Sweden – FDI Screening Practical Q&A Overview

Sweden has no FDI screening rules yet, but the government is working on proposing a general screening system. Sweden will however apply the EU FDI screening rules as of October 2020, which means the authority ISP (Inspectorate for Strategic Products) may ask the target or investor to provide information on a foreign investment, which the ISP then can share with other EU Member States and the European Commission.

Currently, there are two inter-connected legislative initiatives for FDI screening rules, which run in parallel:

1. an inquiry (Sw. Direktinvesteringsutredningen) appointed to investigate and suggest legislation on the introduction of a comprehensive FDI screening procedure and blocking mandate; and
2. a fast-tracked initiative, triggered by the Covid-19 outbreak, by means of a revamping of the Protective Security Act.

As of today, there are however some ownership restrictions, mainly in three laws:

• The Law on Acquisition of Land for Agricultural Activity: restrictions on who may acquire land for agricultural activity from an individual. Authorization is required for a legal person in most cases, and thus also for a foreign legal person.
• The Military Equipment Act (Sw. Lagen om krigsmateriel (1992:1300): restrictions on foreign ownership when granting authorisations for the manufacture and supply of military equipment in Sweden.
• The Protective Security Regulation (Sw. Säkerhetsskyddsförordningen (2018:658)):  Notification obligations in relation to change of ownership or transfer of operations that fall within “protective security”. A current proposal suggest introduces a approval mechanism through means of a consultation procedure. The amendments are set to enter inte into force on 1 January 2021.

Sweden does not yet have rules specifically addressing FDI.

Certain ownership and notification requirements however apply in acquisition of land for agricultural activity, manufacturing and supply of military equipment, and operations falling under what is deemed “protective security”.

If the proposed amendments to the Protective Security Act enter into force, an approval mechanism would apply as of 1 January 2021 to operations and certain property relating to protective security, also referred to as Sweden security (Sw. Sveriges säkerhet). The scope is not defined in law.

The sectors covered by the notification requirements in question 1 are:

• Military equipment, manufacturing and providing;
• Land for agricultural activity owned by individuals;
• Businesses and other operators of engaging activities in the scope of “protective security”.

No.

The proposed amendments to the Protective Security Act, will not apply to an investment activities. It will apply to the sale or transfer of operations that qualify as protective security operations or assets.

To a certain extent yes.

• For military equipment, the limitations on foreign ownership are usually set out in an operators authorisations. Thus, the increase in foreign ownership could trigger a review of the authorisation.
• For land for agricultural activity owned by individuals this appears not applicable.
• For operations under protective security it is the sale or transfer of operations or property that triggers the consultation and approval mechanism. The question of incremental increase in ownership does not necessarily qualify as such a transfer. A case-by-case assessment has to be performed.

There is no review mechanism in a strict sense.

The proposed amendments to the Protective Security Act, would entail a self-assessment of if the transfer of the operations or assets are suitable in view of the potential buyer. The triggering factor is whether the operations fall under the scope of the Protective Security Act.

There is no screening mechanism.

However, according to the proposed amendments to the Protective Security Act (see question 1), anyone who wishes to sell a business or item covered by the scope of the Protective Security Act needs to document why the sale is not to be deemed unsuitable, and file a consultation request with the responsible authority. Hence, it does not matter whether the intended buyer is Swedish or foreign.

See answer to question 7.

In all cases the rules are or may be (for military equipment) applicable to EU investors.

There are no set thresholds for land for agricultural activity and operations subject to protective security, however for military equipment, thresholds can be set as a requirement in the authorisations.

Not applicable since there is no screening mechanism.

However, the rules presented above all use terminology which would include also publicly listed companies:

• The Law on Acquisition of Land for Agricultural Activity – specifies the obligation to seek authorisation as linked to a legal person buying land form an individual.
• The Military Equipment Act – does not define the meaning of the rules on foreign ownership, which means that they could apply for minority investments.
• The Protective Security Regulation – refers to transfer of ownership, which could include publicly listed investors, however the proposed amendments for the control mechanism exclude transfer of shares in of publicly listed companies

Not applicable. To the extent related to the Protective Security Act, likely yet.

Not applicable.

All laws mentioned in question 1 impose regulatory requirements, e.g. authorization for engaging in activities according to respective laws.
Thus, there are certain notification obligations under the regulatory requirements (e.g. conditions for an authorisation, or notification of change of ownership).

Further, according to the proposed amendments to the Protective Security Act, which are envisioned to enter into force on 1 January 2021, anyone who wishes to sell a business or item covered by the scope of the Protective Security Act first needs to document in detail why the sale is not to be deemed inappropriate, and then file a consultation request (Sw. samrådan) with the responsible authority (Sw. samrådsmyndigheten). The consultation has to start before the transaction is completed.

As there is no FDI screening regulation, this is not applicable. However, as stated in question 13, the seller is the party obliged to file a consultation request with the responsible authority according to the proposed amendments.

Further, under the above-mentioned three laws, the following persons have to notify:

• The Law on Acquisition of Land for Agricultural Activity – the investor
• The Military Equipment Act – the applicant or holder of an authorization (which would be the target company, or the investor after the investment)
• The Protective Security Regulation – the company that intents to “sell” operations subject to the scope of the regulation

In general there is no such right, as Sweden does not have any rules in place.

However, under the new EU FDI screening framework, the ISP will have the right to ask questions regarding foreign investments made in Sweden.

Under the proposed amendments to the Protective Security Act, if a transactions that falls under the scope of the law has not gone through the consultation procedure, the authorities will be able to decide to prohibit the transaction.

Not applicable, as no notification applies (except for the sectors mentioned above).

However, under the new EU FDI screening framework, the ISP will have the right to ask questions regarding foreign investments made in Sweden.

Under the proposed amendments to the Protective Security Act, the authorities will want to see the security assessment and an assessment on the suitability of the transaction. Thus, information on the financing and ownership of the buyer will be relevant (as well as other information relating to the application of the protective security law).

Not applicable.

As for the proposed amendments to the Protective Security Act, the there are not set time limits foreseen in the law. These may however become updated with regulations.

The competent authority takes the decision.

Not applicable.

Not applicable yet. According to the proposed amendments to the Protective Security Act, the responsible authority could either allow the transaction, impose conditions that need to be met for the investment/transaction to be allowed (Sw. besluta om föreläggande), or block the investment (Sw. meddela förbud).

Not applicable in general, as Sweden does not have any screening system. However, according to the proposed amendments to the Protective Security Act, a business or item sold in violation of a blocking decision is automatically deemed null and void. The same goes for a transaction completed without the necessary consultation with the responsible authority, should the authority later find that the transaction ought to have been blocked.
If a transaction has been deemed null and void, the responsible authority is suggested to have a right to order both the seller and the buyer under the penalty of a fine (Sw. vid äventyr av vite) to take measures needed to protect Sweden’s national security. The suggested amendments do not contain any other rules on penalties or fines for failure to comply with the requirements.

Further, for the regimes mentioned above, the following apply:

• The Law on Acquisition of Land for Agricultural Activity – the acquisition is invalid if it was executed without authorization.
• The Military Equipment Act – revocation of the authorisation and criminal penalties, i.e. fines and prison for up to two years, if a holder of an authorisation does not follow the conditions of an authorization.
• The Protective Security Regulation – as of yet no sanctions or penalties.

• The Law on Acquisition of Land for Agricultural Activity – decisions regarding land for agricultural activities are possible to appeal.
• The Military Equipment Act – decision to (or not to) grant an authorisation according to the rules on military equipment is not possible to appeal.
• The Protective Security Regulation – decisions according to the Protective Security Regulation may not be appealed, but according to the proposed amendments to the Protective Security Act, the decision by the authorities shall be appealable with a normal administrative court.