Foreign Investment in Denmark 2024

FOREIGN INVESTMENT 2024

DENMARK

Thomas Gjøl-Trønning, Caroline-Regitze Sosman, Maria Moskova

(Bech-Bruun)

LAW AND POLICY

Policies and practices

What, in general terms, are your government’s policies and practices regarding oversight and review of foreign investment?

Denmark is a small open economy and as such, it is dependent on global trade and foreign investments, which contribute to its national growth as well as increased productivity, competitiveness and innovation. Thus, the policy and practice on foreign investments in Denmark historically have been relatively tolerant and unrestricted. However, as foreign investments may potentially pose a risk to national security and public order, the Danish along with the international focus on regulation has increased in recent years.

Following the introduction of the Regulation (EU) 2019/452 (the Regulation, establishing a framework for the screening of foreign direct investments into the Union), Denmark has taken initiative to increase the control over foreign direct investments and as a result, the Act on screening of certain foreign direct investments, et cetera, in Denmark (the Investment Screening Act) (Act No. 842 of 10 May 2021) (the Investment Screening Act) came into force on 1 July 2021, along with a number of executive orders (i.e, the Application Order, the Procedural Order and the Confidentiality Order). Prior to this, Denmark did not have a general screening mechanism in place concerning screening of foreign investments based on the risk of threatening national security or public order. However, there were two sector-specific screening arrangements which have the same objective: the Act on War Material (Act No. 1004 of 22 October 2012) (the War Material Act) and the Act on the Continental Shelf and Certain Pipeline Installations in the Territorial Waters (Act No. 1189 of 21 September 2018) (the Continental Shelf Act). Currently, the War Material Act and the Continental Shelf Act apply in parallel to the Investment Screening Act as of 1 July 2021.

It should be noted that other sector-specific screening arrangements apply in Denmark. However, as these screening arrangements are applicable to all investments – both national and foreign alike – or aim at managing other interests than the interests of national security or public order, these screening arrangements and the relevant rules will not be further described in this chapter.

Main laws

What are the main laws that directly or indirectly regulate acquisitions and investments by foreign nationals and investors on the basis of the national interest?

The Investment Screening Act, the War Material Act and the Continental Shelf Act.

Scope of application

Outline the scope of application of these laws, including what kinds of investments or transactions are caught. Are minority interests caught? Are there specific sectors over which the authorities have a power to oversee and prevent foreign investment or sectors that are the subject of special scrutiny?

The Investment Screening Act

The object of the act is to prevent foreign investments and special financial agreements from posing a threat to national security or public order in Denmark. This is ensured by a general screening program comprised by a mandatory sector-specific approval scheme for particularly sensitive areas, and a voluntary cross-sectorial notification scheme for other areas, if they pose potential threat to national security or public order.

Mandatory approval

The mandatory sector-specific approval scheme applies to foreign investments and special financial agreements within the following particularly sensitive areas:

Companies in the defense sector;
Companies that develop, manufacture, or maintain products with IT security functions or processing of classified information;
Companies that develop or manufacture dual-use products subject to export control as specified in article 2(1) of Council Regulation No. 428/2009 (EC) of 5 May 2009, as amended;
Companies engaged in other critical technology than those specified in 1–3; and
Companies operating within critical infrastructure.

A foreign investor, who is subject to the act within the mandatory sector-specific scheme, must apply for a pre-approval of the investment, if the investor acquires a qualified share of an enterprise domiciled in Denmark. A qualified share is direct or indirect possession or control over at least 10 per cent of the ownership share or voting rights or equivalent control by other means (e.g, purchase of assets or long term loans). If the acquisition of ownership shares or voting rights constitutes or exceeds a limit of 20 per cent, one-third, 50 per cent, two-thirds or 100 per cent, respectively, the investor must apply for a renewed approval.

Special financial agreements

In addition to foreign direct investments, the Investment Screening Act applies to special financial agreements. A foreign contracting party that intends to enter into a special financial agreement with a Danish entity within the mandatory sector-specific scheme must apply for an approval before the agreement can be executed, if the foreign investor gains control of or considerable influence on the affairs of the company concerned. The definition of a special financial agreement includes joint ventures on research and development, supplier agreements as well as operating and service agreements (e.g, regarding the operation or maintenance of buildings, facilities, installations or systems). The pre-approval requirement with respect to special financial agreements applies to foreign investors (within this context, contracting parties) domiciled outside of the EU and EFTA as well as companies domiciled in Denmark and other EU and EFTA countries, if this company is controlled by persons or companies domiciled outside the EU and EFTA.

The North Sea Energy Island

As of 1 July 2023, the scope of the legislation was broadened to include agreements regarding establishments, joint ownership and operations of the North Sea Energy Island. In such cases, the party that has won a tender process must apply for a pre-approval before entering into the respective agreement. Any sub-contractors of the party also fall within the scope of the regime and therefore, screening and pre-approval by the Danish Business Authority is also required in respect to entering into any sub-contracts. The relevant party that wins a tender process must submit an application on behalf of its sub-contractors. The authorization requirement in accordance with the rules regarding the North Sea Energy Island applies regardless of the party’s nationality and therefore, Danish citizens and entities are equally covered by the mandatory pre-approval requirement.

Voluntary notification

The voluntary cross-sectorial notification scheme applies to all other sectors and activities that may pose a threat to national security or public order in Denmark. The threshold value for voluntary notification is 25 per cent of the ownership shares or voting rights in a company domiciled in Denmark or obtaining similar control by other means.

Foreign investments and special financial agreements that have not been notified, but are considered as posing a threat to national security or public order in Denmark, may be subject to investigation by the Danish Business Authority for up to five years after the relevant investment was completed or the agreement has been executed.

Exemptions

Other applicable rules

The Investment Screening Act does not apply if other legislation provides rules on screening of and possibly intervention in foreign direct investment or special financial agreements for the sake of national security or public order. For instance, foreign investments made in companies covered by the War Material Act are therefore not covered by the Investment Screening Act.

Certain restructurings

The Investment Screening Act does not apply in some internal restructuring scenarios, where there are no new foreign entities that acquire a qualified share in a Danish company within the particularly sensitive sectors. For example, if Company A (foreign entity) owns 100 per cent of Company B (foreign entity) and Company B owns Company C (a Danish entity within a particularly sensitive sector) and Company A and Company B merge, then no new foreign entity obtains a qualified share by way of the restructuring, and thus the restructuring is exempt. On the other hand, if Company B establishes a new foreign holding company above Company C (the Danish entity), the restructuring will fall within the scope of the Investment Screening Act and a pre-approval must be obtained under the mandatory sector-specific scheme, as the new holding company will be regarded as a new foreign investor irrespective of the fact that the ultimate control remaining the same.

Greenfield exemption

The Investment Screening Act does not apply to the establishment of a new enterprise if the foreign investor’s capital inflow does not exceed 75 million Danish kroner in total, during a period of three financial years from the enterprise’s formation, or if the newly established enterprise is not a subsidiarity of a foreign investor. This exemption also applies to special financial agreements.

The War Material Act

The act applies to equipment manufactured for military purposes, ammunition that may be used for military purposes (military equipment) and non-government owned companies that produce material for military purposes.

In addition to permission for manufacturing of military equipment, permission must be obtained from the Ministry of Justice prior to changes in the ownership or management of a company, engaged in manufacturing of military equipment. Such permission for changes in ownership or management is required in certain instances specified in the act, including where such changes imply that foreign individuals or entities, through possession of equity or in any other way, have or will obtain decisive influence over the company. Minority interests can be caught under the circumstances, if the owner through the possession of shares or in any other way, can exert a decisive influence over the company. Furthermore, the company needs to obtain a permission from the Danish Ministry of Justice if the company wishes to obtain a foreign loan or a foreign guarantee. Permission will be granted unless there are any concerns with respect to foreign policy or safety matters.

The Continental Shelf Act

The act is applicable to Danish and foreign companies that wish to install transit power cables or natural gas pipelines in Danish territorial waters. Such companies must obtain permission from the Danish Ministry of Climate, Energy and Utilities prior to the installation. Permission can only be granted if it is consistent with Danish interests regarding foreign, security and defense policies. It is the Minister of Climate, Energy and Utilities who obtains a recommendation from the Minister of Foreign Affairs on whether the installation of the power cable or natural gas pipeline in the Danish territorial waters is consistent with foreign, security and defense policy considerations. A positive or a negative recommendation is a result of coordinated efforts between the Foreign Minster with the Minister of Justice, the Minister of defense and the Minister of Climate, Energy and Utilities.

Definitions

How is a foreign investor or foreign investment defined in the applicable law?

The Investment Screening Act

The Investment Screening Act is applicable to foreign direct investment and special financial agreements executed by foreign investors.

Foreign investors subject to the act are:

Non-Danish citizens;
Enterprises not domiciled in Denmark (including if such enterprises have permanent establishment in Denmark);
Enterprises domiciled in Denmark, if they are subsidiaries or branches of enterprises domiciled outside Denmark; or
Enterprises domiciled in Denmark, if a foreign citizen or an enterprise outside Denmark, directly or indirectly, possesses or controls more than 25 per cent of the shares or voting rights or holds equivalent control by other means.

However, it is noted that the provisions on special financial agreements and the rules on the cross-sectorial non-mandatory notification scheme do not apply to non-Danish citizens of EU or EFTA member states. This exception also applies with respect to enterprises domiciled in an EU or EFTA member state, provided that the enterprise is not controlled or materially influenced by citizens of a country outside the EU or EFTA.

Foreign direct investment

The concept of a foreign direct investment is wide and includes the acquisition of control or significant influence on a company domiciled in Denmark by direct or indirect possession of or control over the shares or voting rights in the company or equivalent control by other means. Equivalent control by other means could be, for example, the purchase of assets, long-term loans, influence on decisions on managerial, financial, developmental or operational conditions in a company or in a business-critical area in a company, as well as the establishment of a new enterprise in Denmark within a particularly sensitive sector with equivalent control or significant influence.

Special financial agreements

Furthermore, the act applies to the conclusion of special financial agreements within the particularly sensitive sector, if such agreement implies that the foreign investor gains control of or considerable influence on the affairs of the enterprise that may constitute a threat to national security or public order. The definition of special financial agreement includes joint ventures on research and development, supplier agreements as well as operating and service agreements (e.g, regarding the operation or maintenance of buildings, facilities, installations or systems).

The War Material Act

The definition of a foreign investor or foreign investment is wide, and it follows from the preparatory works to the act that the definition should be interpreted broadly.

Special permission must be obtained from the Danish Ministry of Justice when obtaining permission to produce military equipment and in the case of later changes to ownership or management of a company engaged in manufacturing of military equipment in the following scenarios:

a personally owned enterprise has or will have an owner that is not a Danish citizen;
a limited liability company or the like has or will have a registered office outside Denmark;
the company has or will have managing directors or persons authorized to sign for the company that are non-Danish citizens;
board members of the company that are Danish citizens consist or will consist of less than 80 per cent;
the share of Danish-owned share capital is or will be less than 60 per cent;
foreigners, through ownership of the share capital, will represent more than 20 per cent of the votes; and
foreigners, otherwise through possession or in any other way, have or will obtain decisive influence over the company.

The Continental Shelf Act

The act does not contain a specific definition of foreign investor or foreign investment. The act is applicable when a Danish or a foreign company wishes to install power cables or pipelines in Danish territorial waters. In this instance, the relevant company must obtain a permission from the Danish Ministry of Climate, Energy and Utilities prior to the installation.

Special rules for SOEs and SWFs

Are there special rules for investments made by foreign state-owned enterprises (SOEs) and sovereign wealth funds (SWFs)? How is an SOE or SWF defined?

The Investment Screening Act

Under the Investment Screening Act, there are no special rules applicable to SOEs or SWFs and the act itself does not contain a definition of SOE or SWF. However, it is noted that SOEs and SWFs will be subject to the Investment Screening Act, unless they are EU or EFTA based and making a direct investment (i.e, not through another legal entity).

The War Materials Act and the Continental Shelf Act

There are no special rules applicable to SOEs nor SWFs pursuant to the War Materials Act and the Continental Shelf Act.

Relevant authorities

Which officials or bodies are the competent authorities to review mergers or acquisitions on national interest grounds?

The Investment Screening Act

The competent authority to grant permission is the Danish Business Authority. However, if the Danish Business Authority considers that the foreign direct investment or special financial agreement may pose a threat to national security or public order in Denmark and such threat cannot be eliminated by remedies, the Danish Business Authority must present the application or notification to the Danish Minister of Industry, Business and Financial Affairs.

If an application or notification is presented to the Danish Minister of Industry, Business and Financial Affairs, they must in turn consult the Minister of Finance, the Minister of Foreign Affairs, the Minister of Justice, the Minister of defense and other relevant ministers before the Danish Minister of Industry, Business and Financial Affairs either approves or rejects the application or notification, or requires the investor to agree to certain remedies as a condition for being granting an approval with respect to the relevant investment or agreement.

The War Material Act

The Danish Ministry of Justice is the competent authority to grant permission. However, before granting the permissions, the Ministry of Justice will consult the Ministry of Foreign Affairs, the Ministry of defense and the national Commission of the Police.

The Continental Shelf Act

The Danish Ministry of Climate, Energy and Utilities is the competent authority to review the application for permission to install cables or pipelines. When processing the application, the Danish Ministry of Climate, Energy and Utilities must obtain a recommendation from the Minister of Foreign Affairs as to whether the installation will be compatible with foreign policy, safety and defense interests. The Minister of Foreign Affairs will engage the Minister of Justice, the Minister of defense and the Minister of Climate, Energy and Utilities in the analysis. The recommendation must be the basis for the Danish Ministry of Climate, Energy and Utilities’ decision. If the recommendation from the Minister of Foreign Affairs is negative, the Minister of Climate, Energy and Utilities must decline to grant the permit for installation.

Notwithstanding the above-mentioned laws and policies, how much discretion do the authorities have to approve or reject transactions on national interest grounds?

The Investment Screening Act

The Danish Business Authority may either approve the investment or special financial agreement or to require the investor to agree to certain remedies as a condition for granting its approval. The Danish Business Authority will approve the investment (or negotiate remedies for granting its approval), if the Danish Business Authority considers that the relevant investment or agreement does not constitute a threat to national security or public order in Denmark.

The Danish Business Authority must present the foreign direct investment or special financial agreement to the Danish Minister of Industry, Business and Financial Affairs, if the Danish Business Authority considers that the investment or agreement may pose a threat to national security or public order in Denmark, and such threat cannot be eliminated by specific remedies. The Danish Minister of Industry, Business and Financial Affairs has the discretion to reject or approve the investment or special financial agreement as well as to require the investor to agree to certain remedies as a condition for granting its approval.

The War Material Act

The Danish Ministry of Justice has full discretion to grant or deny a permission. Permission will be granted unless there are strong indications of foreign or security threats.

The Continental Shelf Act

A permission may not be granted if it would be in conflict with foreign policy, safety and defense interests. It is the Minister of Foreign Affairs that makes a recommendation as to whether this is the case. The Minister of Foreign Affairs has full discretion when assessing the matter, and the statement is subject to a free political opinion.

PROCEDURE

Jurisdictional thresholds

What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?

The Investment Screening Act

Filing is mandatory for foreign investments and special financial agreements within the sector-specific regime that are considered as particularly sensitive areas, but only when the jurisdictional thresholds are met.

Foreign investment

Special financial agreements

A foreign contracting party that intends to enter into a special financial agreement with a Danish entity within the mandatory sector-specific scheme must apply for pre-approval, if the foreign investor gains control of or considerable influence on the affairs of the company concerned. Special financial agreements include joint ventures on research and development, supplier agreements as well as operating and service agreements (e.g, regarding the operation or maintenance of buildings, facilities, installations or systems).

Voluntary notification

The War Material Act

Filing is mandatory both when applying for a permission to produce military equipment and in the case of later changes to ownership or management of a company engaged in manufacturing of military equipment in the following scenarios:

a personally owned enterprise has or will have an owner that is a non-Danish citizen;.
a limited liability company or the like has or will have a registered office outside Denmark;
the company has or will have managing directors or persons authorized to sign for the company who are non-Danish citizens;
board members of the company who are Danish citizens consist or will consist of less than 80 per cent;
the share of Danish-owned share capital is or will be less than 60 per cent;
foreigners, through ownership of the share capital, will represent more than 20 per cent of the votes; and
foreigners, otherwise through possession or in any other way, have or will obtain decisive influence over the company.

The Continental Shelf Act

There are no jurisdictional thresholds and filing is mandatory for all foreign and national companies intending to install transit power cables or natural gas pipelines in Danish territorial waters.

National interest clearance

What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?

The Investment Screening Act

The notification or application for approval of a foreign investment or a special financial agreement under the Investment Screening Act must be submitted to the Danish Business Authority. The substance of the procedure is determined in an executive order (the Procedural Order). According to the Procedural Order, the application or notification must contain information about the investment, inter alia, the purpose of the investment, the value of the investment, the financing of the investment, information about shares, etc. Furthermore, the application or notification must provide information about the investor and the Danish enterprise in question.

As regards special financial agreements, the application or notification must contain information about, inter alia, the type of agreement, duration, value, interminable rights clauses, etc.

The Danish Business Authority has issued a filing form for all applications (investments or special financial agreements under the mandatory or the voluntary schemes), which includes the questions that the foreign investor must answer to meet the information requirements in the Procedural Order. The form must be submitted through the Danish Business Authority’s online application portal. The application form may be answered in Danish or English. In practice, the application is often submitted by the foreign investor’s Danish attorney.

In addition, the Danish Business Authority may request the applicant to provide further information, if such information is deemed necessary for the Danish Business Authority to access whether the intended investment or agreement constitutes a threat to national security or public order.

Once the Danish Business Authority has determined that it has received a complete application with all necessary information for their substantial screening, a confirmation email is sent to the applicant (often the attorney on behalf of the foreign investor).

Currently, there is no filing fee, however the Danish Business Authority may decide to adopt a filing fee to cover its costs related to processing the application.

The War Material Act

The Danish Ministry of Justice has the authority to issue rules on the form and content of the application, but such authority has not been utilized. However, the Ministry of Justice has published a brief memo, which specifies the items to be covered by the application and provides a declaration of consent to be signed and submitted with the application. There is no filing fee, but all companies that have permission pay an annual fee to cover the costs of the administration of the act. The basic annual fee is 500 Danish kroner, and the remaining outstanding amount is shared between all the companies holding permission.

The Continental Shelf Act

When filing for permission to install cables or pipelines, the application must be submitted to the Danish Ministry of Climate, Energy and Utilities. There are no standard forms that need to be observed. Pursuant to the preparatory work to the act, there is some information that may be requested for the purpose of the review in connection with the Minister of Foreign Affairs’ recommendation. This includes, inter alia, information on ownership and business structure, funding, advisers, sub-contractors, possible cooperation with other national or foreign actors as well as planning.

There is no filing fee as such, but the authorities’ costs related to processing the application must be covered by the applicant. The costs are calculated on the basis of the number of hours spent and the average hourly wage.

Which party is responsible for securing approval?

The Investment Screening Act

The foreign investor who wishes to invest (or already has invested) in the enterprise or wishes to enter (or already has entered) into a special financial agreement with an enterprise domiciled in Denmark, is responsible for obtaining approval.

The War Material Act

The company engaged in manufacturing of military equipment is responsible for obtaining approval.

The Continental Shelf Act

The company wishing to install cables or pipelines in Danish territorial waters is responsible for obtaining approval.

Review process

How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?

The Investment Screening Act

The mandatory sector-specific approval scheme and the voluntary cross-sectorial notification scheme were recently amended, whereby a new 2-phased application process was introduced with effect from 1 July 2023. The reasons behind this change to the application process relate to the objective of ensuring that non-complicated cases are resolved in a more expedient manner.

The information required for initiating Phase 1 is less comprehensive, as compared to the previous application form, and the maximum case handling period with respect to Phase 1 is 45 calendar days from the time when the Danish Business Authority deems the submitted application as complete. If the Danish Business Authority finds that an approval cannot be granted during Phase 1, the Phase 2 proceedings will be initiated. In such case, further information is required and there is an additional case handling period of maximum 125 calendar days from the time when the Danish Business Authority finds the phase-2 documentation to be complete.

Based on the above, there is a maximum case handling period of 170 calendar days in total for both Phase 1 and Phase 2. Taking into account that the new 2-phased system only entered into force on 1 July 2023, there is still limited experience with respect to determining the likelihood of when the full 170-day period will be used by the Danish Business Authority; however, we consider that to be applicable only in the most complicated cases.

It is noted that the above-mentioned processing periods do not include the time used by the Danish Business Authority to deem the application and the Phase-2 documentation as complete.

The War Materials Act

There is no predetermined processing time, however, the Ministry of Justice has informed that the usual processing time is two to three months. There are no fast-track options.

The Continental Shelf Act

There is no predetermined processing time and there are no fast-track options.

Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?

The Investment Screening Act

As regards the sector-specific areas that are considered as particularly sensitive areas, a permission is required prior to completing the investment or entering into the special financial agreement. If an investor fails to comply with the obligation to obtain a pre-approval, the Danish Business Authority can deny registration of the ownership in the Danish Central Business Register and may order the investor to divest the investment or to annul the agreement. In case the investor fails to divest the investment, the Danish Business Authority is entitled to revoke the voting rights of the investor. In addition, if the investor fails to annul the agreement, the Danish Business Authority is entitled to declare the agreement invalid (i.e, without legal effect) between the parties.

As regards the other areas besides those that are considered as particularly sensitive areas, prior permission is not mandatory and a voluntary notification may be made with respect to contemplated or completed foreign investments and special financial agreements agreements.

It is noted that foreign investments and special financial agreements that have not been notified, but are considered as posing a threat to national security or public order in Denmark, may be subject to investigation by the Danish Business Authority for up to five years after the relevant investment was completed or the agreement has been executed.

The War Materials Act

Prior permission is mandatory and failure to meet this requirement is subject to fines or imprisonment.

The Continental Shelf Act

The first step in the application process for the laying of a transit power cable or a natural gas pipeline in Danish territorial waters is the screening process described in this chapter. Once the Minister of Foreign Affairs has conducted an analysis of foreign policy and security matters, the Minister of Climate, Energy and Utilities will receive a positive or negative recommendation. If the recommendation is negative, the applicant will receive a refusal of permission to install the cables or pipelines. If the recommendation is positive, the Minister of Climate, Energy and Utilities will assess whether permission can otherwise be granted under the Continental Shelf Act, including whether environmental and safety considerations are fulfilled. If this is the case, the applicant will receive a permission for the laying of the transit power cable or natural gas pipeline.

Failure to apply for and obtain permission prior to installation is subject to fines.

Involvement of authorities

Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?

The Investment Screening Act

There is a standard procedure for application and notification by filling out the relevant form issued by the Danish Business Authority. It is possible to contact the Danish Business Authority to receive informal guidance.

Furthermore, it is possible to obtain a pre-screening from the Danish Business Authority. However, the right to request pre-screening is only available if the investment or agreement concerns the areas of critical technology or critical infrastructure. Following a pre-screening, the Danish Business Authority may either confirm that the investment or agreement does not fall within the scope of the Investment Screening Act or demand that a mandatory application for approval is submitted.

The War Material Act

There is no formal guidance for obtaining permission. However, the Ministry of Justice provides informal guidance related to the application process.

The Continental Shelf Act

There are no standard procedures for filing for permission. However, it is possible to contact the authority to receive guidance.

When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?

The Investment Screening Act

Government relations, public affairs, lobbying and other specialists can be considered, as is the case in any other approval process, where the approval process is likely to have a political dimension. Whether the efforts of such specialists are successful or not depends on the specific circumstances.

The War Material Act

The Continental Shelf Act

What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?

The Investment Screening Act

As regards the other areas besides those that are considered as particularly sensitive areas, prior permission is not mandatory. However, foreign investments and special financial agreements within the particular sensitive areas that have not been notified, but are considered as posing a threat to national security or public order in Denmark, may be subject to investigation by the Danish Business Authority for up to five years after the relevant investment was completed or the agreement has been executed.

The War Material Act

The authorities do not have the power to review, challenge or unwind transactions or acts that are not subject to review.

The Continental Shelf Act

The authorities do not have the power to review, challenge or unwind transactions or acts that are not subject to review.

SUBSTANTIVE ASSESSMENT

Substantive test

What is the substantive test for clearance and on whom is the onus for showing the transaction does or does not satisfy the test?

The Investment Screening Act

When assessing whether the foreign investment or special financial agreement is deemed as posing a threat to national security or public order in Denmark, the Danish Business Authority will consider all relevant circumstances, including the following non-exhaustive list of issues:

whether the Danish enterprise operates within or impacts critical infrastructure;
whether the Danish enterprise processes or has access to classified information or sensitive personal data;
the position of the Danish enterprise on the Danish market, including substitution options;
whether the Danish enterprise is part of the defense industry, manufactures dual-use products or other critical technology of importance to national security or public order; and
whether the Danish enterprise is involved in the supply of critical raw material, including energy, or food safety.

With respect to foreign investors, the Danish Business Authority will consider all relevant circumstances, including the following non-exhaustive list of issues:

whether the non-Danish investor directly or indirectly is controlled by a foreign government, foreign government bodies or foreign armed forces, including through ownership or considerable financing;
whether the non-Danish investor is or has been involved in activities that impact the security or public order of an EU member state or of other friendly and allied countries;
whether there is a serious risk that the non-Danish investor is involved in or associated with unlawful or criminal activities significant for national security or public order; and
whether there are indications that the non-Danish investor is deliberately attempting to circumvent the screening rules, for instance by using a shell corporation structure.

The Danish Business Authority will issue an approval, unless the investment or agreement is considered as posing a threat to national security or public order in Denmark. If the Danish Business Authority considers that the investment or agreement may pose a threat to national security or public order in Denmark, and the threat cannot be eliminated by remedies, the Danish Business Authority must present the investment or agreement to the Danish Minister of Industry, Business and Financial Affairs.

The War Material Act

As a general rule, the Ministry of Justice will issue a permission, unless matters concerning foreign policy and security speak against it. The Ministry of Justice will consult the Danish Ministry of Foreign Affairs, the Danish Ministry of defense and the Commissioner of the Danish Police as to whether this is the case. If no matters of foreign policy or security are identified, the permission will be granted.

The Continental Shelf Act

After having received the application, the Danish Ministry of Climate, Energy and Utilities must obtain a recommendation from the Minister of Foreign Affairs as to whether the contemplated installations conflict with foreign policy, safety and defense interests. The Minister of Foreign Affairs has full discretion when assessing the matter, but will consult with the Minister of Justice, the Minister of defense and the Minister of Climate, Energy and Utilities. The statement is subject to a free political opinion.

To what extent will the authorities consult or cooperate with officials in other countries during the substantive assessment?

The Investment Screening Act

The authorities may consult with officials in other countries or with the EU Commission, if it is found necessary.

The War Materials Act

The authorities may consult with officials in other countries, if it is found necessary.

The Continental Shelf Act

The statement from the Minister of Foreign Affairs is a free political opinion and it follows from the preparatory works to the act that the minister may consult and include foreign political considerations, including EU politics and alliance considerations.

Other relevant parties

What other parties may become involved in the review process? What rights and standing do complainants have?

The Investment Screening Act

The review process will involve the investor as well as the Danish enterprise to which the investment or agreement pertains. The investor may appeal to the Danish courts with respect to a negative decision by the Danish Business Authority or the Danish Minister of Industry, Business and Financial Affairs.

The War Materials Act

The Ministry of Justice will not consult other parties, such as competitors, customers and the like, in the review process. The applying company may complain if it is believed that the Ministry of Justice has made a mistake when processing the application. The decision from the Ministry of Justice contains a complaint procedure.

The Continental Shelf Act

No other parties than the applying company will be involved in the review process. If permission to install the transit power cable or natural gas pipeline is granted, anyone with a material and individual interest may complain over the permission to the Danish Energy Board of Appeal. However, the recommendation from the Minister for Foreign Affairs cannot be subject to appeal.

Prohibition and objections to transaction

What powers do the authorities have to prohibit or otherwise interfere with a transaction?

The Investment Screening Act

The Danish Minister of Industry, Business and Financial Affairs has the authority to prohibit an investment or entering into a special financial agreement if matters of national security or public order support such a decision.

If an investor fails to comply with the obligation to obtain a pre-approval, the Danish Business Authority can deny registration of the ownership in the Danish Central Business Register and may order the investor to divest the investment or to annul the agreement. In case the investor fails to divest the investment, the Danish Business Authority is entitled to revoke the voting rights of the investor. In addition, if the investor fails to annul the agreement, the Danish Business Authority is entitled to declare the agreement invalid (i.e, without legal effect) between the parties.

The War Materials Act

The Danish Ministry of Justice has the authority to prohibit a transaction, et cetera, if matters of foreign policy or security are found to speak against permission. Infringement with the obligation to obtain permission is subject to fines.

The Continental Shelf Act

The Danish Ministry of Climate, Energy and Utilities must prohibit transactions, et cetera, if the installation is not compatible with foreign policy, safety and defense interests (i.e, when the recommendation from the Minister of Foreign Affairs is negative).

Is it possible to remedy or avoid the authorities’ objections to a transaction, for example, by giving undertakings or agreeing to other mitigation arrangements?

The Investment Screening Act

If the Danish Business Authority considers that an investment or a special financial agreement may pose a threat to national security or public order in Denmark, but such threat can be eliminated or mitigated by specific remedies, it is possible to remedy or avoid an objection by the Danish Business Authority by agreeing to remedies.

The War Materials Act

The issue is not regulated. However, the Ministry of Justice has stated that they are not aware of situations where a denial has been remedied by giving undertakings or other mitigation arrangements. This can therefore not be expected.

The Continental Shelf Act

It is not possible to remedy or avoid the authority’s denial by offering remedies.

Challenge and appeal

Can a negative decision be challenged or appealed?

The Investment Screening Act

Negative decisions by the Danish Business Authority or the Danish Minister for Industry, Business and Financial Affairs may be appealed to the Danish courts. The case has to be brought before the courts within six months after receiving the negative decision.

The War Materials Act

If the company filing for permission receives a negative decision, it will be possible to complain if it is believed that the Ministry of Justice has made a mistake when processing the application. The decision from the Ministry of Justice contains a complaint procedure.

The Continental Shelf Act

Negative decisions from the Danish Ministry of Climate, Energy and Utilities (i.e, where a permission to install is refused based on a negative recommendation from the Minister of Foreign Affairs) may be appealed to the Danish courts. The case has to be brought before the courts within six months from the rejection by the Minister of Climate, Energy and Utilities.

Confidential information

What safeguards are in place to protect confidential information from being disseminated and what are the consequences if confidentiality is breached?

The Investment Screening Act

The disclosure of confidential information is regulated in an executive order (the Confidentiality Order), pursuant to which the Danish Business Authority is obliged to protect confidential information received under a filing process. However, the Danish Business Authority may disclose confidential information to other relevant authorities. Cases subject to the Investment Screening Act are exempt from the act on public access to documents in public files and the persons handling the application within the Danish Business Authority, namely, the FDI team, are subject to a strict duty of confidentiality, namely, no information within the application may be made available to anyone other than the FDI team processing the application.

The War Materials Act

The only parties involved in the filing process are the filing company and the relevant public authority. In Denmark, public authorities may consult the company before disclosing any documents according to, for example, an application to access public documents, and the company may then object to the disclosure of the documents or sensitive information concerned. Furthermore, the Access to Public Administration Files Act protects the companies involved from the disclosure of sensitive information.

The Continental Shelf Act

RECENT CASES

Relevant recent case law

Discuss in detail up to three recent cases that reflect how the foregoing laws and policies were applied and the outcome, including, where possible, examples of rejections.

The Investment Screening Act

First rejection in Denmark: It has been announced that the Danish Minister of Industry, Business and Financial Affairs has refused to authorize a foreign investment, as the listed Japanese enterprise Hamamatsu Photonics KK was denied acquisition of NKT’s subsidiary – NKT Photonics Management Europe SRL, a supplier of fibre lasers and photonic-crystal fiber and a known supplier to the defense industry.

The decision was not made public by the Danish Minister of Industry, Business and Financial Affairs, but by NKT, who in their company announcement No 13 on 2 May 2023, announced that Hamamatsu Photonics KK did not obtain the Minister’s authorization under DISA. According to the company announcement, authorizations otherwise required had been obtained from the authorities in Germany, the UK and the US.

The specific details regarding the reason behind the finding that the divestment of NKT Photonics to the Japanese enterprise would pose a threat to national security or public order are unknown.

As far as we are aware, this is the first FDI rejection in Denmark. It illustrates the Danish authorities’ tightened control over foreign investments within the particularly sensitive sectors in Denmark. Investors should, therefore, carefully consider any potential restrictions on foreign investments at the early stages in the transaction process, when pursuing investment opportunities involving Danish entities. Similarly, sellers of Danish entities are advised to perform a risk assessment with respect to the potential buyers before concluding any binding agreements.

The War Material Act

There are no recent cases.

The Continental Shelf Act

In October 2019, the Danish Ministry of Climate, Energy and Utilities issued permits to the Danish independent public enterprise Energinet and to the Polish Gaz-System SA to construct and install the natural gas pipeline in the North Sea (the Baltic Pipe). As a part of the application process and as a premise for the permits, the recommendation from the Minister of Foreign Affairs was that the project was compatible with Danish foreign policy, security policy and defense policy.

UPDATE AND TRENDS IN FOREIGN INVESTMENT IN DENMARK

Key developments of the past year

Are there any developments, emerging trends or hot topics in foreign investment review regulation in your jurisdiction? Are there any current proposed changes in the law or policy that will have an impact on foreign investment and national interest review?

Key developments

The first amendment to the Investment Screening Act introduced two key changes with respect to the Danish FDI regime with effect from 1 July 2023. Firstly, it broadened the scope of application in connection with the North Sea Energy Island, whereby entering into any agreement with respect to establishment, joint ownership and operations of the North Sea Energy Island requires the pre-approval of the Danish Business Authority. The second change relates to the application process, which was amended to consist of two phases, whereby only relatively complicated cases are advanced to phase 2 that require more comprehensive information for the Danish Business Authority to grant or deny authorization of the investment.

Emerging trends

With the increased focus on national security in light of the current political climate, we expect to see tightened control and increased scrutiny of foreign investments. More specifically in relation to expected changes, it is noted that the Danish government’s legislative program for 2023/2024 includes proposals for amendments to the Export Control Act and the Investment Screening Act. Such amendments are expected to increase control in relation to two of the particularly sensitive sectors – critical technology and critical infrastructure, as well as in relation to public tenders and research collaborations.

In previous legislative proposals from the spring in 2023 (although they have been significantly amended), we have seen suggestions to include an obligation on any contracting party, which wishes to enter into a public contract within critical infrastructure, to obtain a pre-approval from the Danish Business Authority before entering into this contract.

* The information in this chapter was accurate as at November 2023.

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