On 1 September 2023, the Luxembourg Foreign Direct Investment ("FDI") Screening law ("Law") (adopted on 13 June 2023) entered into force. The Law defines FDIs as investments of any kind made by a foreign investor (“Foreign Investor”), which enables the Foreign Investor to participate – alone, in concert or through an intermediary – in the control, directly or indirectly, of an entity incorporated under Luxembourg law (“Luxembourg Entity”) carrying critical activities (“Critical Activities”) in Luxembourg.

Pursuant to the Law, the Foreign Investor has the obligation to file a notification to the Ministry for Economy (“Ministry”) and wait for a clearance decision before implementing the FDI. The obligation to notify arises at the latest when the FDI agreement is signed. The notification has no full suspensive effect, meaning that the Foreign Investor can continue its operations to implement the preliminary steps required to complete the FDI while awaiting the decision of the Minister of the Economy. However, the FDI cannot be made – i.e. closing cannot happen – until the Ministry has rendered its decision.

The Ministry has broad authority to review and take remedial action on grounds of security or public order, by considering the FDI’s potential effects on inter alia

• The integrity, security and continuity of supply of critical infrastructures, whether physical or virtual, related to Critical Activities;
• The sustainability of activities related to critical technologies and dual-use goods;
• The supply of essential inputs, including raw materials and food safety;
• Access to sensitive information or the ability to control such information;
• The freedom and pluralism of the media.

Remedial action can include mitigation, fines or – in the worst case – blocking or unwinding a transaction.

The Luxembourg screening regime is focused on national security and public order, but not on economic protectionism per se.

A ‘Foreign investor’ is an individual or entity governed by foreign law who is not a national of a Member State or a state party to the Agreement on the European Economic Area.

As mentioned above, the Law targets investments that allow a Foreign Investor to exercise control over a Luxembourg Entity carrying out so-called Critical Activities in Luxembourg.

The Law provides the following exhaustive list of Critical Activities (ordered by sectors):

• Dual-use goods
  • The production, exploitation and sales of dual-use goods within the meaning of Council Regulation (EC) no. 428/2009, as amended.
• Energy sector
  • The production and distribution of electricity;
  • The conditioning and distribution of gas;
  • The storage and sale of oil;
  • Quantum and nuclear technologies.
• Transport sector
  • Air, water and land transport.
• Water sector
  • Collection, treatment and distribution of water;
  • Collection and treatment of used water;
  • Collection, treatment and disposal of waste.
• Health sector
  • Activities linked to healthcare and medical analysis laboratories;
  • Nanotechnologies and biotechnologies.
• Communications sector
  • Wired, wireless, and satellite telecommunications activities;
  • Postal and courier activities.
• Data processing or storage sector
  • Installations for data processing, storage of information services and internet portals;
  • Technologies related to artificial intelligence:
  • Semiconductors;
• Aerospace sector
  • Spatial operations;
  • The exploitation of spatial resources.
• Defense sector
  • Activities related to the national defense;
  • The production and trade of weapons and munition, explosive substances and powders for military purposes and war materials.
• Financial sector
  • Activities and infrastructure of the central bank;
  • Infrastructure and systems for the exchange, payment and settlement of financial instruments.
• Media sector
  • Publishing, audiovisual activities and radio broadcasting.
• Agri-food sector
  • Activities related to food safety.

In addition, the Law includes in its scope (i) research and/or production activities related to the above Critical Activities, as well as (ii) linked activities allowing access to sensitive information related to such Critical Activities, or premises where such Critical Activities are carried out.

An FDI notification is required when the contemplated investment allows a Foreign Investor to directly or indirectly (i) exercise control or (ii) acquire at least 25% of the voting rights over a Luxembourg Entity carrying out Critical Activities in Luxembourg.

The Law does not provide notification thresholds in terms of revenues/turnovers.

Yes, the Law sets forth a mandatory notification for foreign investments that meet the thresholds.

Yes, the Ministry’s approval is required prior to closing.

Not applicable as the Law was not in force during COVID-19 (it was adopted on 13 June 2023 and entered into force on 1 September 2023).

Due to the recent adoption of the Law, there are not enough cases to provide a specific comment on this topic.

The Ministry has broad authority to review and take remedial action on grounds of security or public order (in relation to Luxembourg), by considering the FDI’s potential effects on inter alia

• The integrity, security and continuity of supply of critical infrastructures, whether physical or virtual, related to Critical Activities;
• The sustainability of activities related to critical technologies and dual-use goods;
• The supply of essential inputs, including raw materials and food safety;
• Access to sensitive information or the ability to control such information;
• The freedom and pluralism of the media.

Due to the recent adoption of the Law, there are not enough cases to provide a specific comment on this topic.

None, considering the Law has just entered into force as of 1 September 2023. However, the Ministry might issue guidance notes in the next few months.