Until March 2020, foreign direct investments ("FDI") into Spain were generally liberalized — only those made into activities directly related to the national defense required prior screening and authorization. However, within the context of the COVID-19 crisis, the Spanish government amended the FDI regime to suspend the liberalization for non-EU and non-EFTA residents (on a look-through basis) and established a screening mechanism, which applies to FDIs in certain sectors or by certain investors (regardless of the sector). In addition, on a temporary basis until 31 December 2024, similar screening requirements apply to non-Spanish EU and EFTA residents for their FDIs in certain sectors.               

The regime is inspired by Regulation (EU) 2019/452 and is focused on public order, public health and public security. Its application shows that the screening is not intended to impose protectionist measures, as no FDI to date has been blocked, but to screen investments into sensitive sectors or by certain investors deemed to have a specific risk profile.               

There are three separate categories of “foreign investors”. The first category relates to “Non-EU/EFTA Investors”, namely: (i) non-EU and non-EFTA residents, and (ii) EU/EFTA residents beneficially owned by non-EU and non-EFTA residents, that is, those in which a non-EU and non-EFTA resident ultimately owns or controls more than 25% of the share capital or voting rights of, or otherwise exercise control over, the EU/EFTA resident. There is a second category of the foreign investor, subject to a different regime and in force on a transitional basis until 31 December 2024: “EU/EFTA Investors” (provided they invest in listed companies, or more than EUR 500 million in private companies), namely: (i) EU and EFTA residents in countries other than Spain, and (ii) Spanish residents beneficially owned by EU or EFTA residents in countries other than Spain, that is, those in which an EU or EFTA resident other than in Spain ultimately owns or controls more than 25% of the share capital or voting rights of, or otherwise exercises control over, the Spanish resident. Finally, there is a third category for the purposes of the screening applicable to investments in national-defense-related activities or weapons-related activities: any non-resident in Spain, as well as a non-Spanish individual residing in Spain (regardless of nationality), is deemed a foreign investor.                 

The following sectors are subject to FDI screening:

• critical infrastructure, either physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, as well as sensitive facilities and investments in land and real estate, crucial for the use of such infrastructure;
• critical and dual-use technologies, key technologies for industrial leadership and training, and technologies developed under programs and projects of particular interest for Spain, including telecommunications, artificial intelligence, robotics, semiconductors, cybersecurity, quantum, aerospace, defense, energy storage, nuclear technology, nanotechnologies and biotechnologies;
• supply of critical inputs, including energy, strategic connectivity services or raw materials, as well as food security;
• access to sensitive information, including personal data, or the ability to control such information;
• national defense and weapons-related activities; and
• media

In addition, the following Non-EU/EFTA Investors are subject to screening regardless of the sector where they invest:

• Investors are directly or indirectly controlled by a non-EU/EFTA government.
• Non-EU/EFTA Investors who have already made an investment affecting national security, public order or public health in another EU Member State (and in particular in the strategic sectors listed above), which in practice and according to the approach taken by the Spanish authority is deemed to apply if the investor has been denied or approved subject to conditions an FDI authorization by any EU Member State.
• If there exists a serious risk that the non-EU/EFTA investor engages in illegal or criminal activities affecting national security, public order or public health in Spain.

Only FDIs that allow the foreign investor to acquire at least a 10% stake in a Spanish company or that confer control over the Spanish company are subject to screening. In addition, there are thresholds to apply the screening. Investments by non-EU/EFTA Investors in companies whose annual turnover is below EUR 5,000,000 are exempt from screening, with some exceptions to the exemption which are sufficiently broad that, in practice, the exemption is limited to companies active in the food security sectors, those that have access to sensitive information and the media sector. For EU/EFTA Investors, the investment value threshold is EUR 500 million, provided however that there is no threshold when the FDI is made into listed companies (in which case, the 10% stake/acquisition of control thresholds still apply). For these purposes, “investment value” means the equity value/purchase price attributable to the Spanish companies or businesses within the transaction perimeter.

Yes. Prior authorization by the Spanish Council of Ministers, or by the Directorate General on International Trade and Investments when the value of the investment in Spain is below EUR 5 million, is required. It is mandatory prior to the closing of the transaction — obtaining the required authorization is usually a condition precedent in the applicable purchase or investment contract.

Yes, as mentioned above. Transactions closed without authorization when required are deemed invalid and without any legal effect until the required authorization is obtained. In particular, the unauthorized buyer would not be able to exercise their voting and economic rights as a shareholder of the Spanish company until the authorization is obtained. In addition, fines up to the value of the investment may be imposed on the unauthorized foreign investor.

Very significant. As mentioned above, until the COVID-19 crisis FDIs in Spain were generally liberalized. Now, in practice, all transactions involving a foreign buyer or investor require an FDI assessment. This does not mean that investments will be blocked, but additional legal analysis and paperwork are required.

Very active in reviewing and authorizing investments. The legal term to issue the authorization is 3 months, although the FDI authorities are entitled to request additional information and suspend the legal term until this information is submitted. Without prejudice to this, in practice, the time required to obtain clearance is around 3 months. To our knowledge, no FDI has been blocked to date and very few have been conditioned (the details of these resolutions are confidential).

To our knowledge, no FDI has been blocked to date. The applicable laws are not explicit on the grounds to block an FDI, but they must be based on national security, public order or public health concerns, i.e. concerns that the foreign investor will negatively affect national security, public order or public health. These should be the grounds for conditioning authorizations as well.

No. On 1 September 2023 a new regulation entered into force, which amends and develops the Spanish FDI framework and, in particular, the existing screening mechanisms for specific FDIs. Therefore, no additional developing regulations to the existing regime are expected in the short term.