Luca Amato of Fenech & Fenech Advocates authored this publication

Malta's FDI regime regulates certain FDIs made or planned to be made in Malta. The regime covers greenfield investments and acquisitions of companies operating in certain key areas, which would result in non-EU investors having direct or indirect ownership, or a controlling interest of more than 10 per- cent, in such companies.

Summary of major changes in 2024

• No major changes occurred in 2024.
• The National Foreign Direct Investment Screening Office (NFDISO) continues to adopt a pragmatic and responsive approach to notifications, and is generally forthcoming when investments are subjected to screening.

Who files?

The NFDISO Act obliges foreign investors and all persons involved in relevant FDIs to notify the NFDISO regarding the investment and to provide certain information regarding the entity carrying out the investment.

"Foreign investor" is defined as a natural person or an undertaking of a third (non-EU) country intending to make or having made an FDI in Malta.

The information to be provided includes the ownership structure and ultimate beneficial ownership of the investor, the value of the investment, the products, services and business operations of the foreign investor, and the source of funds for the investment. Additionally, the NFDISO may request any other information as it may reasonably require to ascertain whether a transaction ought to be screened.

The notification is made via NFDISO's online portal and must be signed by a company director of the foreign investor and, where applicable, the relevant advisory firm or agent assisting with the notification. Contact details of the director of the target must also be provided.

Types of deals reviewed

The Act covers certain FDIs made or planned to be made in Malta. An FDI is defined as an investment of any kind by a foreign investor aiming to establish or maintain lasting and direct links to carry on an economic activity in Malta, including investments that enable effective participation in the management or control of a company based in Malta.

Mandatory notification of FDIs is required by a foreign investor where an investment that affects any of the factors or activities mentioned in the schedule of the Act is planned to be carried out in the future. It is also required where, having carried out an investment in Malta, the business activity of a foreign investor is changing to one that affects any of the factors or activities mentioned in the schedule of the Act.

Notification is also required where, having carried out an investment in Malta that affects any of the factors or activities mentioned in the schedule, the ownership structure of an investor changes such that at least 10 percent becomes owned or controlled by foreign investors; and where, having carried out an investment, the direct or indirect controlling interest of a company or a group changes and passes onto a foreign investor.

Scope of the review

The factors and activities mentioned in the Act that trigger a notification requirement are a direct transposition of the factors and activities contained in article 4 of the EU Regulation on FDI Screening (2019/452).

The first category is critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure.

The second category is critical technologies and dual-use items as defined in point 1 of article 2 of the European Council Regulation (EC) No. 428/2009 (15), including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies.

Notification is also required for activities relating to the supply of critical inputs, including energy or raw materials, as well as food security; access to sensitive information, including personal data, or the ability to control such information; and the freedom and pluralism of the media.

The factors to be considered are: whether the foreign investor is directly or indirectly controlled by the government of a third country, including state bodies or armed forces, 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.

Where, after considering the above activities and factors, the NFDISO concludes that the FDI affects the security or public order of Malta, it may condition, prohibit or unwind such an investment, and it must inform the foreign investor in writing of its decision. The notification of the decision includes the NFDISO's reasoning and justification, and the investor is not entitled to claim any compensation or reimbursement.

If the NFDISO determines that an investment should be subjected to one or more conditions, it shall permit the foreign investor to take all necessary measures in order to satisfy the said conditions within a reasonable time period. Should the investor fail to satisfy these within the prescribed time period, the NFDISO shall prohibit or unwind the investment.

Similarly, if an investment is declared unwound, the NFDISO shall permit the foreign investor to reverse or modify the investment within a reasonable time period. Failure to do so within the prescribed time period would entitle the NFDISO to commence judicial proceedings before the Civil Court for the unwinding of the investment.

Review process timeline

The NFDISO shall determine within five days whether the investment will be subject to screening. In reaching its decision, the NFDISO will consider whether the investment may affect the security or public order of Malta on the basis of the aforementioned activities and factors. In making its assessment, the NFDISO may request any necessary additional information from the foreign investor and may seek clarifications and explanations.

Where the NFDISO concludes that the FDI shall not be subject to screening, it shall inform the foreign investor within five business days from the date of its decision. If the NFDISO concludes that the FDI should be subject to screening, it should inform the foreign investor within five business days from the date of its decision, and trigger the cooperation mechanism under the EU FDI Screening Regulation. Within 60 calendar days, the NFDISO must also determine whether the FDI could affect the security or public order of Malta.

The NFDISO is also empowered by law to impose administrative penalties ranging from not less than €1,000 for failure to provide information, to not more than €100,000 for providing incorrect, inaccurate or incomplete information.

Appeals to any decision of the NFDISO or the imposition of administrative penalties are allowed by bringing an action before the Administrative Review Tribunal.

How foreign investors can protect themselves

Due to the broad wording of the law, the Act covers a substantial number of transactions, particularly in the context of the notification requirement. The activities mentioned in the legislation are drafted in a broad manner, particularly under limb, which covers sectors ranging from energy and health, to more commonplace industries such as media, communications and data processing or storage.

Prudent foreign investors would do well to take a cautious approach and notify the NFDISO whenever an investment is planned in a Maltese business that operates in the relevant sectors. Maltese law does not outline a specific point when the investment needs to be notified. In practice, it makes sense to notify the NFDISO whenever an investment is reliably deemed to occur, such as the period immediately following the signature of a share purchase agreement. Indeed, it is nowadays commonplace to include the obtaining of regulatory consent by the NFDISO as a condition precedent to completion in such agreements.

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