In Belgium, the screening of foreign direct investments is carried out by the federal and regional governments (depending on sector and location of the target company), under the coordination of the Interfederal Screening Commission (ISC).

Summary of major changes in 2024

On April 4, 2024, the ISC issued new draft guidelines on the scope of the screening mechanism and the procedure to be followed. The guidelines provide guidance on certain questions left open by the legislator and by the previous draft guidelines issued on June 30, 2023, but still provide very limited guidance on the scope of activities. They will likely be updated in the future, as the ISC gradually reviews more cases.

On September 30, 2024, the first annual report covering the first year of the Belgian screening mechanism was published. Between July I, 2023 and June 30, 2024, 68 notifications were received, including one as a result of an ex officio procedure. At the date of the report, 53 investments were authorized, 15 case were still pending and no investments had been blocked. The ISC opened a formal screening procedure in only 7 percent of cases.

The top-five most important sectors were data (15.1 percent of notifications), health (15.1 percent), digital infrastructure (11.6 percent), transport (10.5 percent) and electronic communication (8.1 percent). A majority (42.3 percent) of notified transactions concerned ultimate beneficial owners established in the US, whereas ultimate beneficial owners established in the UK and China respectively made up 25.7 percent and 5.4 percent of the notifications. 

Who files?

The foreign investor must notify the investment that falls within the scope of the secretary's office of the ISC. For the purposes of the screening mechanism, the following persons are considered foreign investors: physical persons with their primary residence outside the EU; undertakings (including states, public and private companies, associations, foundations, and so on) with their registered office or main activities outside the EU; or undertakings which have at least one ultimate beneficial owner (UBO) with a primary residence outside the EU.

In light of the above, investors based in the UK or EFTA will fall under the definition of foreign investors. The same goes for Belgian undertakings that have a UBO residing outside the EU, even if the UBO is a Belgian citizen.

The notification must be made after signing but before closing of the transaction. The notification requirement is both mandatory and suspensive, which means the transaction cannot be closed until clearance has been obtained. Failure to comply with this obligation may give rise to an administrative fine imposed on the foreign investor, ranging from 10 to 30 percent of the value of the investment in question, depending on the circumstances.

Types of deals reviewed

The screening mechanism covers any type of investment, including share acquisitions, subscriptions to capital increases and public takeover offers, in each case to the extent that it results in a direct or indirect, active or passive acquisition of a certain percentage of voting rights in a Belgian business operating in one of the sensitive sectors covered by the Cooperation Agreement.

Greenfield investments are excluded from the scope of the screening mechanism. Asset deals however may fall within the scope of the screening mechanism if they result in a change of control as defined in the Cooperation Agreement. Similarly, the latest version of the guidelines clarifies that the sale of a “division” of a company must be notified if the activities carried out by the division fall within the scope of the regime.

Scope of the review

The screening mechanism covers investments resulting in a direct or indirect acquisition of 25 percent or more of the voting rights in a Belgian business, active in one of a number of areas.

These areas include 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.

They also include 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.

Investments in the supply of critical inputs, including energy, raw materials and food security; access to sensitive information (for example, relating to Belgium's defense and strategic interests), as well as personal data or the possibility to control such data; private security (such as monitoring and protection of persons and goods); and freedom and pluralism of the media (including news outlets, broadcasting services, newspapers) are also covered by the screening mechanism.

The mechanism also covers investments resulting in a direct or indirect acquisition of 25 percent or more of the voting rights in a Belgian business that is active in the biotech sector and has realized a turnover of more than €25 million during the financial year preceding the investment; or 10 percent or more of the voting rights in a Belgian business that is active in the energy, defense (including dual-use products), cybersecurity and electronic communication or digital infrastructure sectors and has realized a turnover of more than €100 million in the financial year preceding the investment.

To date, little to no additional guidance has been provided regarding the interpretation of the relevant sectors and activities.

Review process timeline

The screening process, which will only commence once the notification file is deemed complete by the secretary's office, is carried out in two main phases.

During the initial assessment phase, the federal and regional governments (each to the extent concerned by the investment) will assess whether the investment could potentially result in threats to the public order, national security or strategic interests of Belgium or the relevant region. In principle, the decision must be taken within 30 calendar days following receipt of the complete notification. However, this period may be suspended and thus extended in case additional information is requested.

If one of the relevant governments considers that the investment presents a potential risk, a formal screening procedure is carried out. During this second phase, the relevant governments carry out a more detailed risk analysis of the investment in a span of 28 days, subject to possible suspensions and extensions.

Each government that believes a risk exists draws up a draft report, which is provided to the foreign investor for comments and may be the subject of an oral hearing. Following the end of the review period, each government has six calendar days to adopt a decision.

The investment is considered approved unless the federal government (acting alone) or all relevant regional governments (acting together) decide to reject the transaction.  

Clearance may be subject to corrective measures. These could include: the establishment of a code of conduct for the exchange of sensitive information; the appointment of compliance officers responsible for handling sensitive information; installing a liaison officer or security council within the undertaking providing access, or be able to regulate the transmission of information and report infringements to the competent authorities.

Other measures could include requiring that certain technology, source code or know-how be given into the custody of a third party in Belgium and only be (temporarily) made available in the event of acute risks to certain vital processes or security interests; imposing an update obligation on undertakings to notify transactions to the authorities; bundling and housing certain vital processes in Belgium or services to the Belgian authorities in a separate subsidiary; limiting the investment percentage or certifying all shares; or requiring guarantees of continuity of certain processes or delivery of services and goods for a specified period with prior notification and consultation if the company decides to cease certain activities.

In case of a negative decision, the foreign investor may lodge an appeal with the Court of Appeals of Brussels. The Court may decide to annul the decision but may not replace it by a positive decision. In the case of annulment, the ISC will be called upon to take a new decision in accordance with the above-mentioned procedure.              

How can foreign investors protect themselves?

The scope of the screening mechanism is broad, and the sensitive sectors that it covers are not precisely described. With time, as the guidelines are updated and precedents are established, investors will have a better view of which types of investments effectively fall within the ambit of the screening mechanism.

In the meantime, the ISC recommends notifying a transaction if it is uncertain whether it falls within the scope of the screening mechanism, to be on the safe side. This is to avoid an ex officio investigation, which could result in penalties of up to 30 percent of the transaction amount for failure to notify the transaction, as well as legal uncertainty about the transaction, if it had already closed.

If a contemplated transaction falls within the scope of the screening mechanism, parties should ensure that this is accounted for in the transaction documents, including condition precedent, cooperation undertaking, and so on. In doing so, they should also carefully review the screening timeline.

Although the process should normally not take more than two or three months according to the ISC, it could be delayed due to certain circumstances, such as requests for more specific information on the investment, or delays in the cooperation and discussions between the various authorities involved in the review. This should be considered, for instance, when agreeing on a long-stop date.

As noted, a transaction falling within scope cannot be closed until clearance has been obtained. It is therefore recommended that foreign investors start preparing their file well before signing so that they are ready to notify the transaction immediately following signing. In certain cases, it is permitted to proceed with the notification based on a draft agreement, provided that all parties involved confirm that they have the intention of entering into an agreement that does not materially deviate from the draft agreement.

To avoid delays, and although the ISC can request further information, it is essential that the initial notification includes at a minimum all information required by law, including: the ownership structure of the foreign investor and of the target; the approximate value of the investment and the manner in which this value was determined; the products, services and business operations of the foreign investor and its controlling entities, including entities under their control and of the target; Member States of the EU and third countries in which the foreign investor and its controlling entities and the target conduct relevant business activities; the financing of the investment and its source; and the date or expected date of completion of the investment.

Foreign investors who fear that their investment is at risk of not being cleared may want to start working on a contingency plan. Indeed, if one of the competent governments takes the view that the investment would result in threats to the public order, national security or strategic interests, it may approve the transaction subject to corrective measures to be agreed with the relevant investor as illustrated above.

Depending on the circumstances, it may be useful for a foreign investor to carry out a feasibility study of certain of such measures and potentially start preparing for their implementation. This should speed up the negotiations with the competent government and the process of obtaining clearance. 

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