Foreign Investment Controls in Europe: Belgium
Introduction
The European Union ('EU') has one of the world's most open investment regimes. Nevertheless, there have been growing concerns in recent years about the impact of certain foreign investments on security and public order. A key issue has been the increasing level of Chinese foreign investment that takes place in the technology sector, with prominent examples in Europe including the takeover of the German robotics manufacturer Kuka by Midea and the attempted takeover of the chip equipment manufacturer Aixtron by Fujian Grand Chip Investment Fund.
Partly as a result of such acquisitions, member states of the European Union (the 'Member States') and EU decision-makers have become increasingly concerned about European know-how and consumer data being transferred to China and related security issues. In early 2017, Germany, France and Italy proposed in a letter to the EU Trade Commissioner that the Member States should be able to block investments from non-EU countries. At the same time, several Member States, including Germany and Italy, tightened or considered tightening their national investment control regimes. As of April 2020, 14 Member States[1] have national screening mechanisms in place aimed at preserving security and public order at national level. In November 2018, a political agreement was reached by the European Parliament, the Council and the Commission on an EU framework for screening foreign direct investment into the European Union and in March 2019 a regulation of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into EU was adopted. In March 2020, as part of the overall response to the economic effects of the COVID-19 pandemic, the European Commission issued guidance to the Member States concerning foreign direct investment and the protection of EU's strategic assets, in particular in healthcare-related industries.
Against this background, Ashurst Guantao (FTZ) Joint Operation Office seeks to give general insights into the foreign investment control regimes in the European Union and in the major European jurisdictions, including Belgium, France, Germany, Italy, Luxembourg, Spain, and the United Kingdom.
Please feel free to contact any of your Ashurst contacts in case of any questions.
The Ashurst Team
Belgium
Belgium has always encouraged international trade and foreign investments and maintains an investor friendly policy that does not differentiate between domestic and foreign investors. Some sectors, such as the financial services, energy and food production, are supervised by federal or regional regulatory bodies and investments in such sectors typically trigger certain specific procedures. However, such investment restrictions or regulations, if any, apply equally to both domestic and foreign investors.
In 2019, Belgium approved a substantial reform of the Belgian companies and associations law aiming to make the regime more flexible, simple and coherent. This new regime provides a modern and flexible legal framework that allows national and foreign investors to set up and structure Belgian companies in a manner that is tailored to their needs.
What are the key laws and regulations governing restrictions and controls of foreign investments？
As a general rule, no filing with or approval from any governmental authority in Belgium is required to make a foreign investment – regardless of its nature, size or legal structure – subject to (i) certain exceptions in some regulated industries (see below) which equally apply to both domestic and foreign investors, and (ii) general merger control rules.
Foreign investors are free to establish a new presence in Belgium (such as a branch or subsidiary), to acquire an existing Belgian business or to set up a joint venture with a Belgian or a foreign entity. In general, there are no foreign exchange controls or specific currency regulations in Belgium and foreign investors do not need prior authorisation for making payments. Investors can also use their preferred currencies for transactions.
There are no specific rules restricting market access to foreign shareholders, nor are there any rules differentiating between state-owned (or state-controlled) and privately-owned investors. Moreover, there are no regulations prescribing the proportion of foreign capital to domestic capital in investment projects or new enterprises.
As regards the applicable legal framework, it is important to note that Belgium has a multi-level state structure consisting of the federal state, the regions of Flanders, Wallonia and Brussels, and the French, Flemish and German-speaking communities. This federal structure means that business activities in Belgium may be governed by legislation adopted by several different parliaments and governments, depending on the location in Belgium where these activities are conducted. All levels of the Belgian state have exclusive legislative and governmental powers and responsibilities for specified topics. In short, the competencies of the different levels are the following:
• Federal level: critical nation-wide matters such as defence, domestic and foreign affairs, justice, finance, Belgian Railways, social security, parts of the tax framework and the national health system.
• Flemish Region, Brussels-Capital Region and the Walloon Region: competencies that are connected to the respective region in the areas of economy, employment, agriculture, public works, energy, planning and environment.
• Flemish Community, French Community and the German-speaking Community: competencies in relation to language-related areas such as culture and education, and areas related to individuals (e.g. health policy, social welfare or assistance to families).
In December 2018, the government of the Flemish Region adopted a decree permitting the Flemish government to annul or declare inapplicable certain acquisitions by foreign investors, if such transaction would threaten the strategic interests of the Flemmish Community or the Flemish Region (for more details see 'Are there any restrictions on the regional level?' below).
How is a foreign investor defined?
As the Belgian legal regime does not differentiate between foreign and domestic investors, no legal definition of a 'foreign investor' exists.
There are also no specific rules for investments made by foreign state-owned enterprises.
Which transactions are scrutinised and which sectors are affected?
Constraints in certain regulated sectors
Although there are some constraints when investing into companies active in certain regulated sectors (e.g. financial services, energy, food production, telecoms and postal services), such constraints apply equally to domestic and foreign investors.
Some specific activities require an environmental permit or another type of permit prior to commencing the activity concerned (e.g. permits for activities in relation to food production, transport services, energy production or pharmaceuticals). Rules on permit requirements are, for most sectors, governed by the regional governments and thus depend on the location in Belgium where the activities are conducted (note, however, that the regions impose similar requirements for most activities). Again, no distinction is made between Belgian and foreign investors.
Subsidies for investments in certain sectors
Several subsidies and other financial incentives (e.g. tax exemptions) are granted by the federal government and the regional governments to domestic and foreign investors setting up a business in Belgium. Each region has set up a separate public administration to this end, i.e. Brussels Invest & Export, Flanders Investment & Trade and Wallonia Export-Investment Agency.
Typical investments for which financial support can be sought are investments in eco-friendly activities, renewable energy and research and development activities.
Who is the decision-maker?
Foreign investments are not subject to authorisations or other restrictions, with the exception of investments made in certain regulated sectors (see above). For the latter, the competent authority is determined by the regulated sector in which an investment is made.
Is filing or approval mandatory?
No specific mandatory or voluntary filings for foreign investments exist, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
What are the assessment criteria?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
What does the review process look like?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and
foreign investors (see above).
What are the powers of the competent authorities and can they prohibit or otherwise interfere with a transaction?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
How long does the review process take?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
How much does the review process cost?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
What is the degree of transparency?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
What are the consequences of the lack of clearance?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
Is there a right to challenge?
Not applicable, subject to certain exceptions in some regulated industries which apply to both domestic and foreign investors (see above).
Are there any restrictions on the regional level?
Further to the interest expressed by the Chinese state-owned company State Grid to acquire a majority stake in the Flemish electricity and gas distributor Eandis in 2016, on 7 December 2018 the government of the Flemish Region adopted a decree (which entered into force on 1 January 2019) permitting the Flemish government to annul or declare inapplicable, with retroactive effect, a transaction resulting in a foreign (EU or non-EU) investor (natural person or legal entity) acquiring control or decision-making power over a Flemish or local governmental entity or any other entity controlled by the Flemish government (e.g. entities which are financed for more than 50 per cent by a Flemish or local governmental entity) provided that (i) the strategic interests of the Flemish Community or the Flemish Region are threatened by such transaction, and (ii) the Flemish government attempted to safeguard the concerned strategic interests by other means with the consent of the relevant Flemish or local government entity.
The verification of transactions by the Flemish government will take the form of an ex-post assessment on a case-by-case basis.
The strategic interests of the Flemish Community or the Flemish Region are deemed to be threatened when the continuity of vital processes is jeopardized, certain strategic or sensitive knowledge falls into foreign hands, or the strategic independence of the Flemish Community or the Flemish Region is endangered.
This decree does not apply to exclusively privately held companies.
Given that the decree does not provide for explicitly defined sectors, it has a broad scope of application and can be applied to any strategic sector such as energy supply, transportation or high technology activities which involve processing or protecting personal data and/or classified information
Are any significant changes planned?
No significant changes are currently planned.
[1] According to the List of screening mechanisms notified by Member States, dated 12 December 2019: Austria, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal, Romania and Spain. The United Kingdom is technically no longer an EU Member State following its decision to exit the EU, although it remains subject to EU rules for a transitional period, which currently lasts until 31 December 2020. The UK does have a national screening mechanism, although there have been proposals to strengthen it.
Key Contacts
Belgium
David Du Pont
Partner
T +32 2 626 1923
M +32 471 129987
david.dupont@ashurst.com
France
Anne Reffay
Partner, Avocat à la Cour
T +33 1 53 53 54 99
M +33 6 11 49 04 71
anne.reffay@ashurst.com
Germany
Matthias von Oppen, LL.M.
Partner
T +49 (0)69 97 11 28 32
M +49 (0)170 63 26 165
matthias.vonoppen@ashurst.com
Luxembourg
Isabelle Lentz
Partner, Avocat à la Cour (Luxembourg)
T +352 2813 3222
M +352 621 798357
isabelle.lentz@ashurst.com
Spain
Jorge Vázquez
Partner
T +34 91 364 9899
M +34 676 622 948
jorge.vazquez@ashurst.com
United Kingdom
Neil Cuninghame
Partner
T +44 20 7859 1147
M +44 7917 064 750
neil.cuninghame@ashurst.com