Matej Črnilec and Špela Lovšin (Schönherr Attorneys at Law) authored this publication.

The current Slovenian FDI control regulation, effective from July 1, 2023, has already been amended twice. Despite amendments, the Ministry of the Economy, Tourism, and Sport's inconsistent interpretation of critical sectors and non-disclosure of decisions create uncertainty, complicating the assessment of notification obligations for foreign investments.

Summary of major changes in 2023

• The current FDI control regulation, introduced under the Investment Promotion Act in 2023, replaced the temporary FDI framework established by the "third anti-corona intervention law, " which was in effect until June 30, 2023. Since its enactment, the regulation has undergone two amendments.
• Initially, it was unclear whether the new FDI regime applied to branch offices. However, the 2024 amendment clarified this by redefining "corporate entity" to explicitly include (indirect) investments in branches of foreign, EU-based corporate entities, thereby expanding the scope of application.
• No additional significant changes were made to the FDI framework in 2024.

Who files?

Foreign investors are required to notify their investment if specific criteria are met.

A foreign investor is defined as an individual or an entity from a non-EU country that: intends to make or has already made a direct foreign investment in Slovenia; holds, directly or indirectly, at least 10 per- cent of the capital or voting rights in a business entity established in an EU Member State and intends to make, or has already made, a direct foreign investment in Slovenia.

The notification may also be submitted by the target company or the foreign investor's subsidiary in Slovenia.

Failure to notify within the prescribed deadline can result in fines of up to €500,000 for the foreign investor. Notably, there is no filing fee for the notification process.

The Ministry of the Economy, Tourism, and Sport is the competent authority overseeing FDI reviews.

Types of deals reviewed

The following types of transactions by foreign investors are caught by the Slovenian FDI Control Rules: direct or indirect acquisitions of at least 10 percent in share capital or voting rights in a corporate entity registered in Slovenia; and investment in tangible or intangible assets for the establishment of a new corporate entity in Slovenia whereby the foreign investor acquires, directly or indirectly, at least 10 percent in share capital or voting rights of a newly established legal entity in Slovenia.

The obligation to notify a foreign investment only applies if the transaction also concerns a "critical sector" in accordance with the Slovenian FDI Control Rules. As long as an interest of at least 10 per- cent is acquired and the transaction concerns one of the critical sectors, the filing requirement applies, even if the acquisition does not confer control.

Transactions concerning internal reorganization within a corporate group should be assessed on a case-by-case basis to determine a potential notification obligation.

Scope of the review

When assessing the potential impact of an FDI on security or public order, the ministry will consider a number of factors.

These include whether, and the extent to which, the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country through ownership structure or significant funding.

The ministry also considers any previous involvement of the foreign investor in activities affecting security or public order in an EU Member State; the likelihood of the foreign investor engaging in illegal or criminal activities; whether the foreign investor has met acquisition thresholds in the target company, such as one-third of voting rights, a 10 percent share of voting rights after a takeover bid, or at least 75 percent of total voting shares through a successful takeover bid; the presence of a market share of at least 20 percent in critical activities in Slovenia through the target company or a newly established entity; and the level of participation the foreign investor has achieved in the capital or voting rights of the target company.

Review process timeline

After the FDI notification is filed, the FDI Commission within the ministry performs a prima facie review, known as phase I. It may issue an opinion that the transaction does not fall within the scope of the Slovenian FDI Control Rules; the transaction does not raise serious concern from the perspective of the Slovenian FDI Control Rules; or the transaction raises serious concerns, in which case it proposes the commencement of a screening procedure.

The law does not specify a deadline for the phase I decision; however, general rules on administrative procedure apply, requiring the phase I decision to be issued within two months from the complete notification. The vast majority of cases are cleared in phase I.

If FDI screening proceedings—phase II—are initiated, the FDI Expert Group within the ministry must deliver an opinion within two years from the date of the transaction or the entry of the newly established legal entity in the court register. Based on the FDI Expert Group's opinion, the ministry should within an additional two months approve the transaction (with or without conditions), or prohibit the transaction.

How foreign investors can protect themselves

The regime is still relatively new, and the ministry has so far stressed on several occasions that the purpose of the law is not to discourage foreign investments, as in practice only a marginal number of notified transactions will be reviewed. However, the ministry's interpretation of critical sectors has been inconsistent in the past three years and, hence, there is no clear guidance as to which targets or business activities fall within such sectors.

Given this uncertainty and the fact that the ministry's decisions are not publicly disclosed, assessing notification obligation can be challenging. Thus, investors are encouraged to proceed with caution.

While the notification does not have suspensive effects and no standstill obligation applies, investors may—in FDI-sensitive transactions—consider including in the transaction documents a closing condition precedent related to the obtaining of FDI approval in Slovenia.

Foreign investors should also take into account that the law imposes an unusually long deadline for the completion of the phase II review procedure, if initiated. Hence, for phase II candidates' pre-alignment with the authority should be considered.

It is also important to note that the ministry may initiate the review procedure and potentially annul the transaction later on—within two years as of the conclusion of the transaction or of the registration of the establishment of a company in the Slovenian court register—if it obtains information that a foreign investor who has made an FDI in Slovenia is engaged in activities in critical business sectors, which have affected or are likely to affect the security or public order of an EU Member State or is engaged in illegal or criminal activities. However, to-date we are not aware of any case of the authority enforcing this option.

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