CMS Expert Guide to Foreign Investment Screening Laws in Austria

The Austrian FDI laws are set out in the Austrian Investment Control Act (Investitionskontrollgesetz – "ICA"), which entered into force on 25 July 2020.

The ICA replaced the previously applicable rules on investment screening in the Foreign Trade Act (Außenwirtschaftsgesetz 2011) which had only a very limited scope of application.

The ICA implements the requirements introduced by the EU-FDI Screening Regulation (EU) 2019/452 (the "EU-FDI-Screening-Regulation") which is applicable in Austria.

The ICA applies to direct/indirect acquisitions (see point 2.1) involving

• an Austrian undertaking (i.e., an undertaking having its registered office or headquarters in Austria),
• which has activities in a sector/area considered as sensitive under the ICA (see below under point 2.3.),
• by a "foreign person" (i.e. by a (a) natural person that is not a citizen of an EU/EFTA country or (b) legal person having its registered office or headquarters outside the EU/EFTA).

The ICA applies to the direct or indirect acquisition, by a foreign person, of:

• an Austrian undertaking (i.e. asset deal) or of substantial assets of an Austrian undertaking;
• voting rights in an Austrian undertaking if the thresholds of
  • 10 %, 25 % or 50 % of the voting rights are reached or surpassed if the Austrian undertaking is active in any of the Highly Sensitive Sectors listed in part I of the Annex to the ICA, see under point 2.2. below), or
  • 25 % or 50 % of the voting rights are reached or surpassed if the Austrian undertaking is active in any of the Other Sectors listed in part II of the Annex to the ICA;
• a decisive influence over an Austrian undertaking.

Intra-group restructurings resulting in a change of the (indirect) ownership of an Austrian target are, in principle, within the scope of the ICA. The ICA does not apply to Greenfield investments (unless they result in a notifiable acquisition under the ICA, e.g. an acquisition of shares or decisive influence over an Austrian target).

No approval is required if the target is a micro enterprise (including start-up enterprises) with (i) fewer than 10 employees and (ii) an annual turnover or balance sheet total of less than EUR 2 million.

Under the ICA, “foreign persons” are only non-EU/non-EFTA persons.

The ICA covers direct and indirect acquisitions. This means that acquisitions carried out via a natural or legal person residing or having their seat or head office in the territory of the EU or EFTA may also trigger a filing requirement if the direct acquirer(s) are ultimately controlled by a non-EU/non-EFTA person or if such person(s) hold a participation in such direct acquirer exceeding the above voting rights thresholds.

The ICA applies if the Austrian undertaking is active in any of the sectors/areas listed in an Annex to the ICA.

Part I of the Annex contains an exhaustive list of areas that are considered to be highly sensitive sectors (the "Highly Sensitive Sectors"):

• Defence equipment and technology;
• Providing/operating critical energy infrastructure;
• Providing/operating critical digital infrastructure, in particular 5G infrastructure;
• Water;
• Providing/operating systems that safeguard the data sovereignty of the Republic of Austria; and

Part II of the Annex includes a non-exhaustive list of other areas "in which a threat to security or public order including crisis management and services of general interest within the meaning of Articles 52 and 65 TFEU may arise" (the "Other Sectors"):

• (1) Energy, (2) information technology, (3) traffic and transportation, (4) health, (5) food, (6) telecommunications, (7) data processing and storage, (8) defence, (9) constitutional institutions, (10) finance, (11) research facilities and institutions, (12) social and welfare systems, (13) chemical industry, (14) investments in land and real estate crucial for the use of the infrastructures under (1) – (13) and, any activities in other areas qualifying as critical infrastructure;
• Critical technologies and dual-use items as defined in EU Regulation No 428/2009; notably artificial intelligence, robotics, semiconductors, cybersecurity, defence technology, quantum and nuclear technologies, nano- and biotechnologies;
• The supply of critical inputs/resources, including energy or raw materials, food security, medicines, vaccines, medical devices and personal protective equipment as well as R&D in these areas;
• Access to sensitive information, including personal data or the ability to control such information; and
• Freedom and pluralism of the media.

As the Austrian FDI authority generally takes a very broad and formalistic approach on whether a transaction is covered by the ICA, it is sufficient that the Austrian undertaking is active in any of the sectors mentioned in the Annex to the ICA (e.g. chemical industry), regardless of whether its activities have any actual impact on security or public order in Austria.

Filing is mandatory for transactions caught by the regime (point 2 above). Such transactions cannot be closed prior to obtaining approval (suspensory effect). In case of uncertainty whether an approval requirement applies, an application for a negative clearance is possible.

The substantive test is whether a foreign direct investment can lead to a threat to security or public order, including crisis management and services of general interest within the meaning of Articles 52 and 65 TFEU.

The following aspects are also considered:

• Whether an acquiring person is controlled directly or indirectly by the government, including government agencies or the armed forces, of a third country, inter alia by means of ownership structure or in the form of substantial financial resources,
• Whether an acquiring person, or a natural person who holds a senior position in an acquiring legal entity, is or has been involved in activities that have or have had an impact on security or public order in another EU Member State, and
• Whether there is a significant risk that an acquiring person, or a natural person who holds a management position in an acquiring legal entity, is or has been involved in illegal or criminal activities.

The competent authority enforcing the Austrian FDI laws is the Federal Minister of Economy, Energy and Tourism (Bundesminister für Wirtschaft, Energie und Tourismus, “BMWET”).

In addition, a committee for investment control, consisting of representatives of several Austrian Federal ministries and the Austrian States affected by the investment, serves as an adviser to the BMWET in the FDI approval process.

For direct acquisitions of the Austrian undertaking, the direct acquirer(s) is/are responsible for submitting an approval application. For only indirect acquisitions (i.e. no direct acquisition of the Austrian undertaking), the indirect acquirer(s) is/are obliged to submit an application. An Austrian target undertaking engaging in activities caught by the ICA is obliged to inform the BMWET of changes in its ownership structure subject to an approval requirement if it has no information that such changes were notified to the BMWET.

In addition, the BMWET can also assume jurisdiction and initiate ex officio proceedings for any case caught by the ICA (point 2 above) if no approval application has been submitted.

FDI approval proceedings in Austria typically require 1 ½ months to 2 ½ months (in unproblematic cases that receive clearance in phase 1):

• EU consultation mechanism: After receipt of a complete application, the BMWET notifies the European Commission under the EU consultation mechanism (as stipulated in EU-FDI-Screening-Regulation) 
• Phase 1: : Under phase 1 of the national review mechanism, the BMWET has one month to (i) decide that an authorization procedure is not initiated/reject the approval application if the transaction is not subject to approval, (ii) clear the transaction or (iii) initiate an in-depth investigation. The BMWET has recently adopted its practice regarding the initiation of the national phase I review mechanism. While the BMWET initially only initiated the deadline for the national phase 1 review after the expiry of all deadlines under the EU consultation mechanism (i.e. at least 35 days), the BMWET now initiates the phase I review after the expiry of 15 calendar days from the initiation of the EU consultation mechanism provided that neither the European Commission nor any other Member State indicated an intention to submit an opinion or comments during this period.
• Phase 2: If an in-depth investigation is initiated, the BMWET has two months to decide whether to approve, approve subject to conditions or prohibit the transaction.

If no decision is issued (and in case of Phase 1, if no Phase 2 is initiated) within these time periods, the acquisition is deemed to be approved/cleared.

There are no filing fees under the ICA (however, minor fees for administrative duties/taxes and stamp duty apply).

Generally, no information relating to procedures under the ICA is published.

The BMWET is required to publish an annual report including aggregated information on the procedures and the cooperation mechanism as well as on FDI in Austria.

Implementation of a transaction requiring approval under the ICA prior to obtaining approval constitutes a criminal offence and can be sanctioned with imprisonment of up to a maximum of one year (and up to three years in case of certain qualified offences); note that Austrian criminal law sanctions in parallel also can be imposed on legal entities for actions of the management/staff.

Agreements violating the standstill obligation are (provisionally) invalid until approval is obtained.