The Swedish FDI Act – What we’ve learnt
Written By
Senior Associate
Sweden
I'm a senior associate in our Corporate practice in Stockholm, where I advise our clients on both domestic and cross-border transactions, private M&A transactions and other corporate law matters.
Counsel
Sweden
I'm a Counsel in our Corporate group and head of our Retail & Consumer sector group in Sweden. I specialise in M&A and corporate law.
Counsel
Sweden
I lead projects and negotiations to completion in private M&A transactions, corporate management, business transformations and strategic partnerships.
On 1 December 2023, the new Swedish Foreign Direct Investment Act (the FDI Act) entered into force. The FDI Act prescribes that investors who, through an investment, gain an influence above a certain threshold in Swedish companies/businesses within a wide range of sectors that are deemed as sensitive, must notify the investment to a Swedish regulatory authority (the ISP), and receive clearance prior to closing the investment. The main purpose of the FDI Act is to screen as many investments as possible within these sensitive sectors, to be able to further investigate and if necessary, stop or adjust investments that are deemed harmful from a national security policy perspective.
The FDI Act has now been in place for about 10 months and here is what we’ve learnt so far.
The sensitive sectors
The sectors deemed sensitive are:
- essential services,
- activities warranting protective security,
- critical raw materials and minerals,
- sensitive personal data or geolocational data,
- dual-use products,
- military equipment and
- strategic or emerging technology.
The scope of each sector is specified in appendices to the FDI Act and is wider than one at first glance may assume. For example, the sensitive sector of essential services includes activities regarding manufacturing, supply of energy, water, food, waste management, transportation, infrastructure, IT, communications, finance, insurance, real estate, technology, education and healthcare.
Furthermore, the essential services sector was further widened on 1 September 2024 by adding activities in the information and communications sector. The Swedish government also proposed that the Swedish Defence Research Agency (FOI) should assist the ISP in its review of critical infrastructure from 2025. It seems clear that the Swedish FDI review mechanism moves towards more regulation and not less.
Types of investments covered
The FDI Act applies to all types of investments, regardless of structure or method, in a company within a sensitive sector resulting in the investor obtaining (i) control of 10 percent or more of voting rights in the company, or exceeding the thresholds 20, 30, 50, 65, or 90, or (ii) direct or indirect influence via e.g. a right to appoint board members or management, or influence the general direction of the business. Thus, the law applies to share issues (except for share issues to existing shareholders with preferential right), intra-group restructurings, asset transfers and, notably, establishment of new companies within the sensitive sectors. The law could also apply to other arrangements such as loans and establishment of shareholder agreements, provided that sufficient influence is obtained.
What do the statistics tell us about the Swedish FDI regime
As per late September 2024, more than 900 FDI notifications have been submitted to the ISP. Of these the ISP has:
- Screened and decided to take no further action in about 84% of notifications;
- Decided to initiate a further investigation in only about 2% of cases;
- In five cases (about 0.5%) accepted the investment with conditions.
We have very little insight into the considerations taken by the ISP as these decisions are classified, but the ISP may, for example, impose conditions on the activities that the target company may carry out, and on the target company’s governance.
The statistics reiterate that the purpose of the FDI Act is to catch as many investments as possible in the notification phase, of which very few of them are potentially problematic.
Notification details
All in-scope investments must be notified to the ISP. The obligation to notify lies on the investor, but the target company has an obligation to inform the investor of the applicability of the FDI Act.
The actual notification is made by submission to the ISP of a specific notification form, providing requested information with focus on the investor and the deal specifics. The ISP requires information of all entities in a group structure which will own, directly or indirectly, 10 % or more of the votes in the target company.
What to consider ahead of an investment in Sweden
- Always determine whether FDI clearance is required for a transaction, as the scope of the FDI Act is broader than one might assume.
- Consider the FDI Act as early as possible in the transaction as it may affect the timeline, transaction terms and deal certainty - and prior to seeking investments if your business is active in sensitive sectors.
- If you are an investor active within sensitive sectors, prepare a basic set of questions regarding FDI in your standard due diligence questionnaire.
- Consider preparing a FDI policy for your company’s investments.
If you need more information or further guidance in this area, please contact Michael Butler, Caroline Grotenfelt and Lukas Holmberg.
