New guidelines for the Belgian rules on foreign direct investment

Since 1 July 2023, the Belgian rules on the screening of foreign direct investments (“FDI”) have been in force. As the decisions of the Interfederal Screening Commission (“ISC”) are not published, the rules’ application and interpretation still raise a lot of legal uncertainty. On 4 April 2024, the ISC published guidelines to provide further clarification.

Since 1 July 2023 a mandatory notification procedure has been in place in Belgium for transactions involving a non-EU investor investing in a Belgian target active in certain specific sensitive sectors. This notification procedure is in addition to other, already existing, requirements like mandatory merger notification to and approval by the competition authorities. In particular, transactions by a foreign investor acquiring either control over or 10% or 25% of the voting rights in a Belgian target – depending on the target’s activities –  must be notified to and approved by the ISC before they can be implemented. This screening system applies to foreign investments in Belgian targets active in a number of exhaustively-listed sensitive sectors, like defence (including dual-use goods), healthcare, energy, telecoms, transport, critical technology and raw materials, critical infrastructure (whether physical or virtual), food security, private security, media, cybersecurity, access to sensitive information and personal data, and biotechnology. More information on the introduction of the Belgian FDI rules is available in our dedicated blog post.

On 30 June 2023 – right before the entry into force of the Belgian FDI system – the ISC published some guidelines on the rules’ application and interpretation, but it was explicitly indicated that this guidance merely concerned a proposal of guidelines.

On 4 April 2024, the ISC has now shed some more light onto this new and non-public screening process by publishing finalised (as they are no longer called a “proposal”) and expanded guidelines.

While the system still raises a lot of questions, the new guidelines at least provide some very welcome clarity on at least some elements. The following are some examples of such clarifications.

According to the new guidelines, prior notification and approval is also required:

  • For an asset deal, if it leads to a change of control;
  • For the sale of a company division;
  • For internal restructurings, even if the Belgian target ultimately remains owned or controlled by the same non-European company;
  • If the number of voting shares that eventually exceeds the thresholds is acquired spread over multiple occasions;
  • If the foreign investor’s voting rights before the entry into force of the Belgian FDI rules (i.e. 1 July 2023) did not exceed the threshold, but his/her share of voting rights exceeds the threshold due to an investment after that date;
  • For an investment through which the foreign investor’s existing control increases;
  • For an investment through which the foreign investor’s veto rights increase.

According to the new guidelines, no prior notification and approval is required:

  • For greenfield investments (as only investments into existing Belgian targets are notifiable);
  • For public tenders (except if a notifiable investment occurs in the context of such a public tender);
  • For the reduction in the number of joint controlling shareholders (unless, as a result, the voting share thresholds are exceeded or if this leads to a change of control);
  • If the foreign investor’s voting rights before the entry into force of the Belgian FDI rules (i.e. 1 July 2023) already exceeded the threshold (which, however, was irrelevant at that time), and then his/her share of voting rights further increases due to an investment after that date. While the draft guidelines indicated that a notification was required in this situation, the new guidelines now indicate that no notification is required, except if the foreign investor acquires control over the Belgian target due to the new investment;
  • For an investment through which the foreign investor’s existing control decreases;
  • For an investment through which the foreign investor’s veto rights decrease;
  • For an investment in a Belgian target that is not itself active in one of the sensitive sectors, even if a non-Belgian entity belonging to the same group is active in a relevant sector;
  • For corrections of material errors or purely formal amendments to investment agreements signed before 1 July 2023 (though substantial changes could be notifiable).

According to the new guidelines, the following elements are irrelevant to determine whether or not prior notification and approval is required:

  • The size of the investment;
  • The Belgian target’s turnover (with two specific exceptions);
  • The Belgian target’s market share, whether in Belgium or abroad;
  • The Belgian target’s number of employees;
  • Whether or not the transaction is notifiable in other jurisdictions;
  • The identity and the activities of the Belgian target’s clients (although this information can be relevant for the transaction’s substantive assessment);
  • The fact that the Belgian target has a Belgian public authority as its client (although that could mean that the target has access to sensitive information, which could justify a requirement to notify).

The guidelines give a reminder that it is up to the foreign investor to determine whether or not a filing is required – there is no possibility in that regard to ask for some preliminary decision or ruling on the notification requirement. No further clarification is given on the interpretation of the sensitive activities and sectors – the guidelines are limited to a general note that the activities and sectors have to be interpreted on the basis of the purpose of the screening mechanism, i.e. to safeguard national security, public order and strategic interests.

In general, the guidelines encourage always notifying an investment in case it is uncertain whether it falls within the scope of application. While the notification process of course has timing consequences for the deal, at least notification before the ISC is free of charge, while administrative fines (up to 10% of the investment’s value) may be imposed for lack of or an incomplete notification.

In that regard, the guidelines also advise including in the transactional documents a solution to potential problems linked to the target’s unwillingness to provide certain information or the target’s provision of incorrect information – as even in such a situation the foreign investor is the one responsible for the notification and thus can be fined.

Moreover, the guidelines confirm that the ISC can – in the context of a negative decision following an ex officio investigation when no prior notification was made – order a divestment. It is thus key in any transaction involving a foreign investor to carefully study the notification requirement and, if required, to diligently prepare the filing documents.

At ALTIUS, we have all the necessary expertise to guide you in this new and challenging area.

Carmen Verdonck
Beatrijs Gielen