Malta has implemented EU Regulation (EU) 2019/452 (the “Regulation”) Through its implementation, Malta has established the National Foreign Direct Investment Screening Office (the “Office”) within the Ministry for the Economy, Investment and Small Businesses pursuant to the Regulation. The relevant law in Malta is the National Foreign Direct Investment Screening Office Act (Chapter 620 of the Laws of Malta) (the “Act”).

This Act implements the provisions of the Regulation which was promulgated for the purposes of establishing a comprehensive framework for the screening of foreign direct investment into the EU on the grounds of security or public order. The overarching rationale of the Regulation is to preserve strategic European interests whilst remaining open to third-country investment.

A foreign investor is defined under the Act as a natural person or an undertaking of a third country intending to make or have made foreign direct investment in Malta and which investment is likely to impact one of the sectors indicated in our response to "What sectors are subject to Foreign Investment Restrictions screening?" above. The FDI Act does not distinguish between investments from different countries.

Portfolio investments are excluded.

The activities indicated in our law are the following:

1. critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
2. critical technologies and dual-use items as defined in point 1 of Article 2 of Council Regulation (EC) No. 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies;
3. supply of critical inputs, including energy or raw materials, as well as food security;
4. access to sensitive information, including personal data, or the ability to control such information; or
5. the freedom and pluralism of the media.

No specific thresholds arise as the FDI Act refers to the obligation to notify when there is a foreign investment. However, the Act establishes the threshold for a UBO as being any person who inter alia acquires, through direct or indirect ownership, more than 10% voting rights or control in the Maltese entity.

The FDI Act provides that foreign investors and all persons involved in a foreign direct investment shall be obliged (prior to carrying out such investment) to notify the Office of the investment and provide such information as the Office may request in the following circumstances:

1. where the investment will affect one of the following activities (the “Activities”):
   1. critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure.
   2. critical technologies and dual-use items as defined in point 1 of Article 2 of Council Regulation (EC) No. 428/2009 (15), including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies.
   3. supply of critical inputs, including energy or raw materials, as well as food security.
   4. access to sensitive information, including personal data, or the ability to control such information; or
   5. the freedom and pluralism of the media.

                        or the following factors (the “Factors”)

1. whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding;
2. whether the foreign investor has already been involved in activities affecting security or public order in a Member State; or
3. whether there is a serious risk that the foreign investor engages in illegal or criminal activities.
   1. where having carried out an investment in Malta, the business activity of the foreign investor will affect one of the Activities or Factors;
   2. where having carried out an investment in Malta which affects one of the Activities or Factors, the ownership structure of the investor changes so that 10% or more is owned by foreign investors;

where having carried out an investment, the direct or indirect controlling interest of the company or the group company changes and passes onto a foreign investor

Yes, otherwise the Office is authorized, in terms of the Act, to take all necessary measures to unwind the investment.

Upon receipt of notification, the Office has 5 working days to determine whether the foreign direct investment is subject to screening. In reaching this decision, the Office may request further information, in which case the lapse of the 5 working day period is suspended until all information is provided.

The timeline for screening can range from 3 weeks to 4 weeks and depends on a number of factors including:

1. the magnitude of the proposed transaction
2. response time of the Office due to certain factors including clearance/guidance sought from the European Commission; and
3. response time by the investor.

In practice, the Office will require:

1. a detailed description of the activity undertaken in Malta;
2. an indication of the target market(s) and market share;
3. third party reference(s) on the UBO(s);
4. details on the investor’s business strategy in connection with the transaction;
5. the impact (if any) that the investment will have on the operations of the company;
6. information on the ownership structure of the foreign investor;
7. approximate value of the foreign direct investment;
8. information on the funding of the investment.

The Office may also request certain KYC information on the UBOs and/or any intermediate entities, however, this is largely assessed on a case-by-case basis.

In the initial COVID-19 period, foreign investment in Malta decreased slightly due to the situation being a developing one with few certain or predictable outcomes. However, adaptation to the new realities on a global level as well as a recognition that it is possible to work and communicate effectively while living in a more virtual environment ensured that Malta remains attractive to foreign investment.

As far as we are aware, there have been few transactions that have actually required full screening in terms of the Act. The Office tends to be very responsive in terms of providing initial reviews and concluding whether the investment is one that requires screening.

There is an obligation on the foreign investors and all persons involved in the foreign direct investment to notify the Office prior to the carrying out of the foreign investment. If there is a requirement to notify, then the Office will carry out a review and determine whether the foreign direct investment is subject to screening or not.

If, following the screening process, the Office concludes that the foreign direct investment affects the security or public order of Malta, it may condition, prohibit or unwind such an investment.

There is a right of appeal from a decision made by the Office before the Administrative Review Tribunal which is competent to hear objections made by any person aggrieved by a decision taken in terms of Article 12 of the Act or in terms of an administrative fine imposed in terms of the Act.

The appeal needs to be filed within twenty days from the date of the decision.

None are anticipated at this stage.