Johannes Barbist and Regina Kröll (Binder Grösswang) authored this publication

The Austrian investment Control Act (Investitionskontrollgesetz, ICA) entered into force on July 25, 2020 and applies to foreign direct investments. Proceedings under the ICA are administered by the Austrian Federal Minister for Labor and Economy (Bundesminister für Arbeit und Wirtschaft, BMAW). Since its introduction, the Austrian FDI regime has had a significant impact, as shown by the high number of cases. Every year, approximately 90 national investment control procedures are completed.

Summary of major changes in 2024

No changes were made to the ICA in the course of 2024.

Who files?

The Austrian FDI regime applies to foreign investors: both natural and legal persons who are not citizens of or do not have their seat or headquarters in the EU, the EEA or Switzerland.

The primary responsibility to submit an application for clearance under the ICA rests with the acquirer. In order to determine whether an investor qualifies as foreign within the meaning of the ICA, the BMAW looks beyond the direct acquirer and its ultimate beneficial owner (UBO). Any non-EU, non-EEA or non-Swiss entities or persons in the vertical chain may result in the investor being deemed a foreign investor.

In other words, while the direct acquirer may not be considered foreign because it is EU, EEA or Switzerland-based, a foreign investment may still occur where an entity at any level in the ownership structure or the UBO is a non-EU, non-EEA or non-Swiss entity or person.

In order to submit a filing and for formal communication with the BMAW, a foreign investor must notify an authorized recipient in Austria. The Austrian target has a secondary obligation to notify the BMAW if the investor fails to submit an application for clearance of a notifiable transaction.

Types of deals reviewed

For an investment to trigger Austrian FDI control, referred to as a “relevant investment”, the following conditions all have to be met.

Firstly, the investment is made by a foreign investor. There is no broad exemption for companies which are publicly listed in the EU, EEA or Switzerland. Based on a decision by the BMAW, the foreign shareholders of a publicly listed company need not be taken into account, provided that they do not play any active role in the transaction and have not entered into any kind of agreement on a shareholder level that points toward a joint acquisition of the Austrian target or a joint exercise of voting rights, directly or indirectly, over the Austrian target.

The target must be a company or business in Austria pursuing a commercial activity that may pose a threat to security or public order, including crisis prevention and services of public interest, within the meaning of articles 52 and 65 of the Treaty on the Functioning of the EU.

Additionally, the investment must concern: the direct or indirect acquisition of an Austrian business or legal entity; material parts of an Austrian business resulting in the acquisition of a controlling influence over such parts of an Austrian business; a shareholding where at least 10 percent of the voting rights (if the target is active in a highly sensitive sector) or 25 percent of the voting rights (if the target is active in a “normal” sensitive sector) is reached or exceeded; and there must be controlling influence over an Austrian business or legal entity.

The ICA does not apply to greenfield investments or the acquisition of mere branch offices or material parts thereof.

Furthermore, clearance under the ICA is not required if the target is a micro-enterprise. A micro-enterprise is defined as an enterprise that employs fewer than ten persons, and whose annual turnover or annual balance sheet total does not exceed the threshold of €2 million.

Scope of the review

The scope of the Austrian FDI regime is very wide, and its interpretation by the BMAW arguably even wider, in particular in regard to the sectors considered sensitive.

The ICA distinguishes between particularly sensitive sectors as set out in part 1 of the annex to the ICA, and normal sensitive sectors, set out in part 2 of the annex.

Particularly sensitive sectors include: defense goods and technologies; operation of critical energy infrastructure and operation of critical digital infrastructure, in particular 5G infrastructure, water and operating systems that guarantee the data sovereignty of the Republic of Austria. If an investment concerns a particularly sensitive sector, the relevant threshold of voting shares is 10 percent.

Normal sensitive sectors include: critical infrastructure, including information technology, health, data processing and storage; critical technologies and dual-use goods, including artificial intelligence, robotics and semiconductors; security of supply of critical resources, including energy and food; and access to and the ability to control sensitive information, including personal data. If an investment concerns a normal sensitive sector, the relevant threshold of voting shares is 25 percent.

While the term “critical infrastructures, technologies and resources” is defined in the annex to the ICA, the sectors explicitly listed within the respective categories of critical infrastructures, critical technologies or critical resources are intrinsically considered to be critical. The degree of criticality is therefore not part of the jurisdictional assessment as to whether an investment is notifiable to the BMAW.

Whether an investment may pose a risk to security or public order is part of the material assessment of the BMAW. In assessing this risk, the BMAW mainly focuses on the following two factors.

The first is investor-related: whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces of a third country, including through ownership structure or significant funding; whether the foreign investor has already been involved in activities affecting security or public order in an EU Member State; or whether there is a serious risk that the foreign investor engages in illegal or criminal activities.

The second factor is the effect of the investment in the sectors listed in the annex to the ICA. In this context, the BMAW looks at the nature and scope of the Austrian target’s activities, including the products and services offered, the position on the market, customers, competitors and substitute products.

The BMAW’s material assessment is not limited to key national security sectors—for example, defense or energy—but has a much broader focus, taking into consideration security of supply in a wide variety of sectors. Due to the long list of sensitive sectors and the broad categories, a vast number of investments is subject to the ICA and subject to a requirement to submit an application for approval.

Internal restructurings are not exempted and therefore, in principle, caught by the ICA.

A notifiable relevant investment may only be implemented following approval by the BMAW. As long as FDI clearance has not been granted, a notifiable relevant investment—the underlying transaction agreement—is deemed to have been concluded subject to the condition precedent that approval is granted.

A notifiable relevant investment that is carried out without FDI clearance is void under civil law until FDI clearance has been obtained.

If the BMAW becomes aware of a notifiable relevant investment for which the foreign investor has not applied for FDI approval, the foreign investor is requested to submit an application within three business days from receiving notice from the BMAW. If no such application is submitted on time, the BMAW has to initiate an official approval procedure on its own account and inform the foreign investor accordingly. The BMAW often consults the Austrian target to check the relevance and notifiability of a transaction under the Austrian FDI regime.

Under the ICA, the following outcomes are possible. In phase 1, there could be a decree that no approval procedure will be initiated because such procedure would be contrary to obligations under EU or public international law; a decree clearing the transaction; or approval by operation of law (legal fiction) in phase 1 after expiry of the one-month period at the national level.

In phase 2, the possible outcomes are a decree clearing the transaction; a decree clearing the transaction subject to commitments, although the BMAW may impose commitments unilaterally; a decree prohibiting the transaction; or approval by operation of law (legal fiction) in phase 2 after expiry of the two-month period at the national level.

Review process timeline

FDI proceedings in Austria take on average two-and-a-half to three months and may take up to five-and-a-half to six months.

Under the Austrian FDI regime, the EU cooperation mechanism is a mandatory step before national proceedings are initiated. Phase 0 takes 35 calendar days on average, but may take considerably longer in case of comments or questions from the European Commission or other member states, which stop the clock. This does not include the time the BMAW takes for notifying the European Commission that a foreign direct investment within the meaning of the ICA is being made in Austria, which may take up to ten business days.

Phase 1, national proceedings, takes one month and starts upon conclusion of the EU cooperation mechanism.

Phase 2, in-depth examination, takes two months. Phase 2 proceedings are only initiated where the BMAW sees the need for further clarification or has substantive concerns.

Requests for information in phase 1 and phase 2 do not stop the clock. Usually, the BMAW uses the review periods close to the maximum allowed.

How foreign investors can protect themselves

Foreign investors should start to think about FDI early on in the transaction planning process, and check whether the Austrian target is a branch office or qualifies as a micro-enterprise and may therefore be excluded from Austrian FDI review.

They should perform a thorough case-by-case assessment of the FDI risk in Austria. The BMAW’s decisions are not published, and no guidance on the interpretation or implementation of the ICA is publicly available. Furthermore, there is no formal pre-screening option available, for example, to determine whether the activities of an Austrian target company are sensitive within the meaning of the ICA.

While the BMAW is generally quite forthcoming and very responsive, the authority holds that any alignment before submission of the application is not “necessary or advisable.” A case-by-case analysis that also takes the BMAW’s administrative practice into account is therefore crucial.

Investors should pay attention to internal restructurings. Internal restructurings are not exempted under the ICA and may be notifiable. The BMAW promotes a case-by-case analysis to determine the notifiability of internal restructurings. As a result, no clear pattern of non-notifiable internal restructurings has emerged based on the BMAW’s administrative practice so far.

Investors should bear in mind that it is currently not clear whether assets of an Austrian company located outside of Austria come within the ambit of the Austrian FDI regime.

The “domino effect” should be considered. FDI authorities across the EU obtain information about planned investments out of the EU cooperation mechanism and from other public sources, such as websites of merger control authorities. Some member states, including Austria, submit every application to the EU cooperation mechanism. A multijurisdictional FDI analysis and filing strategy is key.

Investors should also factor in the FDI risk: a prohibition or the imposition of economically unfavorable commitments in the contractual framework, such as CP or a long-stop date.

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