A new law empowers Norwegian authorities to screen investments in Norwegian businesses on grounds of national security. The screening regime, which took effect on 1 January 2019, is not confined to specific sectors. It will apply to EU-based investors and non-EU investors alike.
The law grants Norwegian authorities potentially far-reaching powers to screen and block foreign direct investment (FDI) in Norwegian companies.
The law is not limited to companies in specific sectors. However, the new screening regime only applies to investments in target companies that have been brought within the scope of the law by way of an individual decision addressed to the company.
The authorities will have the power to issue such decisions in respect of any company that:
- is processing classified information;
- has access to information or information systems deemed essential to national security interests;
- owns physical assets or infrastructure deemed essential to national security interests; or
- is involved in activities deemed essential to national security interests.
The law sets out a quite broad definition of national security interests that includes, inter alia, national financial stability and autonomy.
The government ministries have been granted the power to take decisions that bring new companies within the scope of the act. The company shall receive prior notice, but no minimum notice period has been set. The ministry does not need to consult any expert bodies prior to taking its decision.
The regime applies to all investors, whether based in EU countries or outside the EU. While the initial proposal was explicitly limited to foreign investors, the screening regime set out in the law applies even to Norwegian investors.
If the target company is subject to the screening regime, the regime applies to any investor that wishes to acquire a “qualified” stake.
A stake will be considered “qualified” if it results in the acquirer holding, directly or indirectly, one-third or more of the share capital, assets or voting rights. The same applies to options to acquire ownership of one-third or more of the share capital or assets. Additionally, a stake will be regarded as “qualified” if it enables the buyer to exercise significant influence over the company’s business.
An investment falling within the scope of the security law triggers a filing obligation. The filing shall be submitted to the government ministry responsible for the sector in which the target company is active. No formal requirements have been laid down for the contents of the filing.
The ministry has 60 working days to assess each filing. The deadline may be extended, as the authorities may request the parties to offer further information for the assessment, which will “stop the clock” until the required information is provided.
If an acquisition causes a “not insignificant” risk to national security interests, the Norwegian government may block the transaction, or decide that the investment may only be implemented subject to conditions.
The fact that the new screening regime is limited to target companies that have been singled out to be covered by the law would seem to ensure a high degree of foreseeability. However, the law may give Norwegian authorities the power to bring new companies under the scope of the law at short notice.
It does not provide any legal protection against an ad hoc decision to subject a company to the screening regime.
In other words, at the beginning of a sales process a company may fall outside the regime, but following public concern over a possible sale to a foreign buyer, the target company could potentially be subjected to the screening regime by way of a ministerial decision addressed to the company.
As a result, the new FDI screening rules are relevant to investments in two categories of Norwegian companies:
- companies which have already been brought within the scope of the law through a ministerial decision addressed to them; and
- companies which have not yet received such a decision but which could catch the authorities’ attention once a possible sale to a foreign investor becomes publicly known.
While some countries have set up dedicated bodies to handle the filing and screening process –notably CFIUS, the Committee on Foreign Investment in the United States – no such body will be established in Norway. No expert bodies need to be involved in the screening process. Although the law sets out specific objectives and tests that constitute the framework for the authorities’ assessment, it may ultimately grant them a relatively wide discretion.
In November 2018, the European Commission and the EU member states reached an agreement on a draft regulation on FDI into the EU. The draft regulation sets out a framework for national screening of FDI, but will not introduce a unified review process. It also will not establish a centralized EU screening regime comparable to CFIUS. The regulation is unlikely to affect Norway’s new investment screening rules.
Further reading: Usikkerhet i sikkerhetsloven (in Norwegian language)