Jesper Fabricius and Rikke Sonne (Accura Advokatpartnerselskab) authored this publication

The Danish Investment Screening Act (DISA) applies to foreign direct investments and special financial agreements (certain specified supply, operating, service, and research and development agreements). The DISA also applies to certain contracts relating to the Danish energy island in the North Sea. The DISA is administered by the Danish Business Authority (DBA).

Summary of the major changes in 2023

• In 2023, the Danish Minister of Industry, Business and Financial Affairs blocked a foreign investment in a Danish company under the DISA for the first time, although the investment had been approved by regulators in Germany, the UK and the US
• In 2023, the DISA was amended to introduce a two-phased approval procedure in line with what is seen in other countries and in many merger control regulations. At the same time, contracts relating to the Danish energy island in the North Sea were expressly included in the scope of the DISA regardless of ownership of the supplier/contractor/investor in question

Who files?

FDIs and certain special financial agreements are investments/agreements that are made or entered into by the following foreign investors and service providers: non-Danish citizens; companies not domiciled in Denmark, even if the company has a permanent establishment in Denmark; companies domiciled in Denmark if the company is a subsidiary or a branch of a company not domiciled in Denmark; or companies domiciled in Denmark if a non-Danish citizen or a company not domiciled in Denmark has control over or significant influence on it.

The filing obligation concerning contracts relating to the energy island in the North Sea applies to all tenderers and contracting (and subcontracting) parties.

The filing obligation rests with the foreign investor, and filings must be made digitally to the DBA using the DBA's designated application forms.

The filing must include detailed information on the investment or agreement, the foreign investor and the Danish target company, including ownership structure charts of the foreign investor and of the Danish target company before and after the investment or agreement.

An EU notification form must be submitted for investments going into phase 2.

Types of deals reviewed

The filing obligation only relates to foreign direct investments in and special financial agreements with Danish entities operating within "particularly sensitive sectors or activities." These sectors/activities include: the defense sector; IT security functions or processing of classified information; production of dual-use items; critical technology; and critical infrastructure. 
Filing to the DBA is mandatory if the foreign investor directly or indirectly acquires at least 10 percent of the shares or equivalent control by other means. The obligation applies to all foreign investors, even in the EU or European Free Trade Association (EFTA).

For special financial agreements, a filing obligation only applies to foreign investors domiciled outside the EU/EFTA or under significant influence from non-EU/EFTA entities or citizens. Significant influence is defined as at least 25 percent of the shares or equivalent control by other means held by non-EU/EFTA entities or citizens.

The DBA may intervene even in investments in or special financial agreements with entities outside the particularly sensitive sectors or activities if the investment or agreement nevertheless poses a threat to national security or public order. This only applies if the foreign investor is domiciled outside the EU/EFTA or under significant influence from non-EU/EFTA entities or citizens. The risk of intervention may be avoided by a voluntary filing to and approval from the DBA.

Moreover, contracts relating to the Danish energy island in the North Sea are also subject to a filing obligation.

Scope of the review

When assessing whether a foreign direct investment or a special financial agreement may constitute a threat to national security or public order, the DBA will take all relevant circumstances and available information into account.

When looking at the Danish target, the DBA assesses whether it operates within or influences the critical infrastructure sector; whether it processes or has access to classified information or sensitive personal data; its position on the Danish market, including opportunities for substitution; whether the target belongs to the defense industry, produces dual-use items or other critical technology of importance to national security or public order; and whether it deals with supply of critical raw materials, including energy and food safety.

The DBA will also examine: whether the foreign investor is directly or indirectly controlled by a foreign government, including foreign government agencies or armed forces of a third country, including through ownership or substantial financing; whether the foreign investor is or has been involved in activities affecting security or public order in an EU Member State or in other friendly and allied countries; whether there is a serious risk that the foreign investor will engage in or has relationships to illegal or criminal activities significant to national security or public order; and whether there are indications that the foreign investor is deliberately trying to circumvent the screening rules, for example through the use of front companies.

The DBA will consult other relevant Danish authorities, EU Member States and the EU Commission when making the assessment.

Review process timeline

The review process timeline for Danish FDI filings is divided into two phases.

Phase 1 begins once the DBA declares the foreign investor's application for approval to be complete, and it must be concluded within 45 calendar days. A phase 1 screening may result in approval or opening of phase 2 proceedings.

If the DBA cannot approve the transaction within the prescribed deadline for phase 1 but sees a need for further investigation/information, the DBA will initiate phase 2 proceedings. Phase 2 will not start until the DBA has declared that all the requested information has been submitted.

Phase 2 must be concluded within 125 calendar days from when the in-depth investigation was initiated. A phase 2 screening may result in approval; a decision to negotiate terms with the foreign investor; or the application being submitted to the Minister of Industry, Business and Financial Affairs for a final decision. There is no formal deadline for the Minister's review.

How foreign investors can protect themselves

The scope of the DISA is very broad. In particular, the assessment of whether a Danish target may be considered to operate within the particularly sensitive sectors and activities requires a careful assessment of the target's business activities.

A pre-screening option is available, allowing a foreign investor to get a fast-track assessment from the DBA as to whether a Danish entity operates within the sensitive sectors of critical technology or critical infrastructure. Pre-screening applications must be submitted digitally to the DBA, and a response from the DBA can generally be expected within two to three weeks. Pre-screening can only determine whether a Danish entity falls within the sensitive sectors of critical technology or critical infrastructure, not whether it falls into any of the other sensitive sectors and activities. The DBA tends to request a full filing if it cannot easily determine that the Danish entity is not operating in critical technology or critical infrastructure.

The DISA also applies to a foreign investor's investment in targets outside Denmark if the target has a Danish subsidiary operating within the particularly sensitive sectors and activities.

The DBA has a duty to offer reasonable guidance to citizens and businesses. Although the scope of this duty is relatively opaque, the DBA is generally quite forthcoming in rendering informal guidance on the application of the DISA. If circumstances are sensitive, however, very little upfront guidance can be expected.

There are no fines for not complying with the DISA. As regards a foreign investment in shares, the main sanction is that the Danish authorities may request the Foreign Investor to dispose of its investment or, in the alternative, repeal any voting rights on the shares. Depending on the circumstances, this could potentially end up in the Danish target being dissolved. As regards special financial agreements, these may eventually become null and void.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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