New Swedish legislation is proposed regarding certain foreign direct investments

The Swedish government has proposed new legislation regarding foreign direct investments in Swedish entities carrying out certain protected activities. The primary objective of the proposed act (the "FDI Act") is to prevent investments that may pose a threat to national security, public order, or public safety. The FDI Act is anticipated to come into force on 1 December 2023.

The FDI Act is expected to have significant implications for mergers and acquisitions, as well as other investments in Swedish entities. Presently, Sweden lacks similar legislation, so the FDI Act will create a new legal framework within this area. As per the proposal, investors will be responsible for submitting notifications to the screening authority, and entities subject to notifiable investments will need to inform the investor that the investment is subject to the FDI Act. Generally, no turnover or deal value thresholds will apply.

The absence of a review system in Sweden has been a problem, and the proposed FDI Act aims to establish a new system to prevent foreign investments that may compromise national security. The FDI Act will establish a screening authority responsible for assessing the risks associated with each investment on a case-by-case basis. If an investment falls within the scope of the FDI Act, it may only proceed if it has been approved or if the screening authority has decided not to take further action. The screening authority may approve an investment subject to conditions and may also impose administrative fines for breaches of the FDI Act, up to a maximum of SEK 100 million.

Foreign investments in energy production, infrastructure and semiconductor technology are sectors that could be affected by this legislation. However, investments that have already been made will not be subject to the new legislation.

The FDI Act will bring Sweden in line with 18 out of 27 EU countries that already have this type of review system in place.