Danish Parliament adopts investment screening act on foreign direct investment

On 1 July 2021 the investment screening act introduced by the Danish Minister for Industry, Business and Financial Affairs came into force

The overarching object of the act is to prevent foreign direct investment and special financial agreements from posing a threat to national security or public order in Denmark.

Please contact Attorney Thomas Grue Baruch for inquiry regarding formation or investment in Denmark.

This is ensured by introducing a two-legged screening program, implemented by way of a sector-specific approval scheme for particularly sensitive areas and a non-mandatory notification scheme for other areas.

The act applies only if and to the extent an investment or special financial agreement poses or may pose a threat to national security or public order in Denmark. National security and public order are to be interpreted as follows:

• National security: Issues concerning Denmark's territorial integrity and the survival of the population. Threats to national security are, for instance, actions that pose or may pose a risk of disturbance of international relations, nations' peaceful co-existence or Danish military interests, and actions that intend to cause harm to Denmark, including crimes against the sovereignty of the state or crimes against the Constitution and the highest state authorities.
• Public order: Issues concerning Denmark's ability to maintain an independent, democratic and safe society, without the issues thereby affecting national security. 

The act applies to foreign direct investment and special financial agreements made or executed by

• non-Danish citizens,
• enterprises not domiciled in Denmark (including if such enterprises have permanent establishment in Denmark),
• enterprises domiciled in Denmark if they are subsidiaries or branches of enterprises domiciled outside Denmark, or
• enterprises domiciled in Denmark if a foreign citizen or an enterprise domiciled outside Denmark has direct or indirect control of or considerable influence on the enterprise (control through chains of title, including through multiple countries, will also be included). 

However, the provisions of the act on special financial agreements and the rules on the cross-sectorial, non-mandatory notification scheme do not apply to

• non-Danish citizens from EU or EFTA Member States, or
• enterprises domiciled in an EU or EFTA Member State provided that the enterprise is not controlled or materially influenced by citizens from a country outside the EU or EFTA or by enterprises domiciled in a country outside the EU or EFTA. 

The act includes investment in and conclusion of special financial agreements with all commercial undertakings, regardless of their organizational structure, including state-owned and municipal enterprises.

In accordance with the action Investment is construed broadly and includes acquisition of voting rights and capital, but asset transactions and investment by formation of new enterprises may also be included.

Conclusion of special financial agreements within the particularly sensitive areas includes certain joint ventures, certain acquisition of assets and certain operating, supplier, and service agreements, which are subject to the act, if the agreement entails that the foreign investor gains control of or considerable influence on enterprise affairs that may constitute a threat to national security or public order.

The act sets out a threshold value of 10% of shares or voting rights relative to the sector-specific, mandatory approval scheme, see further below, and a threshold value of 25% in relation to the cross-sectorial, non-mandatory notification scheme. These threshold values also apply to similar control by other means that offer considerable influence on managerial, financial, development or operational issues, which as such may be considered as (financial) control or considerable (financial) influence, including the granting of long-term loans.