Foreign Direct Investment

FDI - the Foreign Direct Investment Review Act

The new Swedish FDI Act entered into force on 1 December 2023. The Foreign Direct Investment rules, which have their counterparts in several other EU countries, are motivated by national security interests and allow the Swedish Inspectorate for Strategic Products to review investments in what are known as 'sensitive activities'. The procedure also covers purely Swedish and intra-EU investments.

The purpose of the review procedure is to identify and, if necessary, ultimately prohibit investments from third countries if they may pose a security policy risk. The regulations require the parties to submit a relatively comprehensive investment notification to the review authority and then await the authority's assessment before the investment can be implemented.

What activities are covered by the FDI law?

The new Foreign Direct Investment Act covers investments in activities worthy of protection that are conducted by limited companies, European companies, partnerships, economic associations, partnerships, sole proprietorships or foundations with their registered office in Sweden. Transfers of assets and internal reorganisations are also covered. All investments in activities worthy of protection above certain thresholds give rise to a notification obligation, regardless of the investor's nationality or registered office. This means, for example, that investments through new share issues above these thresholds are also subject to the notification requirement.

Protectable activities are defined as:

• activities that are essential to society

• security-sensitive activities under the Security Protection Act

• exploration, extraction, enrichment or sale of critical raw materials or metals or minerals that are otherwise strategically important for Sweden's supply

• large-scale processing of sensitive personal data or location data in or through a product or service

• the manufacture or development of, research into or supply of war material under the War Material Act or the provision of technical support relating to such war material

• research into or provision of products or technologies in the field of emerging technologies and other technologies worthy of strategic protection or activities with the capacity to develop such products or technologies.

It is thus clear that the regulatory framework covers a large part of the business sector. Activities which at first sight do not appear to be worthy of protection may, because of the manufacture of a particular component or the provision of a particular technology, be considered to fall within the scope.

If a notification obligation exists, a comprehensive investment notification must be filed with the investigating authority, concerning both the investor and the target company.

In the event of a failure to comply with the notification obligation, the investor risks penalties ranging from SEK 25 000 to 100 000 000. And an investment in violation of the issued prohibition entails the invalidity of the legal act.

What Lindahl's experts can help you with:

As one of Sweden's largest and leading business law firms, we have a knowledgeable team with extensive experience of complex transactions and successful deals.

With straightforward and clear advice, Lindahl's experts can help you through the entire transaction process - from planning and understanding the FDI requirements, to preparing and submitting the investment notification.

Through our position as the exclusive Swedish member of the international Terralex network, we work closely with law firms around the world, making our advice on these matters even more comprehensive.