On 30 November 2022, the Belgian federal and regional governments agreed on a cooperation agreement to establish a screening mechanism for foreign direct investment ("Cooperation Agreement"), which will enter into force as of 1 July 2023. The Belgian FDI regime implements Regulation (EU) 2019/452, which established a framework for FDI screening in the EU.

On 31 May 2023, the Federal Public Service of Economy ("Ministry of Economy") published draft guidelines to clarify the scope and procedure of the FDI screening mechanism in Belgium. The guidelines are expected to be updated regularly.

Scope of the screening mechanism

The regime applies to FDI that may have an impact on the national security, the public order or the strategic interests of Belgium and its federated entities (i.e., the Regions and Communities) with a view to establishing or maintaining direct and lasting relationships between the foreign investor and the Belgian target. Strategic interests means ensuring the continuity of vital processes and strategic independence and preventing sensitive knowledge from to a foreign investor.

A "foreign investor" is: (i) an individual with main residence outside the EU; (ii) a company established and with registered corporate seat outside the EU; and (iii) a company with ultimate beneficial owner with main residence outside the EU. Investments by EU-based investors fall outside the scope of the FDI screening mechanism.

The regime covers the following types of investments:

1. Transactions resulting in the acquisition of at least 10% of voting rights in a Belgian target company:

   1. Whose activities relate to the sectors of defence, including dual-use products, energy dual-use, energy, cyber security, electronic communication or digital infrastructures; and

   2. Whose annual turnover in the fiscal year preceding the acquisition of at least 10% of the voting rights exceeded EUR 100 million;

2. Transactions resulting in the acquisition of at least 25% of voting rights in a Belgian target company whose activities relate to:

   1. Critical infrastructures, both physical and virtual, for energy, transport, water, health, electronic communications and digital infrastructures, media, data processing or storage, aeronautics, space and defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate that are critical to the use of such infrastructures;

   2. Technologies and raw materials essential for safety (including health), defence, maintenance of the public order, military equipment, dual-use items, strategic technologies (and related IP rights) such as AI, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, and nanotechnologies;

   3. Supply of critical inputs, including energy or raw materials, as well as food safety;

   4. Access to sensitive information and personal data or the ability to control such information;

   5. Private security sector;

   6. Freedom and pluralism of media;

   7. Strategic technologies in the biotechnology sector, provided that the turnover of the Belgian biotech target company in the fiscal year preceding the acquisition of at least 25% of the voting rights exceeded EUR 25 million.

Importantly, these transactions include "passive" investments (e.g., by funds) or internal restructuring within a corporate group that result in voting rights above the thresholds indicated above. Greenfield investments (i.e., whereby a new company in Belgium is established) fall outside the scope of the FDI screening mechanism.

Procedure

A newly established regulatory body composed of representatives of the Belgian federal government, the federated entities (i.e., three Regions (Flemish, Walloon and Brussels Capital Regions)) and the three Communities (Flemish, French, German-speaking), the French Community Commission and the Common Community Commission, chaired by a representative of the Ministry of Economy, the Interfederal Screening Commission ("ISC") will be responsible for screening the FDIs. The ISC may consist of up to 11 representatives: three from the federal government and one representative from each of the federated entities.

FDI falling in the scope of the screening mechanism will need to be notified and approved prior to closing, i.e., the regime is mandatory and suspensory.

1. Notification:

   • Agreements concluded on or after 1 July 2023 must be notified to the ISC. Transactions signed before 1 July 2023 will not require notification. However, the ISC may decide to launch an ex officio assessment and/or screening procedure up to two years (five years in case of bad faith) after implementation of the transaction.

   • Notification is usually done on the basis of the signed transaction documents, but it is possible for parties to submit a notification on the basis of draft documents together with a declaration of intent on reaching a final agreement on all substantive issues that would not significantly differ from the notified draft.

   • Information to be submitted with the notification includes: ownership structure, activities and countries involved relating to both the foreign investor and the Belgian target company; approximate value of the investment; source of financing of the investment and expected closing date of the transaction.

   • The ISC secretariat will review the notification and may ask for additional information. Once the filing is considered complete, it will notify the parties and transfer the file to members of the ISC for review. The notification triggers the start of the statutory time period for preliminary assessment and the subsequent screening.

2. Preliminary assessment (30 calendar days + extensions):

   • The transaction is sent for review to the competent members of the ICS, which is determined on the basis of the nature and location of the Belgian target's activities (i.e., certain transactions may not require involvement of all Regions and Communities).

   • The ISC must request an opinion from the Coordinating Committee on Intelligence and Security ("CCIV"), which may suspend the 30-day assessment timetable. It may also request other public bodies to adopt an opinion on the matter.

   • Requests for additional information by the ICS will suspend the 30-day assessment timetable.

   • If one of the competent ICS members considers that the transaction may impact the public order, national security or strategic interests, the ICS will open an in-depth screening phase to consider comments from other EU Member States (if any) and whether the foreign investor may be: (i) controlled, directly or indirectly, by a third country government; (ii) involved in activities that might affect national security or the public order of an EU Member State or third country, or in illegal/criminal activities.

   • Where no concerns are raised, the assessment process is completed and the transaction is considered approved.

3. In-depth Screening (28 calendar days + extensions):

   • If concerns are raised, competent ICS members will conduct an in-depth assessment of the transaction to identify concrete threats to the public order, national security, or strategic interests.

   • Within 20 days of opening of the screening procedure, ICS competent members must provide an opinion on the transaction to the (federal, regional, community) minister or local government member they represent, as follows:

     • Positive opinion;

     • Positive opinion with corrective measures;

     • Negative opinion.

4. • During those 20 days, the ICS members will first share a draft opinion with the foreign investor and the Belgian target, which can submit comments within 10 days of receipt of the draft opinion. Where a party requests a hearing, the ICS should organize the hearing within 10 days of the request. The time period for commenting and organizing a hearing suspends the 20-day screening timetable.

   • Further during those 20 days, if an ICS member issues a positive draft opinion subject to corrective measures, it may open negotiations with the foreign investor and Belgian target company in order to reach a binding agreement on such corrective measures. These negotiations suspend the 20-day screening timetable for at least one month, which can be further extended by increments of one month.

   • Competent ministers and/local government representatives  must provide a preliminary decision within 6 days of receiving the opinion of their relevant ICS members. The preliminary decision is shared only within the ICS and will then be consolidated into a combined decision by the ICS secretariat who must notify the parties within 2 days.

Corrective measures

Parties may agree on corrective measures to address certain concerns. These corrective measures may include, for example: (i) adopting a new code of conduct on the exchange of sensitive information; (ii) the appointment of compliance officer(s); (iii) having board members obtain a security clearance; (iv) granting a license for use of restricted knowhow or other sensitive IP rights to the Belgian government or a Belgium-based company to ensure critical technology and knowledge remains available in Belgium; (v) restricting the provision of services or goods from Belgium to specific companies or third countries; (vi) restricting the involvement of non-EU subsidiaries in the transaction; (vii) limiting the number of shares affected by the transaction; or (viii) period on-site controls by the ISC to ensure compliance with corrective measures.

Penalties  

A foreign investor may face fines of up to 10% of the value of the FDI if: (i) no, incorrect or late information was provided on the basis of which a decision was made; (ii) a notification is submitted within 12 months after closing; or (iii) the ISC opens a screening procedure ex officio within 12 months after closing.

Fines of up to 30% of the value of the FDI can be imposed if: (i) no notification was made after 12 months of closing); (ii) incorrect or misleading information was provided; (iii) the transaction was closed during the screening process and prior to the ISC decision; or (iv) corrective measures were not implemented within the timing agreed.

The ISC will notify the foreign investor of its intention to impose a fine, allowing the foreign investor to submit comments before making its final decision.

Appeal

The decision whether or not to proceed with the in-depth screening procedure after the preliminary assessment is not subject to appeal.

The ICS decision approving or rejecting the FDI and/or imposing a fine can be appealed before the Market Court of the Court of Appeal of Brussels within 30 days of the notification of the contested decision. The appeal does not have suspensory effect. Where the Court of Appeal decides to annul the FDI decision by the ICS, the case is referred back to the ICS for a new screening procedure.

Next steps

The Belgian FDI screening mechanism will add scrutiny for non-EU companies planning investments in Belgium and will create additional administrative processes for companies to factor into their deal and commercial timelines, on top of existing merger rules and the new Foreign Subsidies Regulation (see our alert on this topic). 

Companies planning investments in Belgium may wish to seek advice on the potential impact of the new FDI screening mechanism on their transaction.  

The Hogan Lovells team in Brussels and across other regions can provide tailored “one-stop-shop” advice on FDI compliance. See our Global FDI Guide.

Authored by Lourdes Catrain, Stephanie Seeuws, Falk Schöning, Stefan Kirwitzke, Philip Van Steenwinkel, and Charles-Henri Bernard.