The Swedish FDI Act was implemented in December 2023 and has since provided for screening of investments in so-called protection-worthy businesses, to avoid foreign direct investments that will negatively impact Sweden's national security, public order or public safety. The screening is administrated by the Inspectorate of Strategic Products (Inspektionen för Strategiska Produkter, ISP), and all transactions filed to-date have been approved (some with conditions).

Summary of major changes in 2024

• The Swedish FDI Act (Lag om granskning av utländska direktinvesteringar), requiring investments in protection-worthy businesses to be notified to the Swedish authorities, has now applied for more than a year. No major changes to the legislation have occurred during 2024.
• In its first year of application, approximately 1,200 investments were filed, and the vast majority (about 98 percent) were approved in the first phase. An extended review was initiated in approximately 2 percent of the submitted filings, and no investments were prohibited—but some were approved with conditions.
• The Swedish Civil Contingencies Agency (Myndigheten för samhällsskydd och beredskap) has continuously updated the guidelines with regard to activities covered by the scope of the Swedish FDI Act, and it is fair to anticipate additional updates in the future.

Who files?

The filing obligation lies with the investor: the legal or natural person carrying out a transaction or otherwise acquiring influence over a protection-worthy business that falls within the scope of the Swedish FDI Act. In general, the investor will be the actual person acquiring the business. For limited liability companies (aktiebolag), the investor will be the person that is to be registered as the owner in the share register of the target company when the investment is completed.

The filing is to be submitted to the ISP. The filing must be made, and approval must be obtained, prior to the closing of an acquisition. It should be noted that if a filing has not been submitted despite there being an obligation to do so, the ISP may issue a fine and decide to review the investment ex officio.

Although the filing obligation lies with the investor, the target company has an obligation to notify the investor that the target company assesses that its business is covered by the Swedish FDI Act, and that the investor accordingly has an obligation to file.

Types of deals reviewed

The scope of the Swedish FDI Act encompasses investments pertaining to so-called "protection-worthy activities" (skyddsvärda verksamheter). The Swedish FDI Act sets out an exhaustive list of seven types of activities that are to be considered protection-worthy: essential services; security-sensitive activities; activities relating to critical raw materials or metals, or minerals of strategic importance for Sweden's supply; activities relating to large-scale processing of sensitive personal data or location data; activities relating to military equipment; activities relating to dual-use items; and activities relating to emerging technologies or other strategic protection-worthy technologies.

Supplementary guidelines have been published by certain coordination authorities, specifying the types of businesses considered protection-worthy within the seven types of activities. These cover a wide range of businesses, including activities within sectors relating to infrastructure, electricity, healthcare, transportation, information technology, finance, construction, trade and manufacturing.

Scope of the review

Any type of investment in a protection-worthy business must be filed to the ISP if the investor, directly or indirectly, has gained control or influence, or increased its control or influence, of such a business over certain thresholds.

Specifically, an investment carried out in an existing company resulting in the investor holding or exceeding 10, 20, 30, 50, 65 or 90 percent of the votes in the company, as well as an investment resulting in the investor holding 10 percent or more of the votes in a new venture intending to set up a business considered protection-worthy, entail a filing obligation.

A filing obligation also applies on asset deals, investments in a partnership, sole proprietorship, a foundation or a private business activity, and other types of transactions where the investor receives direct or indirect influence over a protection-worthy business. This includes investments resulting in the investor obtaining power to appoint board members or having material veto rights.

There are limited exceptions to the filing obligation, and it should be specifically noted that there is no general exception for investments in listed companies.

The filing obligation applies to all investors, both foreign and domestic. However, only investments made by foreign investors may be scrutinized. A foreign investor is defined as: a natural person with citizenship from a state outside the EU; a legal entity with its registered office in a non-EU country; a legal entity that is directly or indirectly owned or controlled by a state outside the EU; or a legal person directly or indirectly owned or controlled by a legal person established in a state outside the EU or by a natural person having the nationality of such a state.

Review process timeline

Within 25 business days from the submission of a complete filing, the ISP will issue a decision to either approve the investment or initiate a further review. An investment by a non-foreign investor, as well as an investment by a foreign investor that does not have a detrimental effect on Sweden's national security, public order or public safety, is left without action.

If an investment is made by a foreign investor, and it cannot be ruled out that the investment may have a detrimental effect on Sweden's national security, public order or public safety, then the ISP has three additional months, with a possible extension of another three months, to further review the investment. The ISP will then issue an approval, a prohibition or an approval subject to certain conditions.

A breach against the Swedish FDI Act may result in a fine for the investor or the target company amounting to between SEK 25,000 (US$2,200) and SEK 100,000,000 (US$8.9 million). To-date, one fine of SEK 200,000 (US$18,000) has been issued for failure to file a transaction falling within the scope of the law. An investment in a non-listed company conducted in violation of the Swedish FDI Act may be nullified, whereas an investment in a listed company may only lead to an order to divest the relevant shares within a certain time.

How foreign investors can protect themselves

The scope of the Swedish FDI Act is still, despite the updates made to the supplementary guidelines during 2024, very broad, and there is no clear definition of what constitutes a protection-worthy activity. The legislator has expressed an intention to keep the legislation broad and flexible to cover for changes in the needs of protection of the society. A case-by-case assessment of the target company is therefore recommended in every deal.

An investor who aims to invest in a protection-worthy business should be prepared to disclose information about its ownership structure, and about the target company's business, including services or products offered, assets held, customers, personal data processed, and so on. The ISP may also ask for additional information beyond the initial request, requiring the investor to be responsive in their communications with the authority. The ISP respects requests for confidentiality with regard to information about the investor and the transaction.

Responsibility for the filing lies with the investor, and prior clearance should be a condition precedent of any prospective deal. As investors classified as a foreign investor may be subject to a more in-depth assessment—an assessment period of up to three plus three months—investors should review their ownership structure and assess whether they are classified as a foreign investor in order to predict the timeline of the transaction process. Investors with only domestic or EEA persons in their ownership structure can expect a speedier process and to obtain an approval within 25 business days.

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