Introduces new FDI screening regime

01 Sep 2023

On 1 September 2023, a law to establish a national screening process for foreign direct investment (FDI) that could impact security or public order entered into force in Luxembourg. This law aligns with EU Regulation 2019/452, which outlines the framework for FDI screening within the European Union.

The national screening mechanism applies to FDI that involves critical activities likely to affect security or public order. Notably, it excludes portfolio investments. The law defines critical activities as including the production, exploitation, and sale of dual-use goods, operations in various sectors like energy, transport, health, AI, cybersecurity, aerospace, defense, and more. Additionally, the definition of critical activities is expanded to cover research and production activities connected to critical sectors, and related activities involving access to sensitive information.

Non-EEA foreign investors must inform the Minister of Economy when they reach a 25% threshold of voting rights or gain effective control over a Luxembourg entity due to a corporate event, before proceeding with the investment. The Minister evaluates the situation, potentially initiating a formal investigation lasting up to 60 days. Factors considered include infrastructure integrity, technology sustainability, access to essential resources, sensitive information, and media freedom.

The screening process can result in authorization, conditional authorization, or prohibition of the FDI. Non-compliance may lead to measures such as suspension of voting rights, injunctions to modify the transaction, and fines.

  • Type:
    • Entry and establishment (Approval and admission)
  • Industry:
    • Primary (Agriculture, forestry and fishing)
    • Manufacturing (Manufacture of food products, beverages and tobacco products, Printing and reproduction of recorded media, Manufacture of basic pharmaceutical products and pharmaceutical preparations, Manufacture of computer, electronic and optical products, and electrical equipment)
    • Services (Electricity, gas, steam and air conditioning supply, Water supply, sewerage, waste management and remediation activities, Transportation and storage, Publishing, audiovisual and broadcasting activities, Telecommunications, Financial and insurance activities, Scientific research and development, Other professional, scientific and technical activities, Human health activities)
  • Sources: