Last update 21.08.2023
Foreign direct investments (FDIs) are of major importance for the global economy and are regarded as one of the main drivers of economic development. The European Union (EU) and Luxembourg recognise FDIs as being key to positive economic growth and social development.
However, the appearance on the scene of new types of investors has given rise to fears that some investors may acquire an entity for reasons which are not purely economic but rather with a view to gaining access to technologies, information, goods or services that are essential for State security. Through direct investment, an investor may in particular gain significant influence over an entity having strategic importance for the State in the field in which it operates, and may thus compromise the national security or public order of that State. Non-respect of the principle of transparency by foreign investors has also been a source of increasing concern amongst the main commercial partners of the EU, the Member States and the European Commission.
In light of these risks, it has been concluded that EU needs to increase its resilience by coupling the opening-up of the market with dynamic, efficient policies aimed at protecting essential European assets against investments which harm the legitimate interests of the EU or of its Member States. Thus, Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for screening foreign direct investments into the Union, hereinafter referred to as Regulation (EU) 2019/452, was adopted in April 2019.
That Regulation is designed to empower the European Commission to issue opinions on FDIs which may affect projects or programmes of Union interest, and to put in place a mechanism for intra-European cooperation. In addition, Regulation (EU) 2019/452 provides the appropriate legal basis for putting in place national FDI screening mechanisms and lays down various basic rules.
In this context, and on the basis of that Regulation, Luxembourg has adopted a national screening mechanism via the Law of 14 July 2023 setting up a mechanism for screening foreign direct investments which may affect security or public order, published on 18 July 2023 and due to enter into force on 1 September 2023.
Who is concerned
- which are made by a foreign investor; and
- which are intended to establish or to maintain lasting and direct links between the foreign investor and an entity governed by Luxembourg law to which the capital is made available, thereby enabling the foreign investor to participate effectively on its own, in concert or through an intermediary in the control of this Luxembourg entity;
are subject to compulsory notification to the Minister of the Economy, provided the Luxembourg entity carries out an activity in one of the following areas, considered to be critical:
- the development, exploitation and trade in dual-use items within the meaning of Article 2(1) of Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items;
- in the energy sector: the production and distribution of electricity, the conditioning and distribution of gas and the storage and trading of oil, as well as quantum and nuclear technologies;
- in the transport sector: transport by land, sea and air;
- in the water sector: the abstraction, treatment and distribution of water, the collection and treatment of sewage and the collection, treatment and disposal of waste;
- in the health sector: activities connected with healthcare and medical analysis laboratories, as well as nanotechnologies and biotechnologies;
- in the communications sector: wireline and wireless telecommunications, satellite telecommunications and postal and courier services;
- in the data processing and data storage sector: computing facilities for the processing of data, hosting of information services and internet portals, technologies concerning artificial intelligence, semiconductors, cybersecurity;
- in the aerospace sector: space operations and the exploitation of space resources;
- in the defence sector: activities in connection with national defence, the production of and trade in arms, munitions, powders and explosive substances designed for military purposes or armaments;
- in the finance sector: activities of the central bank and infrastructures and systems for trading, payment and settlement of financial instruments;
- in the media sector: publishing, audiovisual activities and broadcasting;
- in the agri-food sector: activities in connection with food safety;
- research activities directly connected with the activities listed above;
- production activities directly connected with the activities listed above;
- ancillary activities potentially allowing access to sensitive information, including personal data, directly connected with the activities listed above;
- ancillary activities potentially allowing access to places where the activities listed above are carried out.
N.B. The notification does not have suspensive effect. Investors may pursue their operations with a view to implementing the preliminary steps necessary for completion of the investment, pending the decision of the Minister of the Economy whether or not to trigger the screening procedure. In the event that the screening procedure is triggered, the foreign direct investment may not be completed until such time as a screening decision authorising the foreign direct investment in question has been taken.
Foreign investor: a natural person or an entity incorporated under foreign law who does not come from a Member State of the European Union or a State party to the Agreement on the European Economic Area, intending to make or having made a foreign direct investment.
Control: the fact, whether directly or indirectly, of:
- having a majority of the voting rights of the shareholders or partners in an entity incorporated under Luxembourg law ('Luxembourg entity'); or
- having the right to appoint or to revoke the appointment of a majority of the members of the body charged with administering, managing or supervising a Luxembourg entity and of being, at the same time, a shareholder or partner in that entity; or
- being a shareholder or partner in a Luxembourg entity and having control, pursuant to an agreement concluded with other shareholders or partners in that entity, over a majority of the voting rights of the company's shareholders or partners; or
- exceeding the threshold of 25 % of ownership of the capital conferring voting rights of a Luxembourg entity.
Foreign direct investment: an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and a Luxembourg entity to which the capital is made available, thereby enabling the foreign investor to participate on its own, in concert or through an intermediary in the control of that entity carrying on a critical activity in Luxembourg.
Notifications must be submitted by the foreign investor prior to completion of the foreign direct investment.
In the event that a foreign investor exceeds the threshold of 25 % of ownership of the capital conferring voting rights of a Luxembourg entity as a result of events modifying the allocation of the share capital, the foreign investor must submit its notification within 15 calendar days.
Neither the compulsory notification of a foreign direct investment nor the administrative steps connected with consideration of the notification or the screening process shall give rise to the levying of any taxes or fees whatsoever.
How to proceed
Foreign investors must lodge their compulsory notification with the Minister of the Economy by using the notification form (see under 'Forms / Online services') and providing the information and supporting documents described below.
The application must be signed by a person empowered to bind the foreign investor. By this signature, that person certifies the correctness of:
- the information provided in the application; and
- the content of all the documents annexed thereto.
Notifications must be submitted by foreign investors prior to completion of the foreign direct investment.
In the event that a foreign investor exceeds the threshold of 25% of ownership of the capital conferring voting rights of a Luxembourg entity as a result of events modifying the allocation of the share capital, the foreign investor must submit its notification within 15 calendar days.
As part of the notification, the foreign investor must communicate the following to the secretariat of the interministerial committee on investment screening:
- the notification form, duly completed (see 'Forms / Online services');
- Annex 1: a brief synopsis setting out the reasons for which the foreign investor considers that the notified transaction falls within the scope of application as described in Article 2 of the above-mentioned Law;
- Annex 2: an organisation chart showing the ownership structure of the foreign investor, stating the registration number and nationality of the entity described, together with the surname(s), first name(s) and nationality(ies) of the natural person(s) participating, whether alone, in concert or through an intermediary, in the control of the entity, including the beneficial owners, as defined in Article 1(7) of the Law of 12 November 2004 on combating money laundering and terrorist financing, as amended;
- Annex 3: an organisation chart in respect of the Luxembourg entity in which the investment is to be made, indicating the Luxembourg entity/entities by means of a specific colour and stating its/their RCS number(s) and the address(es) of its/their registered office(s), together with information concerning the beneficial owner, as defined in Article 1(7) of the Law of 12 November 2004 on combating money laundering and terrorist financing, as amended;
- Annex 4 (not necessary for so-called 'greenfield investments'): a description of the modalities and set-up of the operation, where necessary providing diagrams or organisation charts of the operation, such as to enable the control mechanism to be identified, both before and after completion of the investment. Please also indicate, as the case may be, any option in respect of the balance of the capital;
- Annex 5 (where the ultimate investor is a legal person): a table listing the members of its management and supervisory bodies or of any other body performing equivalent functions, and indicating their nationality(ies);
- Annex 6 (where the ultimate investor is a legal person): a table indicating the identity of, the proportion of the share capital held by, and the percentage of the voting rights held by, each shareholder or partner;
- Annex 7: an exhaustive list of the products and/or services offered by the Luxembourg entity;
- Annex 8: an exhaustive list of the intellectual property elements (patents, trade marks, licences) held or exploited by the Luxembourg entity in which the investment is to be made. That list must state their nature and duration;
- Annex 9 (to be provided only if the application is submitted by a legal representative of the foreign investor): any document evidencing the power or representation mandate vested in the representative of the foreign investor.
Assessment of the notification
Following receipt of the notification, the Minister of the Economy decides whether or not the foreign direct investment thus notified is to be the subject of a screening procedure. The Minister adopts the decision pursuant to an opinion from the interministerial committee on investment screening.
The screening procedure consists in assessing and scrutinising a foreign direct investment in the light of criteria making it possible to determine, on the basis of screening factors, whether a foreign direct investment may affect security or public order.
In order to determine whether a foreign direct investment may affect security or public order, account is taken of its potential effects on:
- the integrity, security and continuity of the provision of critical infrastructures, whether physical or virtual, connected with the critical activities listed above;
- the continuity of activities linked to critical technologies and dual-use items within the meaning of Article 2(1) of Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items;
- the supply of critical inputs, including raw materials, as well as food security;
- access to sensitive information, including personal data, or the ability to control such information;
- the freedom and pluralism of the media.
The following factors may also be taken into account in the context of the screening procedure:
- whether the foreign investor is directly or indirectly controlled by the government of a third country, including its state bodies or armed forces;
- whether the foreign investor has already been involved in activities affecting security or public order in a Member State of the European Union;
- whether there is a serious risk that the foreign investor engages in illegal or criminal activities.
The screening decision (authorisation, conditional authorisation, prohibition of the investment) is taken by the Minister of the Economy pursuant to an opinion from the interministerial committee on investment screening, and notified in writing to the foreign investor within the statutory time-limit.
One or more conditions may be attached to the authorisation of a foreign direct investment.
The conditions that may be attached to the authorisation of a foreign direct investment are determined in light of the screening factors, and are designed to ensure that the planned foreign direct investment does not affect security or public order. Any authorisation carries with it an obligation requiring the foreign investor to report on fulfilment of the conditions, in accordance with the modalities fixed by the Minister of the Economy in the screening decision.
In the event that the screening procedure is triggered, the foreign direct investment may not be completed until such time as a screening decision authorising the foreign direct investment in question has been taken.
Application processing time
The Minister of the Economy is required to issue an acknowledgement of receipt of any compulsory notification of a foreign direct investment.
Consideration of the notification
The Minister decides whether or not the foreign direct investment that has been notified is to be the subject of a screening procedure. The decision must be notified to the foreign investor within 2 months from the date of the acknowledgement of receipt.
If the information provided by the foreign investor is insufficient to enable a decision to be taken regarding the triggering of the screening procedure, a request for the provision of any further information needed is sent to the foreign investor. The statutory time-limit for consideration of the notification (2 months) is suspended until such time as the additional information requested has been provided.
The time taken to complete the screening procedure may not exceed 60 calendar days from the date when it is triggered. The screening decision must be notified in writing by the Minister to the foreign investor within that time.
The foreign investor may be requested to supply further information at any time throughout the screening procedure. The statutory time-limit for the screening procedure (60 calendar days) is suspended until such time as the additional information requested has been provided.
Decisions imposing administrative fines taken pursuant to Article 9(7) of the Law of 14 July 2023 setting up a mechanism for screening foreign direct investments which may affect security or public order may be the subject of an appeal to have the decision reversed before the Administrative tribunal. The appeal must be filed within one month from the date of notification of the decision, failing which it will be time-barred.
Where a foreign direct investment is completed without having been notified, or without having been the subject of an authorisation issued in the context of the screening decision, the exercise of the voting rights attaching to the foreign direct investment and conferring control of the Luxembourg entity may be suspended, and the Minister of the Economy may order the foreign investor to modify the operation or to restore the previously existing situation, at the latter’s expense.
Where the voting rights of the Luxembourg entity are exercised despite the fact that the exercise of those rights has been suspended by operation of law, the District court, sitting in commercial proceedings in the judicial district in which the Luxembourg entity has its registered office, may, upon application by any person demonstrating a legitimate interest, declare all or any part of the decisions adopted by the general meeting to be null and void if, in the absence of the unlawfully exercised voting rights, the quorums in respect of presence or majority needed for adoption of the decisions in question would not have been attained.
If the conditions attaching to the authorisation are not met, the Minister of the Economy may:
- order the foreign investor to comply with the conditions laid down in the authorisation within such period of time as the Minister may fix;
- order the foreign investor to carry out, within such period of time as the Minister may fix, certain requirements in substitution for the obligation that has not been performed, including restoration of the situation existing prior to the non-compliance with that obligation or the disposal of all or part of the business;
- suspend the exercise of the voting rights linked to the foreign direct investment which confer control of the Luxembourg entity.
If the foreign investor fails to comply with the order thus made within one month from notification thereof, a fine may be imposed, amounting to a maximum of EUR 1,000,000 where the foreign investor is a natural person and a maximum of EUR 5,000,000 where the foreign investor is a legal entity.
Processing personal data
The Minister of the Economy is responsible for the processing of personal data carried out pursuant to the Law of 14 July 2023 setting up a mechanism for screening foreign direct investments which may affect security or public order. The processing of personal data is authorised for the purposes stipulated in that Law.
The Minister may limit, wholly or in part, the data subject’s right of access to personal data as referred to in Article 15 of Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), where and for as long as such total or partial limitation constitutes a necessary and proportionate measure to safeguard:
- national security;
- national defence;
- public security;
- the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, including the safeguarding against and the prevention of threats to public security;
- other important objectives of general public interest of the European Union or of a Member State, in particular an important economic or financial interest of the Union or of a Member State, including monetary, budgetary and taxation matters, public health and social security.
This limitation may be applied to all categories of personal data with the exception of personal data provided by the data subject himself.
The Minister may also defer or limit the provision of the information referred to in Article 14 of Regulation (EU) 2016/679, or decline to provide that information, where and for as long as a measure of that kind constitutes a necessary and proportionate measure to safeguard the interests enumerated above.
In such cases, the rights of the data subject may be exercised through the intermediary of the National Commission for Data Protection (Commission nationale pour la protection des données - CNPD). Where that right is exercised, the CNPD shall inform at least the data subject of the fact that it has carried out all the necessary checks or a review. The CNPD shall also inform the data subject of the latter’s right to seek a judicial remedy.
European cooperation mechanism
Where a screening procedure is initiated in accordance with Article 6(1) of Regulation (EU) 2019/452, the Minister of Foreign and European Affairs is required to notify the other Member States and the European Commission by providing them with the information referred to in Article 9(2) of Regulation (EU) 2019/452.
The form associated with this step will operate as a notification within the national framework and within the framework of the European cooperation mechanism. The national notification must be supplemented by the information required in the context of Article 4 of the Law of 14 July 2023 setting up a mechanism for screening foreign direct investments which may affect security or public order.
The Minister of Foreign and European Affairs acts as the national contact point as regards exchanges of information within the framework of the European cooperation mechanism.
Forms / Online services
Who to contact
Ministry of the EconomySecretariat of the interministerial committee on investment screening19-21, boulevard Royal
Postal address :
Phone : (+352) 247 – 74780