Since the approval of EU Regulation 2019/452 on the control of foreign direct investments (FDI) in the EU, and the measures approved in Spain, and in the current geopolitical context, return to the almost fully liberalized framework is quite unlikely. Therefore, in order to decide on FDI project in Spain, it is of essence to analyze and determine the regime beforehand:
Restrictions on the general liberalization regime. Prior and sectoral authorization applicable.
The previous general regime was one of liberalization – except in specific sectors such as national defense, or subject to special regulatory regime – air transport, gambling. However, EU Regulation (EU) 2019/452 significantly increases the number of FDI subject to clearance.
The term Foreign Direct Investment means: (A) an (A) investment made by: (i) non-resident in the EU or EFTA (Iceland, Liechtenstein, Norway and Switzerland), or (ii) resident in the EU/EFTA whose beneficial owner is a non-resident EU/EFTA; and (B) when investor reaches 10% of the capital or acquires total or partial control under the Defense of Competition Act.
Special requirements must be met in activities related to national defense, sectors with special regulation - gambling, air transport, telecommunications - and in sectors related to the exercise of public power, public order, public security or public health.
Investments subject to authorisation.
Investments by the following entities and in the following sectors require authorization:
A) General Rule:
(i) Investors from outside the EU/EFTA, including sovereign wealth funds.
(ii) Investors with previous investments in security, public order or public health in EU/EFTA
(iii) Investors from, or owned by investors in EU/EFTA (temporarily until 31/12/2026), on listed companies, or private companies worth more than € 500 million, and
(iv) The target company develops activities in protected strategic sectors.
B) Special rule: When the investor regardless of the target sector:
(i) It is controlled by the government of a third country.
(ii) Has previously intervened in sectors affecting public policy, public security or public health in another Member State, or
(iii) There is a serious risk that the investor will carry out criminal or illegal activities affecting public order, public safety or public health in our country.
Protected sectors and investments.
a) Critical infrastructures.
b) Critical and dual-use technologies, key technologies in industrial leadership and training, and those developed through programs of particular interest to Spain like telecommunications, AI, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum, nuclear, nanotechnologies, biotechnology, advanced materials and production systems;
c) Fundamental inputs: energy, strategic services, connectivity, raw materials or food security.
d) Sectors with access to sensitive information.
e) Media.
EU Regulation 2019/452 provides for the exchange of information between member states and the EU Commission for coordination in the control and monitoring of investments in the EU.
Authorization procedure.
Spanish government - Council of Ministers is the competent authority to resolve on FDI authorizations, following a report from the Foreign Investment Board – although investments of up to € 5,000,000 Euros correspond to the Directorate General of International Trade and Investment. The deadline for resolving – as the case ma be, with conditions - is three (3) months, after which, without notification of approval, the application is understood to be rejected.
Exemptions.
In general, the following investments are exempted from prior clearance:
• Investments in targets of strategic sectors but with a net turnover of up to € 5,000,000 (except those with technologies developed under programs of particular interest to Spain).
• Temporary investments (days, hours) where the investor does not influence the management – e.g. placement and underwriters of securities issues, in public offerings for sale or subscription – yet, the final investor will be subject to the regime applicable.
• Investments in real estate not used for critical infrastructures or essential services.
Communication obligations.
All foreign direct investments, whether or not subject to clearance, continue to be liberalized, with reporting for statistical purposes remains applicable, in one (1) month from formalization.
Investments exceeding 50% of the capital from tax havens must also be reported before signing.
Implications of non-compliance.
FDIs without the mandatory authorization is are and void, without legal effects, which prevents investors from exercising information, voting rights or economic rights (dividends, pre-emptive subscription rights, etc.), and is subject to fines of up to the amount of the operation, with a minimum of €30,000 and a private or public admonition.
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