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Belgium is coming closer to a foreign direct investment regime

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On 1 June 2022, the Council of Ministers (Conseil des Ministres/Ministerraad) has approved the Cooperation Agreement (Cooperation Agreement) between the federal State and federal entities implementing a screening mechanism for foreign direct investment in Belgium. Although the text is not final and will be submitted to the review of the Council of State (Raad van Staat/Conseil d’Etat), this Cooperation Agreement is an important step since the competences for promoting and regulating foreign investments simultaneously belong to the federal government, the regional governments and the community governments. This has increased the duration of the negotiations (more than three years) and highlighted the delicate character of this topic in the current political and economic environment. Firstly the COVID crisis and then the current conflict between Russia and Ukraine have accelerated global trends towards more expansive foreign investment reviews. The proposed framework is expected to take effect on 1 January 2023.

Scope of the transactions targeted by the screening mechanism

The mechanism enshrined in the Cooperation Agreement covers investments by foreign investors which could entail an impact on Belgium’s security and public order, or on the strategic interests of the federal entities. A foreign investor is either a (i) natural person with its main residence outside the EU, (ii) an undertaking established outside the EU or (iii) every undertaking of which the ultimate beneficial owner [1] has its residence outside of the EU.

A foreign direct investment is each type of investment that aims at establishing or maintaining lasting direct relations, including, but not limited to effective participation in the management or control of the target company. A transaction resulting in a lasting direct relation, may fall within the scope of the screening mechanism, if it fulfils one of the two following sets of criteria:

1.    The transaction constitutes a direct or indirect acquisition of 25 percent or more of the voting rights of a Belgian entity and the Belgian entity’s activities relate to:

  • critical infrastructure;
  • private security;
  • technologies and raw materials essential for safety, defence and public security, military equipment, dual-use goods and technologies of strategic importance;
  • freedom and pluralism of the media;
  • supply for critical inputs, such as energy or raw materials;
  • technologies of strategic interest in the biotech sector, on the condition that the turnover of the Belgian target exceeds 25 million euros;
  • access to sensitive information.

2.    The transaction constitutes a direct or indirect acquisition of 10 percent or more of the voting rights of a Belgian entity with a turnover that exceeded 100 million euros in the previous financial year and the Belgian entity’s activities relate to:

  • defence;
  • electronic communications; 
  • cyber security; 
  • digital infrastructure;
  • energy

Screening procedure and guiding principles

An Investment Screening Commission (ISC) (Interfederale Screeningscommisie/Comité de Filtrage Interfédéral) will be in charge of the screening procedure. The ISC will be composed of a representative of the federal public service for finance, of the federal public service for internal affairs and of the federal public service for foreign affairs, three representatives of the regions and three representatives of the communities. 

Transactions that fall within scope, cannot close before an assessment is made by the ISC. The screening will take place in three phases:

1.    Notification (Aanmelding/Notification): transaction documents, in draft or signed, should be submitted to the secretariat of the ISC. The ISC shall review the documents and notify the parties if information is missing. The notification should include the following information:

  1. ownership structure of the foreign investor and the target company, including information on the identity, the participation in the capital and the UBO of the investor;
  2. approximate value of the investment, and the elements used to get to this valuation;
  3. products, services and activities of the foreign investor and the target company;
  4. the EU and third countries in which the foreign investor and the target company have activities;
  5. the financing of the investment and its origin; and
  6. the date or the envisaged date for the closing.

2.    Assessment (Toetsing/Vérification): once the file is judged to be complete by the secretariat of the ISC, it will be submitted to the ISC itself. The ISC will judge whether the characteristics of the transaction or the foreign investor may entail a risk for public order, security or strategic interest. If no risks are identified, the parties may proceed with the closing of the transaction. Until the green light is given by the ISC, the parties have to refrain from completing the transaction. This phase may take up to 40 calendar days, starting from the day the file was submitted to the ISC by the secretariat.

3.    Screening (Screening/Filtrage): if certain risks are identified, the members of the ISC shall further analyse the transaction and draft an advice with regards to the specificities of the government they report to. Based on these advices, one consolidated decision will be communicated to the parties, which can either approve the transaction, possibly under conditional mitigation measures, of which compliance with would lead to a positive advice, or refuse the transaction. Mitigation measures may relate to the structure of the transaction itself, to governance and compliance requirements or limiting the flow of information. The duration of this phase cannot be put in concrete terms, as it depends on various factors and the number of extensions used. The more complex a transaction and the more governments affected, the longer this phase will take.


In case of non-compliance with the procedure, for example by failure to notify, by providing misleading or incorrect information or by not implementing the mitigation measures, fines of between 10 and 30 per cent of the value of the transaction may be imposed upon investors. 

Additionally, the ISC will have the possibility to still conduct an assessment and screening, following which structural modifications and mitigation measures may be imposed up until two years after the acquisition of the voting rights with a possible extension of three extra years in case of indications of bad faith.

When the acquisition of the control by the foreign investor took place before the entry into force of the Cooperation Agreement, the ISC can start the assessment and screening procedure up to two years after the acquisition, if deemed necessary in light of the protection of public order, national security or strategic interests. 

Other European mechanisms in place

The European Commission has been urging member states to improve and/or fully implement existing screening mechanisms to protect key infrastructures and sectors.[2] To date, Belgium is one of a small number of member States that has yet to adopt a general mandatory screening mechanism.[3] In comparison to our neighbouring countries, Belgium has some catching up to do.

Germany adopted its screening mechanism back in April 2021 and has modified its scope multiple times since then. It was recently extended again so that more entities operating in sensitive business areas become subject to screening. In that regard, the definition of critical infrastructure has been broadened all the while significantly increasing its complexity.

The Netherlands have chosen to introduce two FDI screening mechanisms: a general one and a specific one for telecommunications. The general mechanism shall enter into force at the end of 2022. Therein, the choice has been to avoid enumerating all different sectors targeted but to provide definitions for categories of sectors, namely vital providers (vitale aanbieder), managers of a corporate campus (beheerder van een bedrijfscampus) and sensitive technologies (sensitieve technologie).

France has had an FDI regulation in place since 1966 and therefore has established experience to rely on. Its scope of targeted activities has nevertheless been extended in the past years, now including for example R&D-related activities in the biotechnology sector. Following the COVID-19 crisis as well as public criticism after the disposal of some French high-profile strategic assets to foreign investors, the list of information to be provided has been extended on top of this broadened scope of application. The use of a veto against a transaction has been scarce, however, since the introduction of the extensions of powers of the competent Minister, some transactions have been blocked, among which the acquisition of Carrefour by a Canadian convenience store chain and the acquisition of electro-optic solutions manufacturer Photonis by the American defence manufacturer Teledyne. 

Implications for Belgian M&A

As is clear from the above, the impact on M&A transactions is not to be minimized and the following factors should be taken into consideration:

  • Deal timeline: as a transaction may not be closed before the ISC has given its green light, the period between signing and closing may be affected by the screening process.
  • Auction process: it may be a disadvantage for a foreign investor to step into an auction process, where deal certainty and the speed of execution may be of essential importance. 
  • Transaction documents: the transaction documents should include clauses relating to the risk allocation, conditions precedent, cooperation obligations and possibly a long-stop date.
  • Uncertainty: as there is room for interpretation and no precedents available, it is unclear how the ISC will apply the provisions with regards to the screening. 
  • Sanctions: as explained above (Penalties), important penalties may be imposed. 

[1] For more information on UBO requirements in Belgium, see the following e-zine.

[2] The European Commission has adopted EU Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a general framework for the screening of foreign direct investments into the Union (The EU Regulation).

[3] Other member states include Bulgaria, Croatia, Cyprus, Estonia, Greece, Ireland, Luxemburg and Sweden.