Financial Crime World

New Foreign Direct Investment (FDI) Regime in Slovakia: Key Changes and Implications

The Slovakian government has introduced significant changes to the regulation of Foreign Direct Investment (FDI), affecting businesses operating within the country. This article outlines the key aspects of the new FDI regime, highlighting its implications for foreign investors.

Key Features of the New Regime

1. Ex officio Screening Procedure

  • The Ministry of Economy may initiate a screening procedure on its own initiative if there is a reasonable presumption that an investment poses a threat or disruption to security or public order.
  • This discretionary power allows the ministry to investigate and make decisions regarding foreign investments, without prior notice to the investor.

2. Discretionary Power of the Ministry of Economy

  • The ministry has the ultimate authority to issue final decisions on foreign investments, considering factors such as:
    • Circumstances concerning the target and foreign investor
    • Potential impact on national security, public order, or other interests

3. Sanctions for Breaches

  • Foreign investors may face significant penalties in case of breaches of obligations under the new regime, including:
    • Fines up to 2% of their aggregate net turnover
    • A maximum fine of €1 million
  • Ruling out potential FDI screening based on publicly available information will likely remain a challenging task for legal counsel advising on foreign investments.

5. Optional Screening Procedures

  • Foreign investors may elect to apply for optional screening procedures to avoid uncertainties concerning the designation of their foreign investment.
  • This allows investors to proactively address potential issues and avoid unintended consequences.

6. Impact on Secured Finance Transactions

  • The new regime may impact secured finance transactions concerning securities held by non-EU security agents, particularly if enforcement of a pledge qualifies as a foreign investment.

Conclusion

The implementation of the new FDI regime in Slovakia introduces significant complexities and potential challenges for businesses operating within the country. Foreign investors are advised to carefully review the implications of this new regime and consider seeking professional advice to ensure compliance with the regulations.