Denmark does not currently have a cross-sectoral regime for screening foreign direct investments (FDI), but the implementation of such regime is under way. Here we provide a brief introduction to the expected regime and the limited FDI rules currently in place.
The Danish government has announced that it plans to introduce a “national investment screening scheme” before 2023, most likely in 2021.
This announcement follows the previous government's establishment of a cross-ministerial working group set up to examine the options for establishing a screening mechanism for FDIs in Denmark. The recommendations of the cross-ministerial working group are still pending. Currently, the group is finalising its recommendations for possible models for a future Danish screening mechanism.
The previous Minister of Justice has stated that the new rules will be broader to not only cover "critical infrastructure" such as energy, IT, telecom, transport, health and life science, but also advanced technologies and artificial intelligence, and that not only will direct investments be covered, but also rental agreements, operation agreements and other ways of establishing "control".
In our insight you can read more about our view on the expected cross-sectoral regime in Denmark.
As of today, the existing rules on FDIs only apply in relation to certain investments into specific industries. The Danish Act on War Material (in Danish) is currently the only legislative act that regulates foreign acquisitions and investments on the basis of national security interests in Denmark. Investments which fall within the scope of the Act need prior approval. Besides the Danish Act on War Material, the Act regarding the Continental Shelf and Certain Pipeline Installations in Territorial Waters (in Danish) is the only other Danish act that takes foreign and national security interests into consideration.
Other Danish acts also provide for screening mechanisms, for example the rules on merger control in the Danish Competition Act and the rules regarding ownership of financial institutions, but these screening mechanisms are not based on national security or public order. Further, as opposed to rules on FDI, these rules apply irrespectively of the origin of the investor.
The European Union has enacted Regulation (EU) 2019/452 which is establishing a framework for the screening of foreign direct investments into the European Union.
The regulation is effective from 11 October 2020 and is directly applicable in all Member States. The regulation sets forth a cooperation mechanism between all Member States and the European Commission when screening foreign investments. Member States shall notify each other and the Commission of any FDI undergoing screening in their jurisdiction which gives the other Member States and the Commission the possibility to comment on such screening.
Member States must give due consideration to such comments of the other Member States and/or an opinion from the Commission. Further, the Commission and the Member States may also request information and provide comments to other Member States if they think that an investment taking place in the jurisdiction of the other Member State should undergo a screening.
Investments covered by the Act on War Material
Authority: The Ministry of Justice
Scope: Investments made by a non-Danish entity, resulting in control over a Danish undertaking producing:
1) materials constructed for military purposes, which do not serve any civilian purpose,
2) firearms and objects that appear to be firearms (except for firearms specially constructed for sporting or hunting),
3) ammunition, which can be used for military purposes,
4) gunpowder and explosives, and
5) components and parts, which are constructed for use in any of the equipment mentioned in points 1) - 4), and do not serve any civilian purpose.
Undertakings can be exempted from the Danish Act on War Material under specific provisions. An exemption according to Section 14 of the Act can for instance be granted to undertakings engaged in the spray-painting or heat treatment of munitions.
Voluntary/mandatory regime: Mandatory.
Review period: There are no specific rules regarding the format and procedure of notifications.
Fee: Notifications are not subject to filing fees.
If you have any questions, feel free to reach out to Kromann Reumert's FDI team.
The information on this site has been prepared as a service to our clients and other interested parties to provide an introduction to FDI regulation. Thus, the information is for general information purposes only and should not be considered or relied on as legal advice.