurisdictions

The Danish Investment Screening Act introduces screening mechanisms for foreign direct investments and financial agreements, which may pose a threat to national security or public order. The Danish Business Authority is the responsible authority for granting approvals. The Act was adopted on 4 May 2021 by the Danish Parliament and introduces two screening mechanisms: (1) a mandatory screening process for investments in particularly sensitive sectors and (2) a voluntary cross-sectoral screening process. The Act entered into force on 1 July 2021 but will only apply to investments and agreements implemented after 1 September 2021.

Scope of the screening mechanism

The Act applies to foreign direct investments and special financial agreements made or concluded by foreign nationals or by companies (i) not domiciled in Denmark, (ii) domiciled in Denmark but a subsidiary or a branch of a company domiciled outside of Denmark, or (iii) domiciled in Denmark but controlled or significantly influenced by a foreign national or foreign company domiciled outside of Denmark. The Act also applies to national authorities and non-profits outside of the EU and EFTA. The Act’s mandatory screening process applies to foreign investors who intend to make an investment by acquiring, directly or indirectly, at least 10% of the shares, voting rights or similar control in a Danish company deemed to be particularly sensitive in relation to national security or public order. Particularly sensitive sectors and activities include (1) companies in the defence sector, (2) companies in the field of IT security functions or treatment of classified information, (3) undertakings producing dual-use items, (4) companies in critical technology, and (5) critical infrastructure companies. The mandatory screening process also applies to newly established companies unless the company does not exceed DDK 75 million for up to three financial years from the foundation. The exemption does not apply if the newly established company is a subsidiary of a foreign investor. The voluntary screening process applies to foreign investors from outside the EU and EFTA who acquire possession, directly or indirectly, of at least 25% of the shares of or voting rights in a Danish company, regardless of the sector’s sensitivity in relation to national security or public order.

Review criteria

The Danish Business Authority will conduct a review of the FDI to ensure the protection of national interests. These relate to FDIs or financial agreements that are likely to constitute a threat to national security or public order.

Application procedure

If the FDI or special financial agreement falls within the scope of the mandatory screening process, the foreign investor must file an application for a permit and the permit must be granted before the transaction can be concluded. Applications must be submitted digitally via virk.dk on forms provided by the Danish Business Authority and can be submitted in both Danish and English.

Filing fees

The Danish legislation does not provide for specific filing fees. The Danish Business Authority may issue rules requiring the payment of an application fee.

Implementation and government practice

If the Danish Business Authority finds that an application for an FDI or special financial agreement cannot constitute a threat to national security or public order, the Danish Business Authority will issue a permit for the investment or agreement. Permission may be announced on more detailed terms if the foreign investor has made a commitment to comply with further agreed conditions in order to prevent the investment or agreement from posing a threat to national security or public order. If the Danish Business Authority does not approve the application and the threat cannot be mitigated by additional agreed terms, the Agency must submit the application to the Minister of Trade and Industry. The Minister of Trade and Industry may then decide to (i) lay down more detailed terms as a condition for approval, (ii) refuse or impose a ban on the implementation of an FDI or special financial agreement, or (iii) order the liquidation of an FDI or special financial agreement.

Due process

Decisions by the Minister of Business and Industry and the Danish Business Authority may not be appealed to another administrative authority. Lawsuits for review of orders, prohibitions or conditions may be brought against the Minister of Trade and Industry or the Danish Business Authority, at the Copenhagen City Court.

Time limits

The Danish Business Authority has 60 business days after receipt of a completed application to notify the foreign investor of whether the permission is granted or not. The deadline may be extended to 90 working days if the application requires further investigation or if the foreign investor commits to mitigating measures.

Confidentiality

Employees of the Danish Business Authority and the Ministry of Business and Industry are obliged to keep all information confidential.

Sanctions

When an FDI or special financial agreement has not been notified to the Danish Business Authority but may be considered a threat to national security or public order, the FDI or agreement may be examined for up to 5 years after it has been affected. If the Danish Business Authorities in a subsequent examination find that the investment or agreement is a threat to national security or public order, the authorities may order the investment to be rolled back and possibly against full compensation.

Legislative developments

No further amendments to the current regime are foreseen.

 

The above information is a summary that does not constitute legal advice. For exhaustive information, advice, and assistance please get in touch with our lawyers.