Foreign Investment in Belgium 2024

Foreign Investment in Belgium 2024

FOREIGN INVESTMENT 2024

BELGIUM

Hendrik Viaene, Elisabeth Vanden Kerchove

(McDermott Will & Emery)

LAW AND POLICY

Policies and practices

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

Belgium imposes no foreign exchange restrictions on the movement of capital or profits, and its currency regulations are generally unrestrictive, unless exceptional circumstances like international sanctions, prudential oversight, public policy concerns or anti-money laundering measures apply.

Main laws

2. 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 key legislation that directly or indirectly oversees acquisitions and investments by foreign nationals and investors, considering national interest, is the Cooperation Agreement, which entered into force on 1 July 2023.

The Cooperation Agreement fits within the framework created by the EU Regulation 2019/452 of the European Parliament and of the Council of 19  March 2019 (the EU FDI Regulation).It outlines the rules and regulations pertaining to foreign investments in Belgium, including sectors that may require special authorization, reporting requirements and national interest considerations.

The present contribution will not cover the regional Flemish foreign investment screening mechanism introduced earlier in December 2018 via articles III.59 and III.60 of the Flemish Governance Decree, with some moderate modifications made by the Flemish Decree dated 2 July 2021.

Scope of application

3. 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 FDI screening mechanism in Belgium targets foreign direct investments that aim to establish or maintain lasting and direct connections between the foreign investor and the Belgian undertaking. It has applied as of 1 July 2023.

Transactions meeting the cumulative conditions listed below will require notification to the Interfederal Screening Commission (ISC). If the transaction is not cleared, the transaction cannot be implemented or closed.

An investment is subject to an FDI filing in Belgium when:

• it involves a non-EU investor;
• it is directed towards a Belgian-based entity or undertaking already engaged in economic activities;
• it involves acquiring either control, or a stake of 10 per cent or 25 per cent (dependent on the sector involved and relevant turnover thresholds being met) in the voting rights of the target; and,
• the target’s operations pertain to designated sectors, and, depending on the sector involved and stake being acquired, meet certain turnover thresholds.

Therefore, the value of the investment is irrelevant for the FDI regime to apply. The Cooperation Agreement explicitly excludes greenfield investments, which entail establishing new economic activities by the foreign investor rather than acquiring existing ones. In addition, public contracts are not covered by the FDI regime, unless they require a foreign investment into an existing entity.

The FDI regime in Belgium entered into force on 1 July 2023, and decisions are not yet available. The secretariat of the ISC has published draft guidelines, which are expected to be updated regularly. However, these guidelines are not binding as it is the secretariat that has published the draft, and the document has not been decided on by the component parts of the ISC, which are federal and federated entities.

The Cooperation Agreement leaves room for diverging interpretations on several points. One important point of ambiguity is whether the Cooperation Agreement will cover only foreign acquisitions of 10 per cent or 25 per cent of voting rights in companies, or whether it will also cover acquisitions of control even when these thresholds are not met. The broader reading would follow from the definition of foreign direct investment in the Cooperation Agreement. However, the provisions focusing on notification obligations do not consistently refer to control, but only to 10 per cent or 25 per cent of voting rights being acquired.

As the secretariat of the ISC cannot provide binding guidance on the ambiguities in the Cooperation Agreement and has issued only a ‘proposal for guidelines’, parties are generally advised to notify the transaction and engage in a discussion with the members of the ISC.

Internal restructurings within a business group, where the Belgian company remains ultimately owned or controlled by the same non-EU company, fall within the scope of the Cooperation Agreement so long as the general conditions outlined in the agreement are met, as there are no specific exceptions for internal restructurings.

Definitions

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

The concept of a ‘foreign investor’ covers the following categories:

• private individuals from outside the EU: this includes private individuals whose primary residence is located outside the European Union;
• third country undertakings: this classification pertains to undertakings that are established or structured under the legal framework of non-EU member states; and
• undertakings with non-EU beneficiary owners: this category encompasses businesses in which at least one of the ultimate beneficiary owners maintains their primary residence outside the boundaries of the EU. In an ‘undertaking’ as defined by the provisions outlined in articles 1:33–1:36 of the Belgian Code of Companies and Associations, as well as in compliance with the regulations established by the law dated 18 September 2017 aimed at preventing money laundering and terrorist financing and imposing limitations on cash transactions, the entity holds its main domicile outside the European Union.

The term foreign direct investment, as articulated in the Cooperation Agreement, refers to any form of investment made by a foreign investor with the intention of establishing or sustaining enduring and direct connections between the foreign investor and the entrepreneur or business entity. This includes investments that facilitate active involvement in the management or oversight of said business entity.

Special rules for SOEs and SWFs

5. 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?

According to the Cooperation Agreement, the evaluation by the members of the ISC regarding the necessity of initiating a secondary screening can take into account whether the foreign investor is under (in)direct control of a third country’s government, including entities such as public institutions or military forces, either through ownership arrangement or substantial financial backing.

However, when investments by SOEs or SWFs do not meet the 10 per cent, 25 per cent or ‘control’ threshold, they will not be subject to FDI review under the Cooperation Agreement.

Relevant authorities

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

Under the Cooperation Agreement, when a transaction is subject to the Belgian FDI regime, the acquiring entity (or its representative) must notify the transaction to the ISC. The secretariat of the ISC is part of the Federal Public Service Economy, and the committee is chaired by a delegate from the Federal Public Service Economy. However, this chairperson does not possess voting authority in the decision-making process. Therefore, the secretariat only fulfills a secretarial role.

The ISC itself is a body composed of nine members, three from the competent federal ministries and six from the different competent federated entities. It brings together all the federated states in Belgium in addition to the federal state, where each entity operates and decides within its own jurisdiction, ensuring a unified and consistent stance on foreign investment.

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

In the Belgian FDI regime, only transactions meeting the thresholds of control (10 per cent or 25 per cent voting rights and relating to the industry sectors defined by the Cooperation Agreement) can be reviewed by the ISC.

Decisions regarding the permissibility of an investment under the Cooperation Agreement cannot be based on economic considerations. The only factors considered are the preservation of national security, public order and strategic interests. The authorities will examine transactions against the criteria of public order, national security or strategic interests. While notions of public order and national security seem straightforward, it is the concept of strategic interests that widens the scope of the ISC’s powers to intervene in a transaction, as this is open to broad interpretation. As these concepts are not strictly defined, they in practice give a wide degree of discretion to the ISC’s members.

PROCEDURE

Jurisdictional thresholds

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

The mechanism applies to foreign investment agreements signed on or after 1 July 2023. The need for a notification is not influenced by the value of the investment.

The following jurisdictional thresholds apply for a prior notification obligation for an investment by a foreign investor to be triggered:

• acquisitions of at least 25 per cent of the voting rights in Belgian companies whose activities touch upon:

1. a wide range of critical infrastructures, physically and virtually, for energy, transportation, water, health, electronic communications and digital infrastructure, media, data processing or storage, et cetera;
2. technologies and raw materials that are critical for safety (including health safety), defense, maintaining public order, military equipment subject to the Common Military List and dual use goods;
3. critical input supply, including energy or raw materials and security of food supply;
4. access to sensitive information or personal data or the possibility to control such data;
5. private security;
6. freedom and pluralism of media; and
7. strategic biotechnology, if the target’s turnover in the preceding accounting year exceeds €25 million;

• acquisitions of at least 10 per cent of the voting rights in Belgian companies engaged in activities that touch on the sector of defense, including dual use goods, energy, cybersecurity, electronic communication or digital infrastructures, provided that the target’s turnover exceeded €100 million in the preceding accounting year; and
• acquisitions of control in any of the sectors discussed in the two above bullet points.

Foreign investors who already hold a participation and subsequently exceed one of the voting share thresholds will also have to notify this increase in voting rights.

Internal restructurings within a business group, where the Belgian company remains ultimately owned or controlled by the same non-EU company, fall within the scope of the Cooperation Agreement so long as the general conditions outlined in the agreement are met, as there are no specific exceptions for internal restructurings.

National interest clearance

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

Investments falling within the defined scope should be reported before the closing of the investment. The investment must be notified to the Interfederal Screening Commission (ISC) by either the investor or the acquiring entity, or a representative of the investor.

Additionally, draft agreements can be notified, if the involved parties explicitly state their intention to finalize an agreement that substantially aligns with the relevant points in such a draft.

No filing fees need to be paid.

The screening process comprises two formal stages: the assessment phase, and, if needed, the screening phase. The transaction can be cleared at the end of the assessment phase or at the end of the screening phase.

In order to start the assessment phase, the investor will have to complete and file the following documents:

• the Belgian notification form;
• a summary thereof; and
• the form established by the European Commission within the framework of the EU cooperation mechanism.

The Belgian notification form requires information on the ownership structure of the foreign investor and target, the estimated value of the foreign investment, the business activities of the foreign investor (group) and target, the funding of the investment, including its source, and more.

Additionally, the ISC reserves the right to request additional information it deems essential for a comprehensive notification, which can potentially prolong the initiation of the submission, much like the process in Belgian merger control. Electronic submissions are a viable option.

Assessment phase

The investor will file the notification with the secretariat of the ISC. Any member of the ISC can then request any additional information they deem necessary. Once the notification is deemed complete, the file is communicated to the Coordination Committee for Information and Security as well as to the competent members of the ISC. A summary is sent to the members of the ISC that are not competent.

A member of the ISC is competent to review the dossier if the geographical scope of their concern aligns with the proposed investment, and if the investment could have a significant impact on their areas of expertise.

If a member of the ISC first deemed not to be competent can indicate that they consider themself to be competent, they will then also receive the full notification.

Once the secretariat of the ISC informs the notifying parties that the notification is complete, the assessment phase formally begins. Each of the competent members of the ISC carries out their own independent investigation.

If one of the competent members has concrete indications that the notified transaction entails a potential risk to public order, national security or strategic interest, the transaction is referred to the screening phase.

A decision in the assessment phase has to be made within 30 days from receipt of the complete notification file. If this deadline elapses, the transaction is tacitly approved. This delay can be suspended by requests for information.

Therefore, at the end of the assessment phase, the following outcomes can be achieved:

• transaction is approved explicitly or tacitly; or
• transaction is referred to the screening phase.

Screening phase

Once the screening phase is initiated, each of the competent members of the ISC will draft advice that may conclude that the notified transaction raises potential risks for public order, national security or strategic interests. A copy of this advice is shared with the foreign investor and the Belgian companies that are involved in the transaction. They will be granted access to the file and can submit written observations on the file and request a hearing.

Following the receipt of advice highlighting a potential risk from one of the competent members of the ISC, the notifying parties can enter into negotiations with the competent member of the ISC to agree on corrective measures that will alleviate the concerns of potential risks to public order, national security or strategic interests.

At the beginning of the screening phase, the cooperation mechanism, as laid out in Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the EU, is also set in motion.

In principle, a decision in the screening phase must be made within 28 days. However, communication with the European Commission and other member states, and negotiations with the parties on corrective measures, et cetera, can easily result in decision time-frames of two to three months or even longer.

At the end of the screening phase, one of two outcomes is possible:

• transaction is approved explicitly or tacitly, with or without commitments; or
• transaction is prohibited.

A prohibition decision at the federal level can only be made by the Council of Ministers. A prohibition decision at the federated level must be taken unanimously by all competent federated ministers.

Throughout both the assessment and the screening phases, the secretariat of the ISC will automatically request the opinion of the Coordination Committee for Information and Security. In addition, at the request of one of the ISC members, the opinion of other federal and federated agencies can be requested. Such opinions must be rendered within strict deadlines provided for in the Cooperation Agreement.

10. Which party is responsible for securing approval?

The investor or acquiring entity, or a representative of the investor, is responsible for securing approval.

Review process

11. 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 baseline time period is 30 days for the assessment procedure and, if initiated, 28 days for the screening procedure.

The process can be suspended or extended at moments defined in the Cooperation Agreement. The most important examples are the two-month extension and additional one-month suspension at the request of the Coordination Committee for Information and Security. Each of these extensions must be granted by the members of the ISC and should be justified by the complexity of the file. Another important event that will suspend the deadline by one month is when parties start negotiating corrective measures. This deadline can be moved several times by periods of one month if the notifying parties agree to such an extension.

12. 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 FDI review must be completed before the parties can close the transaction.

The responsibility for notifying the transaction to the ISC rests with the acquiring entity, which can be fulfilled either by the investor directly or through a representative.

Non-adherence to the obligation of notifying or breaching the stipulated standstill commitment can entail financial repercussions of up to 30 per cent of the investment’s value.

Additionally, the ISC will require a filing to be made by the investor that did not file. It will then have the possibility to still conduct an assessment and screening, following which structural modifications and corrective measures may be imposed up until two years after the acquisition of the voting rights, with a possible extension of three extra years in case of indications of bad faith.

Involvement of authorities

13. 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 (secretariat of the) ISC will not give informal guidance, nor is it willing to engage in pre-filing dialogue. It is up to the parties to notify the transaction based on the notification form, and then to await whether any additional requests for information are sent out to further complete the notification.

14. 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 regime entered into force on 1 July 2023. There is no guidance available yet on the usefulness of such tools in order to expedite approval of the transaction.

15. 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?

Authorities are not authorized to assess transactions that fall below the established thresholds or criteria.

They can only challenge or unwind a transaction that wrongly was not notified.

SUBSTANTIVE ASSESSMENT

Substantive test

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

In accordance with the Cooperation Agreement, the Interfederal Screening Commission (ISC) will grant approval for foreign investments in the assessment phase if none of the competent ISC members identify specific indications of a potential risk to public order, national security or strategic interests.

The outcome of the screening phase may lead to: a positive decision permitting the foreign investment; a positive decision with accompanying corrective actions; or a negative decision by the ISC. In cases where multiple federated entities hold competence, a unanimous agreement is required to deem a foreign investment inadmissible. However, the Federal Minister retains the authority to veto the inadmissibility decision within their jurisdiction.

Explicit guidelines regarding the primary assessment criteria are not presently accessible. As per the terms of the Cooperation Agreement, an annual report is the sole requirement for publication in compliance with EU Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019.

As this is a new system that entered into force on 1 July 2023, no case law is available yet to provide further guidance.

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

When an investment is notified in Belgium, it does not trigger a separate notification obligation to another country. For each investment the investor will need to check which countries’ FDI regimes are applicable.

In the Belgian FDI regime, when the investment is sent to the screening phase, Belgium is compelled to share transaction details with both other member states and the European Commission as part of the EU cooperation mechanism. Under the framework of the EU cooperation mechanism, the European Commission has the capacity to furnish recommendations to Belgium, while fellow member states can contribute comments. Belgium is under an obligation to take these recommendations and comments into account, but it retains full authority to arrive at the conclusive decision concerning investment cases.

Other relevant parties

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

As per the Cooperation Agreement, during the assessment or screening phase, the ISC and its authorized members have the authority to solicit input from relevant government bodies, sector overseers and capable regulators. As such, complainants have no formal standing. However, in practice, if they object to an investment, they will have to make sure to convince a competent federal or federated member of the necessity to block the transaction or to extract corrective measures.

Prohibition and objections to transaction

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

The ISC can block a transaction or extract corrective measures from the parties to the transaction. The corrective measures may include imposing a code of conduct in relation to the invested entity’s exchanging of sensitive information; limiting the investment to a lower level of control; or requiring that a new notification is made when there is a change in the quality of control or when over 50 per cent of voting rights are held by the same foreign investor.

20. 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 ISC can suggest corrective measures through consultation with the notifying party and the competent ISC members.

These corrective measures are designed to facilitate a positive decision and may include measures such as establishing a code of conduct for sensitive information, appointing compliance officers for processing sensitive or intellectual property-related data, authorizing security clearances for administrators, designating a liaison officer for regulating information access and transfer, third-party custody of technology or source codes, granting state licenses for know-how, separating vital processes, limiting customer engagement, divestments, ensuring process continuity through guarantees, implementing safety protocols, periodic reporting, and mandating notification in case of a change in the quality of control or when over 50 per cent of voting rights are held by the same foreign investor.

Challenge and appeal

21. Can a negative decision be challenged or appealed?

One cannot appeal the decision to initiate the screening procedure.

Appeals can be lodged only against final decisions by the foreign investor or the entity the investment was made in. The appeal must be made at the Market Court located in Brussels. An appeal does not suspend the contested decision.

The Market Court, through summary proceedings, will render a decision on the case based on the facts and legal arguments presented by the parties. It possesses the authority to invalidate the disputed decision partially or in its entirety. Furthermore, the Market Court exercises complete jurisdiction over ISC rulings that impose fines, and can annul, reduce or increase the imposed fine. Should the Market Court nullify the decision, the matter will be referred back to the ISC.

Confidential information

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

The provided information will be handled with due care and in accordance with General Data Protection Regulation provisions, and it will only be disseminated on a strict ‘need-to-know’ basis.

Business data will be processed only to the extent necessary for screening foreign direct investments and ensuring the effectiveness of international cooperation as described in article 13 of Regulation 2019/452.

RECENT CASES

Relevant recent case law

23. 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 Cooperation Agreement entered into force on 1 July 2023. No cases have been made public yet.

UPDATE AND TRENDS IN FOREIGN INVESTMENT IN BELGIUM

Key developments of the past year

24. 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?

The Cooperation Agreement entered into force on 1 July 2023. No immediate changes are expected, although practitioners continue to insist on the adoption of formal clarifying guidelines to generate more business certainty.

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

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“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”

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