On November 30, 2022, the Belgian Federal State, the Flemish Region, the Walloon Region, the Brussels-Capital Region, the Flemish Community, the French Community, the German Community, the French Community Committee and the Joint Community Committee (through their respective governments and equivalent executive bodies, together the Belgian Governments), agreed on the final text of a cooperation agreement creating a single, uniform screening mechanism for foreign direct investments in Belgium (the Cooperation Agreement). The Cooperation Agreement fits within the framework created by the EU Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019 (the EU FDI Regulation).

For non-EU investors wishing to make investments in a number of strategic areas, the Cooperation Agreement sets forth an ex ante screening mechanism, which shall be carried out by the Belgian Governments, coordinated by an Interfederal Screening Commission (the ISC). The ISC shall be composed of up to three representatives of the Federal State and one representative of each of the eight Regions, Communities and Committees (together the Federated Entities) mentioned above (the "Representatives") and a chair (who shall be a representative of the Ministry of Economy but shall not participate in the deliberations). Each of the Belgian Governments shall also designate one of their members (each a Minister) who shall, in the event a formal screening procedure is opened, have the authority to take the final decision on behalf of his or her government.

The Cooperation Agreement shall enter into force once it has been approved by the federal parliament and the parliaments of all Federated Entities. It is expected that this shall be or around July 1, 2023, although this date may still be postponed. The screening mechanism shall apply to investments which are signed after the date of entry into force.

Since 2021, the Flemish Government is authorized by law to cancel or suspend any operation resulting in a foreign investor acquiring control or decision-making power in government agencies or certain legal entities entrusted with missions of public interest, if such would threaten the strategic interests of the Flemish Region or the Flemish Community. It is expected that this authorization will continue to exist in parallel with the federal screening regime implemented by the Cooperation Agreement, although it may become less relevant in practice.

Who files

The screening mechanism set forth by the Cooperation Agreement covers only direct investments (as further defined below which includes investments in foreign legal entities controlling Belgian entities) by a foreign investor, defined 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.):
  • Which has its registered seat or main activities outside the EU or
  • Whose ultimate beneficial owners have their primary residence outside the EU
  • Ultimate beneficial owners include, among other things, physical persons owning directly or indirectly 25 percent of the voting rights or exercise control through other means (e.g., a shareholders' agreement) or, in the absence of such persons, the physical persons holding senior management positions

Types of deals reviewed

The Belgian federal screening regime covers any kind of investment (including acquisitions of shares, subscription to a capital increase, and public takeover offers) in an undertaking, aimed at developing economic activities within the EU, provided that such investment meets each of the following conditions:

• It aims at establishing or maintaining lasting direct relations between the foreign investor (as defined above) and the undertaking, including, without limitation, investments which allow an effective participation in the management or control of the relevant undertaking and
• It could have negative consequences for the national security, public order or the strategic interests of the Federated Entities

Strategic interests include, among other things, safeguarding the continuity of vital processes, preventing strategic or sensitive information from falling into foreign hands, and guaranteeing strategic independence

The scope of application of the screening regime is not limited to direct investments in legal entities that are established or active in Belgium, but also includes direct investments in foreign legal entities (whether established in EU Member States or in third countries) which control an undertaking that has its registered seat or head office in Belgium, provided that the conditions set forth above are satisfied.

The conditions set forth above are considered satisfied and shall trigger a notification obligation if the envisaged investment would result in a direct or indirect, active or passive acquisition of:

• 25 percent or more of the voting rights in a Belgian entity the activities of which concern:
  • 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 crucial for the use of such infrastructure
  • Technologies and raw materials that are of essential importance to safety, including public health safety, defense and public order control, military equipment subject to 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.)

• 25 percent or more of the voting rights in a Belgian entity that: (a) is active in the biotech sector, and (b) has realized a turnover of more than €25 million in the financial year preceding the investment
  • 10 percent or more of the voting rights in a Belgian entity that: (a) is active in the biotech, energy, defense (including dual-use products), cybersecurity and electronic communication or digital infrastructure sectors, and (b) has realized a turnover of more than €100 million in the financial year preceding the investment

The Belgian Governments may, by unanimous agreement, decrease the 25 percent threshold referred to under (i) and (ii) to 10 percent, and/or increase the 10 percent threshold referred to under (iii) to 25 percent. There is no indication that such is currently contemplated.

Notification

Notifications of direct investments falling within the scope of application must be submitted by the non-EU investor to the secretary office of the ISC, supported administratively by the Federal Ministry of Economic Affairs, which will also play a coordinating role in the process. The notification must be made after signing of the agreement relating to the direct investment but before the closing thereof. Parties may also notify a draft agreement, provided that all parties confirm their intention that the final agreement shall not materially deviate from the draft.

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

The parties may not proceed with closing of the investment until approval has been obtained or is deemed obtained in accordance with the Cooperation Agreement.

The notification includes, among others, information on the foreign investor (ownership structure, including ultimate beneficiary owners, activities of the investor's group including in non-EU countries), deal value and financing of the investment.

Review process timeline

The review procedure can be broken down into two or three phases:

• The secretary office of the ISC will conduct a preliminary review upon receiving the above notification and may send requests for additional information to the parties. In addition, at the latest on the fifth day following the notification, the ISC can request formal advice to multiple relevant official instances, which are mandatory in certain cases. The pre-notification phase, which lasts until the secretary office informs the parties that it considers the notification to be complete, does not have a statutory deadline. In accordance with the EU FDI Regulation, once the notification is complete, the ISC shall inform other EU Member States and the European Commission of the notification, each of which may provide comments within 35 calendar days

• The assessment phase lasts for 40 calendar days and begins when the ISC informs the parties that the notification is deemed complete. During this phase, the ISC will conduct a high-level review of the direct investment and may request additional information, following which the deadline of 40 calendar days is suspended until all requested information has been received

  During the assessment phase, each of the Belgian Governments that is geographically concerned by the direct investment (taking into account the separation of powers between the Federal State and the regional entities) will, under coordination of the ISC, conduct its own investigation. The ISC and each of the relevant Belgian Governments may request the advice from certain federal government agencies, including the General Intelligence and Security Service (whose advice is mandatory in certain cases, e.g., when the undertaking is involved in defense-related industries). The ISC may also decide to appoint one or more experts

  During the assessment phase, each of the relevant Belgian Governments shall examine whether the direct investment could result in threats to the public order, national security or strategic interests, whereby it shall take into account the comments from other EU Member States (if any) as well as the following factors:

  • Whether the foreign investor is directly or indirectly controlled by a government of a third country through ownership or substantial financing arrangements
  • Whether the foreign investors has been involved in activities that might affect national security or the public order of a EU Member state or a third country and/or
  • Whether there is a serious risk that the foreign investor is involved in illegal or criminal activities

  If one of the relevant Belgian Governments has identified concrete indications that such a threat exist, it may request the ISC to proceed with the screening procedure. If no such threats have been identified, the direct investment shall be approved and the parties shall be informed accordingly. If no decision is made within the deadline of 40 calendar days (as may be extended in case additional information is requested), the direct investment shall be considered approved. The decision whether or not to proceed with the screening procedure is not subject to appeal

• A formal screening procedure will be initiated if one of the relevant Belgian Governments has, within the aforementioned deadline, identified concrete threats to public order, national security, or strategic interests of Belgium or the Federated Entities (as applicable)

  Any relevant Belgian Government that believes that the direct investment poses a threat to the public order, national security or strategic interests (each as defined above) may draw up a draft opinion within 14 calendar days following the opening of the screening procedure. Such term can be extended at the request of the relevant Belgian Government in light of the complexity of the matter

  The implementation of the Cooperation Agreement will have to be closely monitored

  Each draft opinion shall be provided to the foreign investor for comments. Following such comments, the ISC or the foreign investor may request an oral hearing to take place within ten calendar days following the opening of the screening procedure (during which the delay of 14 calendar days referred to above shall be suspended). If one of the relevant Belgian Governments proposes to approve the transaction subject to corrective measures, negotiations shall take place between the ISC and the foreign investors in order to agree on the binding agreement relating to such corrective measures as well as the implementation thereof. In case of negotiations, the delay of 14 calendar days shall be suspended for the one month (or longer if agreed by the foreign investor and the ISC)

  Each relevant Minister must, on the basis of the draft opinions, take a "provisional decision" as to whether the direct investment shall be rejected or approved (subject to the binding agreement in case a binding agreement has been agreed). The combination of those provisional decisions result in a joint decision of the ISC as follows:

  • A negative decision, if (i) the Minister of the Federal Government so decides (such decision requiring approval by the Council of Ministers), or (ii) the Ministers of all relevant Federated Entities so decide unanimously or
  • A positive decision (subject to the entering into the binding agreement if applicable) in all other cases

  A foreign investor may lodge an appeal against a negative decision with a specialized section of the Court of Appeals of Brussels, which shall hear the case in summary proceedings. The Court may only decide to annul a negative decision (but not replace it by a positive decision). In case of such annulment, the ISC should adopt a new decision in accordance with the above procedure. However, the Court has full powers in relation to fines (i.e., the Court can decide to annul, increase or decrease fines).

  The Cooperation Agreement also gives the ISC the option to start ex officio investigations of envisaged direct investments deemed to fall under the screening regime. The ISC does not have to inform the companies involved of such an investigation, but it can advise them to notify the envisaged direct investment. A formal procedure may be initiated in the event of non-compliance or non-cooperation.

Corrective measures

Corrective measures referred to above may include requirements related to exchange of sensitive information, security clearance of directors, reporting to Belgian authorities, protection of sensitive technologies/know-how/source codes held by the Belgian entity, continuity of supply of sensitive products/services and, in some cases, corporate or business restrictions on the foreign investor as well as divestment measures.

Penalties for non-compliance

A foreign investor may be subject to an administrative fine of up to 10% of the envisaged direct investment in the following events:

• No or incomplete data were provided during a notification or a request for information on which an opinion or a decision was then based
• Additional information is not provided within the time limit set forth in the request for information and
• The spontaneous notification of a non-notified envisaged direct investment is made within a period of 12 months following its completion or when the ISC ex officio initiates a screening procedure within a period of fewer than 12 months following the date of closing of the envisaged direct investment

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

• The investor fails to comply with the notification obligation, except in the cases expressly provided by the Cooperation Agreement
• 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 time allowed

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