New law for reviewing foreign direct investments

On 16 March 2023, the Swedish government adopted a draft 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. Based on the government’s press release, the following may be noted:

• 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 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)
  –  Sensitive personal or location data
  –  Critical raw materials and other metals and minerals
  –  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
• Transfers of real estate worthy of protection will not be covered by this proposal.
  A separate legislation is being prepared in parallel by the Ministry of Defence.
• 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 ISP, when reviewing the investment, shall be obliged to consult with a number of other Swedish authorities.
• The ISP will be 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).

The draft bill is based on an investigation presented in the autumn of 2021, SOU 2021:87. After the Legislative Council’s comments, the government will return with its bill for parliamentary consideration.