The Danish FDI Act – what’s happening

Looking Back

FDI screening was first introduced in Denmark in 2021 (the FDI Act). Some water has gone under the bridge since the FDI Act entered into force with its broad scope and unpredictable future impact on Danish business. 

The Danish Business Authority (the DBA) has released an overview detailing the processing of cases from 1 July 2021 to 30 June 2023, along with preliminary experiences with the two-phased administrative procedure that came into effect on 1 July 2023.

A significant portion of the cases involved the sensitive 'critical infrastructure' sector. Over 60% of the foreign direct investment (FDI) applications received by the DBA were related to critical infrastructure.

During this period, the DBA handled a total of 358 cases. These included 231 mandatory applications for authorization to carry out a foreign investment or special financial agreement, 10 voluntary notifications, and 117 requests for pre-screening.

Another notable statistic revealed that the average case processing time by the DBA was approximately 30 working days. 

Notably, in 1 case, the DBA authorized the investment subject to specific terms, while 1 case resulted in the prohibition of the investment but that particular investment was later approved. The remaining cases were either approved without conditions or dismissed as outside the scope of the FDI Act.

In short, practice in Denmark has shown that whilst many transactions and special financial agreements are notified, the DBA approves almost all transactions except for very few.

Looking at the Future

During 2024, the DBA initiated a public consultation on the FDI Act – aimed at identifying any need for adjustments and with a focus on checking that the FDI Act continues to meet its objectives considering changes in the geopolitical landscape and nature of national security threats as well as emerging technologies.

Looking at the specific categories of topics under discussion, the following topics seem of particular relevance for the DBA:

Foreign Investments:

• The exemption for intra-group re-organisations;
• Special rules for listed companies, including in relation to, e.g., voting rights and public takeover bids;
• Equivalent control by other means;
• Greenfield investments, including the exemption in the Executive Order on Applications for capital injections of DKK 75 million for up to three years after the formation; and
• How to define ‘critical infrastructure’.

Special Financial Agreements:

• The requirement of control or significant influence in a joint venture, supplier, operations, or service agreement;
• The interaction between procurement law rules and the completion of a screening;
• The need for screening of the main supplier and the underlying supply chain; and
• The need for screening of certain agreements using products/services from third countries that may pose a threat.

From a practical perspective, the above themes largely seem to be of great practical use for considering notification under the FDI Act – both from a business and advisory perspective. It would be helpful to provide further guidance on, e.g., the scope of when something constitutes critical infrastructure and as well as provide further clarity on the interaction between the screening demands and procurement processes.

Looking ahead, there is hope that the experiences gathered by the DBA will help to strike a better balance between protecting national security and still promoting Denmark as an attractive jurisdiction for foreign investments, should the input indeed materialize into an amendment of the FDI Act in Denmark. From the practice until now, it would seem that the bar could be raised somewhat as there are very few cases that present real concerns.

For more information or further guidance in this area, please contact Morten Nissen or Nanna Sofie Krabbe. 

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