David Kunák (White & Case) contributed to the development of this publication

Slovakia has recently joined other EU Member States in regulating foreign investments within its jurisdiction by adopting Act No. 497/2022 Coll., on the Screening of Foreign Investments, as amended (the FDI Act), which entered into force on March 1, 2023.

The FDI Act provides for complex regulation of foreign investments screening in Slovakia.

As outlined in the explanatory memorandum to the FDI Act, its main and fundamental objective is to provide safeguards and ensure the preservation of domestic and EU security and public order, while encouraging responsible foreign investments with no intention of restricting foreign investments in Slovakia.

Summary of major changes in 2023

• From March 1, 2023 until the end of October 2023, the ministry received eight applications for foreign investment screening with foreign investors from the following countries: Singapore (three), and Guernsey, Norway, Qatar, the United Arab Emirates and the US (one each)
• As of the end of October 2023, the ministry had issued two decisions on the approval of foreign investments and no blocking decisions or conditional approval of foreign investments were issued
• Due to the short period of time that has passed since the FDI Act entered into force, there is no established decision-making practice yet that could provide additional useful guidance for foreign investors in Slovakia

Who files?

The FDI Act stipulates that the foreign investor is responsible for applying for screening to the ministry. A foreign investor, as defined by the FDI Act, includes both legal entities having their registered seat outside of the EU and individuals who are not citizens of the EU.

Furthermore, under the FDI Act, EU citizens, as well as legal entities with their registered seat within the EU, are considered to be foreign investors, and thus responsible for filing, if they are controlled by or receive fundings from a non-EU government or if they are being controlled by an entity from a third non-EU country.

Foreign investors are responsible for submitting the application for screening to the ministry if their intended investment falls within the scope of the foreign investment as defined by the FDI Act.

Foreign investment includes any investment, regardless of the applicability of Slovak laws, as long as it directly or indirectly enables the foreign investor to: acquire a Slovak target or key assets of a Slovak target; acquire effective participation (voting rights or registered capital) in a Slovak target (10 percent in a critical foreign investment and 25 percent in a non-critical foreign investment); increase effective participation in a Slovak target (to 20 percent, 33 percent or 50 percent in case of critical foreign investment and 50 percent in case of non-critical foreign investment); or exercise control over a Slovak target.

Types of deals reviewed

The FDI Act distinguishes between critical foreign investments (CFI) and non-critical foreign investments (NCFI). Each is subject to a different screening regime.

CFIs include transactions concerning CFI target companies/assets in certain specific sectors, such as: firearms manufacturers; entities active in military technology or materials research, development or innovation; dual-use items, manufacturers or entities active in the research, development or innovation of dual-use items; entities active in the biotechnology sector; critical infrastructure operators, designated as such by the Slovak government; digital service providers; and providers of content-sharing platforms with an annual turnover exceeding €2 million.

Completion of a CFI is subject to receiving approval or conditional approval from the ministry, which makes pre-closing screening in case of a CFI mandatory.

Even though NCFIs are not subject to mandatory pre-closing screening, for the sake of clarification, foreign investors are encouraged to voluntarily request assessment by the ministry before completing their investment.

It is essential to note that the Slovak government reserves the right to initiate ex officio proceedings (undergo ex post-screening process on any foreign investment) within two years from completion of the foreign investment if there is a reasonable belief that a foreign investment had a negative impact when it was completed.

The government can also initiate proceedings if an EU Member State has made reasonable comments or the European Commission has issued an opinion of the European Commission regarding the foreign investment within the meaning of Regulation (EU)2019/452 of the European Parliament and of the Council of 19 March 2019 establishing the framework for the screening of foreign direct investments in the European Union (the EU Screening Regulation), or if there is a suspicion of circumvention of the law.

Scope of the review

The primary scope of the review is to assess whether the foreign investment possesses a potential risk resulting in a negative impact on the security and public order in Slovakia, and/or other EU Member States. Furthermore, various other factors and aspects, including information concerning the Slovak target and the foreign investor, along with any entities controlling the foreign investor or those under the foreign investor´s control are being considered as well during the screening process.

When assessing the negative effect of a foreign investment, careful consideration shall be given to whether it might affect infrastructure necessary for the administration of justice and imprisonment, access to information important in terms of security and public order, including personal data, and other infrastructure, systems or supplies whose disruption or misuse might threaten security and public order.

During the FDI screening process, the ministry cooperates with other consulting authorities, such as other ministries, the National Intelligence Agency, the Police Force, and so on.

With respect to NCFIs, based on the request of the foreign investor, the ministry conducts an assessment as to whether there is a risk of negative impact of the foreign investment. If no risk of negative impact has been identified, the ministry shall issue a confirmation in that respect to the foreign investor and the Slovak target. However, if the ministry identifies a risk of negative impact, it shall initiate a full-scope screening process of the NCFI, as in the case of CFIs.

Review process timeline

The mandatory screening process will only commence once the ministry considers the screening application filed by the foreign investor to be complete. The FDI Act stipulates that the time limit for the decision on the FDI does not run while the foreign investor or the Slovak target is supplementing or correcting information, documents or explanation requested by the ministry.

The screening procedure with respect to CFIs takes approximately three months.

If the ministry does not issue its decision on the approval (or conditional approval) of the CFI, or if it does not submit its opinion on the CFI's negative impact to the Slovak government within 130 days of the commencement of the mandatory screening procedure, the ministry will be deemed to have approved the CFI.

Should the ministry decide to reject the CFI, the Slovak government may veto this decision, ultimately approving the CFI.

In case of an NCFI, the process of assessment as to whether there is a risk of negative impact of the foreign investment usually takes up to 45 days. In addition, if the ministry does not initiate the full-scope screening procedure within 45 days from receiving the assessment request, it shall be deemed that no risk of negative impact of the NCFI has been identified.

How foreign investors can protect themselves

The screening process does not stipulate strict deadlines for certain steps, such as the assessment of the completeness of the application (which is subject to the discretion of the ministry), the discussion between the ministry and the foreign investor on the comments/objections of the foreign investor to the draft opinion issued by the ministry, or the decision of the Slovak government on the ministry's dismissive opinion. In practice, this may in fact result in an extension of the time necessary for the approval of foreign investment on top of the statutory deadline. It is advisable for foreign investors to duly prepare for the process, monitor it closely and proactively communicate with the authorities to be able to better foresee and manage the entire screening process and its timing.

Additional useful information may be found at the ministry's website, where foreign investors have access to valuable and practical information about the FDI Act and screening procedure, which are also published in English. Although the FDI Act does not explicitly provide for this option, the foreign investor may also informally consult with the ministry via an email (fdiscreening@mhsr.sk), in order to obtain initial information about whether the contemplated foreign investment is subject to mandatory FDI screening.

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