Norwegian foreign direct investment rules - Update

Norwegian foreign direct investment rules - Update

Since the Security Act came into effect in 2019, there has been a growing focus on issues related to the control of foreign investments in entities critical to Norwegian national security. This trend mirrors developments in other countries, where control regimes have become increasingly comprehensive, as seen most recently in Sweden where new rules took effect on December 1, 2023.   

The government-appointed Investment Control Committee has, on December 4, 2023, presented its report (NOU 2023: 28) on the further development of investment control (FDI) in Norway, which also includes companies not subject to the current Security Act. The main task of the committee has been to assess whether the existing control regime is sufficient, or what changes are necessary.    

The Committee's conclusion is, not surprisingly, that the current rules are inadequate and do not capture relevant cases either in a systematic manner or to a sufficient degree. The Committee also points out the need for the regulations to be predictable for both investors and companies.  

The committee proposes the following changes in particular:  

1. Introduction of notification filing requirements for foreign direct investments in national security-sensitive sectors, primarily businesses developing or managing critical national security technology or part of the supply chain for critical raw materials;
   

2. The reporting obligation is triggered by passing 10%, 1/3 and 2/3 of the shares or votes in a company;
   
3. The definition of what is "security-sensitive" should be clarified, so that the obligation to report and the restrictions for others are not broader than necessary;
   
4. The reporting obligation is imposed on the foreign investor;
   
5. Distinguish between foreign investors from EEA countries and investors from third countries, so that the notification requirement regime is primarily aimed at investors from third countries, while EEA-controlled investors are only subject to notification requirements for investments in defined security-sensitive sectors;
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6. Extended access for supervisory authorities to intervene in transactions on their own initiative;
   
7. Introduction of a voluntary reporting scheme for all sectors, with 25% ownership as a threshold;
   
8. Introduce a legal basis for the authorities to be able to require the investor to account for who is the beneficial owner behind the investor - which is particularly challenging where the investor is part of complex cross-border ownership structures;
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9. Introduce fixed assessment criteria to be used by the authorities when assessing cases, so that the regulations become more predictable for both investors and companies;
   

10. Information sharing ban and implementation ban until notification is approved; and
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11. Authorities to be authorized to make transactions conditional on remedial measures etc.  

The Committee proposes that a new Investment Control Act and associated regulations be drawn up.

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AGP regularly assists in transactions where EEA- and third country-controlled companies invest in Norwegian companies and closely monitors the developments of investment control regulations. The regulations are relevant for both potential buyers and sellers.  

Gard A. Skogstrøm, Partner
Gard@agpadvokater.no / +47 973 17 439

Fanny Fasmer, Associate Lawyer
Fanny@agpadvokater.no / +47 936 99 785