Spain

• 08/01/2021
• Jurisdictions

Prior to the coronavirus pandemic, Spain had a liberal FDI framework with restrictions only in the defence, energy, audio-visual and telecommunications sectors. Sector-specific restrictions under that framework continue to apply. On 17 March 2020, Royal Decree Law 8/2020 on public order, public safety, and public health grounds introduced an ex ante authorisation requirement regarding certain investments due to perceived risk of takeovers due to the coronavirus crisis. In March 2020, a simplified transitional procedure to implement the new FDI screening mechanism was established. The procedure was amended and broadened on 17 November 2020, through the Royal Decree-Law 34/2020. The Spanish Directorate General for International Trade and Investments (Dirección General de Comercio Internacional e Inversiones) within the Spanish Ministry of Industry, Commerce and Tourism is the responsible authority for the new FDI screening mechanism.

Scope

From March 2020, the new FDI screening mechanism only applied to investments by residents of non-EU/EFTA Member States or by EU/EFTA Member States’ residents whose beneficial owners were non-EU/EFTA residents resulting in the investor (i) owning 10% or more of the company share capital; or (ii) being able to effectively participate in the management or control of the company. Under the new FDI screening mechanism, foreign direct investments require prior authorisation when they affect: (i) critical (physical or virtual) infrastructure; (ii) critical technologies and dual-use products; (iii) supply of critical inputs; (iv) sectors with access to sensitive information, particularly access to and ability to control personal data; and (v) the media. Investments of less than EUR 1,000,000 are temporarily exempted from FDI screening requirements. Moreover, FDI will also require prior authorization when the foreign investor (i) was directly or indirectly controlled by a non-EU/EFTA government, state-owned entity, or armed forces; (ii) had made any investments or been involved in activities affecting security, public order or public health in another EU/EFTA Member State; or (iii) had been subject to administrative or judicial action for participating in criminal or illegal activities in an EU/EFTA Member State or any other country.

From November 2020, the screening mechanism above became also applicable to investments from the EU and EFTA Member States residents owning more than 10% of the share capital, on companies listed in Spain, or on unlisted companies if the value of the investment exceeds  EUR 500 million. The mechanism is also applicable to residents of Spain, whose beneficial owners are EU or EFTA residents.

In addition, the scope of the sectors subject to the regime was also extended. First, dual use “products” was replaced with dual use “technologies”. Second, the regime included a reference to technologies that are key to industrial leadership and capability, and technologies that are developed under programs and projects of particular interest to Spain, including telecommunications, advanced materials, advanced manufacturing systems, and strategic connectivity services.

Prior to the new FDI screening mechanism implemented in response to Covid-19, Spain already had specific FDI restrictions in certain sectors. These measures continue to apply in parallel to the new FDI screening mechanism and restrict investments (i) in the national defence or weapons sector (authorisation from the Minister for Defence is required) and in civil firearm production companies (mandatory notification to the Ministry of Industry, Commerce and Tourism and the Ministry of Internal Affairs); (ii) by non-EEA residents and entities in a Spanish audio-visual license holder (supervised by the Ministry for Ecological Transition; (iii) by non-EU residents and entities in the telecommunications sector (enforced through the Registry of Operators under the Ministry of Industry, Commerce and Tourism) and (iv) in the energy and fossil fuels sector (mandatory notification to the Ministry of Ecological Transition).

Review criteria

In its assessment, the Directorate General for International Trade and Investments considers if the FDI would affect public order, public safety, or public health.

Application procedure

Foreign investments require prior authorisation from the Directorate General for International Trade and Investments. Exceptionally, the acquisition of assets or shares which grant significant influence in entities in the energy, gas and fossil fuels sectors does not require prior authorization but is subject to an ex post notification requirement. Standardised notification forms were introduced in 2016.

Filling fees

No specific fees apply.

Implementation and government practice

Under the general screening procedure, which provides among others for a hearing and opinions from several government entities, the Directorate General for International Trade and Investments submits its decision to the Council of Ministers which must issue a decision on the application. The screening can result in (i) authorisation, with or without conditions, or (ii) prohibition of the investment. For investments in sectors governed by specific legislation, sectoral rules on prior authorisation and registration apply.

Under the simplified screening procedure, the Directorate General for International Trade and Investments will directly decide on the investment. The simplified procedure applies to investments (i) with a value between EUR one million and five million or (ii) evidenced by binding agreement or offer in which the price had been fixed, determined or determinable before entry into force of Royal Decree 8/2020, i.e. 18 March 2020.

With the amendments of November 2020, the Spanish Government is now empowered to (i) establish the categories of operations and the amounts below which foreign direct investment operations will be exempt from the regime, and (ii) limit the scope of the sectors to which the regime applies.

Due process

A decision rejecting an FDI application can be challenged (i) before the authority requesting a review or (ii) before the administrative law courts.

Time limits

Under the general procedure, the Council of Ministers must issue its decision within 6 months failure of which the application is deemed to have been rejected. Under the simplified procedure approval or rejection has to be issued within 30 days from the date of the application. The failure of the Directorate General to respond within that timeframe is deemed to be a rejection of the application.

Authorised investments must be carried out within a six-month period unless the authorisation provides for a different timeframe. After that period, the investor would need to apply for a new authorisation.

Confidentiality

The FDI legislation does not provide for specific confidentiality rules. General confidentiality laws apply requiring authorities to ensure confidentiality of their processes and systems, and applications for authorisation and decisions are confidential.

Sanctions

Investments carried out without the required prior authorisation or in breach of conditions laid down by the authorisation will be considered invalid and a very serious offence which may result in a fine ranging between EUR 30,000 and the total value of the transaction coupled with public or private admonishment.

Legislative developments

Except for EU and EFTA Member States residents, the period of application of the new FDI screening mechanism remains unclear. Royal Decree 8/2020 stated that general FDI screening measures would be in place until the Council of Ministers decided otherwise, however, Royal Decree 11/2020 deleted this provision.

In accordance with the Royal Decree-Law 34/2020, the extension of the FDI screening mechanism to EU and EFTA residents/investments applies from 19 November 2020 until 30 June 2021. 

 

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.