New foreign direct investments screening mechanism in Belgium

On 19 March 2019, the European Union adopted Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments in the European Union. Following this, Belgium decided to follow in the footsteps of its neighbors by setting up a cooperation agreement on 30 November 2022, providing for a foreign direct investment screening mechanism which came into force on 1 July 2023.

To this end, an interfederal screening commission (the "ISC"), made up of representatives of the federal state and federated entities, controls investment projects envisaged by foreign investors in a Belgian company, but only in certain cases, as summarized below.  

A foreign investor is defined as:

• any individual whose main residence is outside the European Union;
• any third-country company, incorporated or organized under the law of a non-EU country, whose registered office or principal place of business is in a country outside the European Union; or
• any company with a beneficial owner whose main residence is outside the European Union. 

A foreign direct investment consists of an investment of any kind made by a foreign investor with the aim of establishing or maintaining direct and lasting relations between the foreign investor and the entrepreneur or company, including investments allowing effective participation in the management or control of that company. 

This mechanism applies only to the following acquisitions:

• direct or indirect acquisitions of at least 10% of the voting rights in companies established in Belgium operating in the defense, energy, cybersecurity, electronic communications or digital infrastructure sectors, and whose annual turnover in the year preceding the acquisition exceeded EUR 100 million; and
• direct or indirect acquisitions of at least 25% of the voting rights in companies or entities established in Belgium and whose activities relate to, in particular, critical infrastructures for energy, transport, water, health, the private security sector, access to sensitive information, etc.

The procedure is divided into three phases:

• Notification after conclusion and before completion of the agreement by the foreign investor on his own initiative to the ISC in the cases mentioned above, providing certain information such as the identity of the investor or the planned completion date of the investment. In principle, notification should be made on the basis of signed documentation, but draft agreements may also be used.
• Assessment by ISC members of the transaction, examining whether it could have an impact on national security, public order or the strategic interests of federated entities. If the ISC considers that there are concrete indications of impact, a screening procedure is initiated. Otherwise, the file is considered authorized.
• Screening, the aim of which is to carry out a concrete risk analysis. It is then possible to organize a hearing and request additional information. After analysis, the ISC can either accept or refuse the transaction, or accept it subject to conditions and propose corrective measures. The parties may appeal the decision to the Market Court. 

Foreign investors who fail to comply with their obligation may be subject to an administrative fine of up to 10%, and sometimes 30%, of the investment amount. 

The procedure is compulsory and suspensive, so that the transaction can only be completed once the ISC has given its approval. The transaction documentation should include a condition precedent in case of deferred signing and closing, and a series of other clauses concerning, for example, information sharing.

The cooperation agreement itself is available in Dutch and in French.

For further information, please do not hesitate to consult your trusted BDO advisor or one of our experts Didier Leclerq or Bram Demeester.