Spanish FDI regulations provide for the need to obtain prior administrative authorization for certain FDIs in Spain that are deemed to affect public order, public safety or public health. Regulations focus on investments that operate in critical sectors or are made by certain investors, subject to certain thresholds.

Summary of major changes in 2024

• There have been no major changes in the legislation, except for the extension of the application, until December 31, 2026, of the FDI regime for EU/EFTA-based investors agreed through recent Royal Decree-law 9/2024, of December 23, when the investment's value exceeds €500 million or when they are aimed at Spanish listed companies. The extension is justified on the basis of increasing geopolitical tensions and instability, with a determined commitment to economic security, to maintain protection against public order, health and safety risks. From the 434 investment control transactions processed since January 2021, only 15 (3.5 percent) have been from EU/EFTA investors.
• According to the latest data published by the Spanish FDI Authority, the sectors or circumstances that have led to the highest number of transactions requiring authorization have been critical technologies, fundamental supplies (such as energy) and government-controlled investors.
• New trends in the M&A market are also leading to screening from an FDI perspective. This is the case regarding investments in data centers.
• Exceptionally, in 2024 the Spanish government vetoed the public takeover offer presented by the Hungarian consortium Ganz-Mavag to acquire train manufacturer Talgo, based on reports from the National Intelligence Center and National Security. Apparently, these reports pointed to links between Ganz-Mavag and Russia. The decision of the Spanish government to block the takeover was based on the need to safeguard the economic security, territorial cohesion and industrial development of the country, considering Talgo is a strategic company in the railway sector. The transaction is undergoing screening before the Spanish Supreme Court.

Who files?

The FDI application is generally filed by the legal entity that will be investing directly into the Spanish target, although the ultimate investing entity is the one that will be primarily analyzed by the FDI Authority in its reviewing process.

The filing must be made through the electronic office of the Ministry of Economy, Trade and Business.

Among other things, the entity will have to identify details of the investor and the target; the shareholding structure of the investor; the method by which the investment is being made; the amount of the investment; information on contracts with public entities and on sensitive data; and the effective participation of the investor in the target after the transaction, among other information.

There is also the option to submit a preliminary opinion—or consultation—in cases where there are doubts about whether a specific transaction is subject to the FDI regime. In this case, the form to be completed by the investor is shorter.

There is no filing fee.

Types of deals reviewed

The Spanish FDI legislation provides for the need to obtain prior administrative authorization for a number of foreign direct investments in Spain that are considered to affect public order, public safety or public health.

Foreign direct investments in Spain refer to those investments where the investor holds at least 10 per- cent of the share capital of a Spanish company or acquires control, either fully or partially, over the company as a result of a corporate transaction, legal act or business activity.

The FDI regime applies where an FDI is made by EU or EFTA residents; or where the investment is made by residents of EU or EFTA countries but with ultimate ownership belonging to residents of countries outside the EU and EFTA. Ultimate ownership is deemed to exist if these non-EU/EFTA residents directly or indirectly hold or control more than 25 percent of the equity or voting rights of the investor, or otherwise exercise direct or indirect control over the investor.

On top of the above, only investments in certain critical sectors are caught by the FDI regime, including critical infrastructures, critical and dual-use technologies, supply of fundamental inputs, and those with access to sensitive information and the media. Certain exceptions apply: Investments in Spanish companies with a turnover of less than €5 million in the past fiscal year are exempt from previous authorization, except for a few exceptions in the energy, communications and raw materials sectors.

The FDI regime is significantly broader in its application when the investor is controlled by the government of a third country outside the EU.

Investments in the defense sector are subject to their own regime and also require prior administrative authorization.

Scope of the review

The regulator's review focuses primarily on the investor's control structure—whether there is public control, its ultimate beneficiaries, what other investments it has made in Spain or other EU countries, and whether it has been subject to administrative or judicial sanctions.

When it comes to the target, the regulator will look at whether it owns infrastructures included in the National Catalogue of Strategic Infrastructures; whether it supplies a fundamental supply that is indispensable and non-replaceable (which is somehow linked to the existence of competitors who could provide the service); whether it collects personal data or data on strategic infrastructure; and whether it is subject to public contracts or public funding.

As to the transaction itself, the regulator focuses on how the transaction will be carried out, whether it will result in a change of the target's activity or control structure. and what the amount of the investment will be. Employment after the transaction is also an important point to be taken into consideration by the FDI Authority.

Review process timeline

Given the new changes introduced by the FDI Regulation, the authority must authorize or deny the transactions within a maximum period of three months. A lack of response within this period implies that the authorization is rejected. The deadline for clearing FDI requests in Spain is suspended if the competent authority requests additional information from the investor or mandatory reports from other public administrations are required. The FDI Authority benefits from the suspension possibility in cases when the three-month deadline will otherwise not be met. In practice, the average timeline for FDI approvals is two to three months.

For foreign investors who submit the questionnaire seeking a consultation, the authorities will have 30 working days to respond, and during this period, no application for authorization may be made.

In practice, the average time taken by the authority to respond to consultations is approximately one to one-and-a-half months.

In any case, the response time, both for the authorization and for the questionnaire, will depend on the volume of requests that the authority has at the time and the interest attracted by the transaction at the different sectorial ministries who must intervene in the process.

How foreign investors can protect themselves

A good form of protection for investors is to receive specific advice on each transaction, given that there is significant interpretative flexibility in the application of FDI regulations, and practices are adapting very rapidly.

It is also useful to provide the necessary information to the authority in advance, as this may avoid additional questions from the authority and speed up the response process.

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