New law for reviewing foreign direct investments

The Swedish government has now taken its next step in the preparation of the introduction of Swedish foreign direct investment rules. On 11 May 2023, the Swedish government adopted a bill on foreign direct investment and the introduction of a new law whereby investments posing security risks shall be reviewed and, if necessary, restricted or prohibited. The Inspectorate for Strategic Products (“ISP”) is expected to be appointed as the competent authority.

The full legislative proposal is available here. The following can be noted from the proposal:

• The new law is proposed to enter into force on 1 December 2023 and the new legislation will have to be applied to transactions with a closing date after this date.
• The aim on the new law is to prevent foreign direct investments in Swedish sensitive businesses that could harm Sweden’s security or public order or public safety in Sweden
• The legislation will apply to sensitive activities, i.e.:
  • Essential services (the Swedish Civil Contingencies Agency has been assigned with producing a list of relevant sectors).
  • Security-sensitive activities (according to the Protective Security Act)
  • Critical raw materials and other metals and minerals
  • Sensitive personal or location data
  • Military equipment (according to the law on military equipment)
  • Dual-use items (according to the EU regulation on dual-use items)
  • Emerging technologies and other strategically valuable technologies
• The notification obligation falls on the investor (regardless of nationality or domicile) provided that the investment involves influence in or acquisition of sensitive activities. The target company will have a disclosure obligation towards investors. The assessment must take place before the transaction is carried out.
• The obligation to notify arises, inter alia, if the investor will directly or indirectly dispose of votes equal to or exceeding any of the thresholds of 10, 20, 30, 50, 65 or 90 per cent, or if the investor otherwise will obtain a direct or indirect influence on the management of the target company.
• The ISP, when reviewing the investment, be obliged to consult with a number of other Swedish authorities.
• The responsible authority is provided with a range of tools;
  • Right to initiate investigations on its own initiative;
  • Sanction fees (up to SEK 100 million);
  • Approving investments subject to conditions; and
  • Right to prohibit transactions (or order the reversal of a transaction carried out in breach of the legislation).

We will keep you informed of future developments on the adoption of the new law.