This information was provided by Jakob Hans Johansen on 15 September 2020,
and should be reviewed against any later legislative updates.
The Danish Munitions Act (consolidated Act no. 1004 of 22 October 2012). Investments covered by the act must be notified to the Ministry of Justice.
Denmark does not currently have a cross-sectoral screening regime, but only a screening regime in relation to investments into the defence sector. The government has been considering enacting a new regime, but we do not expect anything at least before 2020.
Besides the Danish Munitions Act, there is one other act that partially takes foreign and national security interests into consideration; the Act on the Continental Shelf and Certain Pipeline Installations on Territorial Waters. This act covers the continental shelf and certain pipeline installations in territorial waters, and stipulates that an authorisation must be granted before placing certain pipelines in Danish waters. When reviewing requests for authorization, the Danish authorities will also take foreign and national security interests into consideration (this is not the case in relation to mining for example). However, when an authorisation has been granted, and foreign investments take place in the corporation owning the pipeline, no new authorisation or screening has to take place, but the company holding the authorisation is required to notify that there has been a change, after granting the authorisation.
Other acts provide for screening mechanisms as well, but the screening criteria are not based on national security and public order (e.g. the Competition Act and the Financial Business Act). Other acts provide that an authorisation must be granted before carrying out a specified activity, but these acts are applicable to any person seeking to carry out the specified activity (e.g. professional transport of passengers (taxi)).
The former Danish Minister of Justice confirmed that new rules will be broader, and cover “critical infrastructure” such as energy, IT, telecom, transport, health as well as advanced technologies and artificial intelligence. Further, not only direct investments will be covered, but also rental agreements, operation agreements and other ways of establishing “control”.
The Munitions Act applies to all undertakings producing
1) materials, constructed for military purposes, and which do not serve any civilian purpose;
2) firearms and objects that appear to be firearms (except for firearms specially constructed for sporting or hunting);
3) ammunition, which can be used for military purposes;
4) gunpowder and explosives; and
5) components and parts, which is constructed for use in any of the equipment mentioned in 1)-4), and does not serve a civilian purpose.
Please see the answer to question 2.
If the undertaking is covered by the Danish Munitions Act, and has not been exempted under Section 14 of the Munitions Act, the following investments have to be authorised by the Minister of Justice:
(i) A sole proprietorship has or gets an owner, who is not a Danish citizen;
(ii) A public limited company (A/S), private limited company (ApS), cooperative society or the like has or gets a registered domicile outside of Denmark;
(iii) The undertaking has or gets a CEO or employees authorized to sign for the undertaking, who are not a Danish citizen;
(iv) The percentage of Danish citizens on the Board of Directors is or becomes less than 80 percent;
(v) The percentage of Danish owned share capital is or becomes less than 60 percent;
(vi) Foreigners, by ownership of the share capital, represent or will represent more than 20 percent of the voting rights; or
(vii) Foreigners through ownership of share capital or in any other way have or get decisive influence over the undertaking.
An undertaking can be exempted by the Minister of Justice, from Sections 2-7 (the notification requirements) under Section 14 of the Danish Munitions Act. This requires either that the undertaking, is
(i) only to a small extent producing munitions;
(ii) only produces gunpowder or explosives; or
(iii) solely engaged with ancillary subprocesses in the production.
An exemption under Section 14 of the Danish Munitions Act could for instance be granted to undertakings engaged in spray paint or heat treatment of parts of munition.
Yes. Section 3, number 3 of the Danish Munitions Act is very broad and covers a foreigner having or gaining decisive influence of the target, either through ownership of share capital or in any other way.
An authorization has to be granted unless foreign policy interests or national security speak against it in the specific matter, see Section 4 of the Danish Munitions Act. This is the only criteria for reviewing investments under the Danish Munitions Act.
Section 3 of the Danish Munitions Act applies to all non-Danish citizens and/or undertakings.
In order to setup a business active within the fields covered by the Danish Munitions Act anyone, including Danish citizens or undertakings, will need a permission under Section 2 of the Danish Munitions Act.
However, other rules cover Danish investors as well, see Q 1.
Yes. The Danish Munitions Act covers any non-Danish investment.
If the undertaking is covered by the Danish Munitions Act, see Q 2 and Q 3, and has not been exempted under Section 14 of the Munitions Act, the following investments have to be authorised by the Minister of Justice:
1) A sole proprietorship has or gets an owner, who is not a Danish citizen;
2) A public limited company (A/S), private limited company (ApS), cooperative society or the like has or gets a registered domicile outside of Denmark;
3) The undertaking has or gets a CEO or employees authorised to sign for the undertaking, who are not a Danish citizens;
4) The percentage of Danish citizens on the Board of Directors is or becomes less than 80 percent;
5) The percentage of Danish owned share capital is or becomes less than 60 percent;
6) Foreigners, by ownership of the share capital, represent or will represent more than 20 percent of the voting rights; or
7) Foreigners through ownership of share capital or in any other way have or get decisive influence over the undertaking.
An undertaking can be exempted by the Minister of Justice, from Sections 2-7 (the notification requirements) under Section 14 of the Danish Munitions Act.
This requires either that the undertaking, is
1) only to a small extent producing munitions;
2) only produces gunpowder or explosives; or
3) solely engaged with ancillary subprocesses in the production.
An exemption under Section 14 of the Danish Munitions Act could for instance be granted to undertakings engaged in spray paint or heat treatment of parts of munition.
To our knowledge this has never occurred in practice. But if the thresholds (see Q 9) are reached, a notification would seem to be required indifferent as to whether the stocks are publicly traded.
It will under the Danish Munitions Act.
But the target might be required to inform the markets on changes in ownership etc. if it is traded on the stock exchange under the capital market legislation.
The investment can be structured as the investor sees fit, and there are no requirements on the contents of the purchase agreement.
This aspect is not mentioned in the Danish Munitions Act or the travaux preparatoires. However, the Ministry of Justice has informed us that in order to authorise an investment caught by Section 3 of the Act, certain information has to be provided from the undertakings concerned, and information in relation to the intended investment. Therefore, the investment must be formalized to a certain extent before the Ministry of Justice can grant an authorisation.
There are no specific rules in this regard. Often the parties will contact the Ministry of Justice collectively.
The Ministry of Justice has informed us that is has never occurred that an investment has not been notified.
It is assumed, since nothing is mentioned in the Danish Munitions Act or the travaux preparatoires, that the transaction will be considered void if a prior authorization has not been granted.
The Ministry of Justice has not made use of the authority to enact procedural rules by ministerial order under Section 5(1) of the Danish Munitions Act, but our experience is that basic information about the transaction, the post-transaction ownership and the acquirer has to be provided.
There is no formal time frame, and the Minister of Justice has not made use of the authority to enact procedural rules by ministerial order according to Section 5(1).
The Ministry of Justice takes the final decision.
In the travaux preparatoires it is assumed that the Minister of Justice will consult with the Ministry of Foreign Affairs, the Ministry of Defence and the Commissioner of Police.
It will under the Danish Munitions Act.
But the target might be required to inform the markets on changes in ownership etc. if it is traded on the stock exchange under the capital market legislation.
Remedies are not mentioned in the Danish Munitions Act, and has never been applied in practice.
It is unknown whether remedies could make the Ministry of Justice approve an otherwise unprovable transaction.
If a prior authorization has not been granted, both physical persons and legal persons, can be fined under Section 15 of the Danish Munitions Act. Under aggravating circumstances persons can be imprisoned for up to one year.
It is assumed, since nothing is mentioned in the travaux preparatoires, that the transaction will be considered void if a prior authorization has not been granted.
The Ministry of Justice has informed us that it has never occurred that an investment has not been notified, and therefore sanctions have never been applied.
Yes – under Section 63 of the Constitution any administrative decision can be brought before the courts.
