Lex Mundi Global Foreign Investment Restrictions Guide |
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Iceland |
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(Europe)
Firm
LOGOS Legal Services
Contributors
Guðbjörg Hjartardóttir |
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| Please provide a short summary of the Foreign Investment Restrictions adopted by your jurisdiction. | Act No. 34/1991 on the Investment of Foreign Parties in Business provides for the main foreign investment restrictions set out in Icelandic law. Firstly, the Act limits the ability of foreign parties to engage in fishing within the Icelandic economic zone and to acquire a stake in fishing operations or seafood processing companies. Only Icelandic citizens or companies that are controlled by Icelandic citizens and have less than 25% foreign shareholders can own or control such entities. Secondly, the Act limits foreign ownership of hydropower and geothermal exploitation rights, other than for personal use, as well as energy processing and transportation. Only Icelandic citizens and legal persons, and individuals and legal persons domiciled within the EEA, EFTA or the Faroe Islands may participate in such investments. Thirdly, the aggregate stake of foreign parties in aviation operators in Iceland may not exceed 49%. This does, however, not apply to individuals and legal persons domiciled within the EEA, EFTA or the Faroe Islands. Fourthly, the Act provides that foreign governments, sub-national governments or other foreign authorities are prohibited from investing in Iceland for commercial purposes without special authorization from the relevant ministry. Furthermore, the Act provides that If the relevant Minister considers a certain foreign investment to be a threat to national security or contrary to public policy, public security or public health, or in the event of serious economic, social or environmental difficulties in specific sectors or areas, the minister may block such an investment, provided that the decision thereon is announced within eight weeks following the minister becoming aware of the investment in question. Such investment may also be made subject to certain conditions implemented by the minister. The minister may also suspend a foreign investment in systematically important companies when such investment involves systematic risk. When it comes to real property, Act No. 19/1966 on the Ownership and Use of Real Property and Act No. 81/2004 on Land ("Land Act"), effectively provide that individuals and legal entities domiciled outside EEA or EFTA are subject to restrictions on such investments in Iceland. Foreign nationals and legal entities from such areas are generally not permitted to invest in real property in Iceland. The Minister may grant permission to such an investment if an individual or legal entity finds it necessary to acquire ownership or rights over the real property for direct use in its business activities or if an individual is considered to have a strong connection with Iceland. According to the Land Act, legal entities that own land in Iceland and are established outside of Iceland or are directly or indirectly held by more than 1/3 of foreign parties must annually report to the Icelandic Taxation Authority about its direct and indirect ownership, its beneficial owner(s) and the identity of its directors and management. Large-scale investment projects may be exempt from the abovementioned restrictions via standard clauses in a formal investment agreement with the Icelandic government. |
| Is your regime focused on economic protectionism, national security, or a combination? | Iceland’s regime is focused on a combination of economic protectionism and national security. |
| Who is considered a "foreign investor" and are only investments from particular countries covered? | A foreign investor is usually considered to be an individual residing abroad, irrespective of nationality, as well as any legal entity incorporated/registered abroad and any foreign state. In some circumstances, individuals and legal entities domiciled within EEA or EFTA member states or in the Faroe Islands are exempt, as per the above. |
| What sectors are subject to Foreign Investment Restrictions screening? | Please see our response to section 1 above. |
| What are the relevant thresholds? | Please see our response to section 1 above. |
| Is notification under Foreign Investment Restriction rules mandatory? | Notification must be sent to the appropriate ministry regarding foreign investment in sectors where special restrictions apply, as per our response to section 1. This notification shall be sent as soon as an agreement or decision regarding such an investment has been made. This obligation applies to both the primary foreign investment in a business enterprise and any subsequent additional investments In the case of a foreign investment in an Icelandic entity, the obligation to notify lies with the Icelandic entity, but in the case of a foreign enterprise that has planned economic activity in its own name, the obligation to notify lies with that foreign party. |
| Is the relevant authority's approval required prior to closing? | No, not if the investment is within the appropriate thresholds. Otherwise, the relevant foreign investment remains subject to governmental approvals, i.e. any foreign investment generally prohibited under the Act. |
| What was the impact of COVID-19 on your foreign investment regime? | The COVID-19 pandemic did not have any direct impact on Iceland’s foreign investment regime. |
| How active has your agency been in reviewing, delaying, modifying or blocking foreign investments? | LOGOS Legal Services has been very active in advising foreign clients on any foreign investments that may apply in terms of their proposed activities in Iceland. |
| On what grounds can enforcers review and block a foreign investment? How active have they been in the past 6 months? | In terms of on what grounds enforcers can review and block foreign investment, please see our response to section 1. |
| Do you expect any regulatory developments over the next 6 months? | We are not aware of any expected regulatory developments in the next 6 months having an impact on foreign investment. |
Lex Mundi Global Foreign Investment Restrictions Guide
Act No. 34/1991 on the Investment of Foreign Parties in Business provides for the main foreign investment restrictions set out in Icelandic law.
Firstly, the Act limits the ability of foreign parties to engage in fishing within the Icelandic economic zone and to acquire a stake in fishing operations or seafood processing companies. Only Icelandic citizens or companies that are controlled by Icelandic citizens and have less than 25% foreign shareholders can own or control such entities.
Secondly, the Act limits foreign ownership of hydropower and geothermal exploitation rights, other than for personal use, as well as energy processing and transportation. Only Icelandic citizens and legal persons, and individuals and legal persons domiciled within the EEA, EFTA or the Faroe Islands may participate in such investments.
Thirdly, the aggregate stake of foreign parties in aviation operators in Iceland may not exceed 49%. This does, however, not apply to individuals and legal persons domiciled within the EEA, EFTA or the Faroe Islands.
Fourthly, the Act provides that foreign governments, sub-national governments or other foreign authorities are prohibited from investing in Iceland for commercial purposes without special authorization from the relevant ministry.
Furthermore, the Act provides that If the relevant Minister considers a certain foreign investment to be a threat to national security or contrary to public policy, public security or public health, or in the event of serious economic, social or environmental difficulties in specific sectors or areas, the minister may block such an investment, provided that the decision thereon is announced within eight weeks following the minister becoming aware of the investment in question. Such investment may also be made subject to certain conditions implemented by the minister.
The minister may also suspend a foreign investment in systematically important companies when such investment involves systematic risk.
When it comes to real property, Act No. 19/1966 on the Ownership and Use of Real Property and Act No. 81/2004 on Land ("Land Act"), effectively provide that individuals and legal entities domiciled outside EEA or EFTA are subject to restrictions on such investments in Iceland. Foreign nationals and legal entities from such areas are generally not permitted to invest in real property in Iceland. The Minister may grant permission to such an investment if an individual or legal entity finds it necessary to acquire ownership or rights over the real property for direct use in its business activities or if an individual is considered to have a strong connection with Iceland. According to the Land Act, legal entities that own land in Iceland and are established outside of Iceland or are directly or indirectly held by more than 1/3 of foreign parties must annually report to the Icelandic Taxation Authority about its direct and indirect ownership, its beneficial owner(s) and the identity of its directors and management.
Large-scale investment projects may be exempt from the abovementioned restrictions via standard clauses in a formal investment agreement with the Icelandic government.
Iceland’s regime is focused on a combination of economic protectionism and national security.
A foreign investor is usually considered to be an individual residing abroad, irrespective of nationality, as well as any legal entity incorporated/registered abroad and any foreign state. In some circumstances, individuals and legal entities domiciled within EEA or EFTA member states or in the Faroe Islands are exempt, as per the above.
Please see our response to section 1 above.
Please see our response to section 1 above.
Notification must be sent to the appropriate ministry regarding foreign investment in sectors where special restrictions apply, as per our response to section 1. This notification shall be sent as soon as an agreement or decision regarding such an investment has been made. This obligation applies to both the primary foreign investment in a business enterprise and any subsequent additional investments
In the case of a foreign investment in an Icelandic entity, the obligation to notify lies with the Icelandic entity, but in the case of a foreign enterprise that has planned economic activity in its own name, the obligation to notify lies with that foreign party.
No, not if the investment is within the appropriate thresholds. Otherwise, the relevant foreign investment remains subject to governmental approvals, i.e. any foreign investment generally prohibited under the Act.
The COVID-19 pandemic did not have any direct impact on Iceland’s foreign investment regime.
LOGOS Legal Services has been very active in advising foreign clients on any foreign investments that may apply in terms of their proposed activities in Iceland.
In terms of on what grounds enforcers can review and block foreign investment, please see our response to section 1.
We are not aware of any expected regulatory developments in the next 6 months having an impact on foreign investment.