CMS Expert Guide to Foreign Investment Screening Laws in Sweden

The relevant Swedish FDI legislation is set out in the Screening of Foreign Direct Investments Act (2023:560) (Sw. lagen (2023:560) om granskning av utländska direktinvesteringar) (the “FDI Act”) and in the Ordinance on Screening of Foreign Direct Investments (2023:624) (Sw. förordningen (2023:624) om granskning av utländska direktinvesteringar) (the “FDI Ordinance”), both of which entered into force on 1 December 2023,.

To identify which activities are within scope, the FDI Act must be read in conjunction with the FDI Ordinance, and in particular with the regulation issued by the Swedish Civil Contingencies Agency (the “MSB”) on essential services, the Protective Security Act (2018:585) (Sw. säkerhetsskyddslagen (2018:585) (“the Protective Security Act”), and the Military Equipment Act (1992:1300) (Sw. lagen (1992:1300) om krigsmateriel) (“the Military Equipment Act”).

Alongside this Swedish FDI legislation, Regulation (EU) 2019/452 (“EU FDI Screening Regulation”) is also applicable in Sweden. 

The Swedish FDI legislation is extensive and covers asset deals, share deals/acquisitions of voting rights, and situations where the investor, through the investment, gains direct or indirect influence over the target entity’s management. A notification obligation arises, among other things, when the investor will directly or indirectly hold voting rights at or above 10%, 20%, 30%, 50%, 65%, or 90%. A notification must be submitted (i) each time one of these thresholds is crossed, regardless of prior approval at a lower level, or (ii) if influence is otherwise gained, for example, through board representation or extensive veto rights.

Importantly, the Swedish FDI legislation applies to any investor, including those based in Sweden and the EU. This is to prevent circumvention of the screening system, such as when a foreign investor invests via a Swedish entity ultimately owned by natural or legal persons from a third country. While such EU- or Sweden-based investors (without foreign ownership) may still be subject to notification requirements, the screening authority will generally dismiss these notifications in a decision following the first review phase concluding that the investment does not warrant further action. Nevertheless, the investment will still be conditional on obtaining such an approval decision.

Furthermore, intra-group restructurings are within the scope of Swedish FDI legislation, e.g., the transfer of ownership to a different subsidiary within a large corporate group or from a natural person to a holding company wholly owned by that person. The notification obligation arises in the same manner regardless of whether the investment concerns new establishments, so-called greenfield investments, or acquisitions of existing assets, so-called brownfield investments. Investments in entities that intend to engage in activities requiring protection should be notified under the same conditions as investments in existing companies.

The Swedish FDI legislation identifies seven groups or broad categories of protected activities:

• Essential services. What constitutes essential services is outlined in the MSB’s regulation MSBFS 2024:9. However, the regulation is only applicable if the entity either (i) has at least five employees, or (ii) has an average annual turnover of SEK five million based on the last three years, or, if the entity has been operating for less than three years, had an annual turnover of SEK five million (approx. EUR 447,580) during the previous financial year. However, certain types of essential services have other criteria regarding number of employees or average annual turnover;
• Security-sensitive activities under the Protective Security Act, which applies to anyone conducting activities that are of importance to Sweden’s security or that are covered by an international commitment on security protection that is binding on Sweden;
• Prospecting, extraction, enrichment, or sale of critical raw materials or of metals or minerals of strategic importance for Sweden’s supply. The critical raw materials, metals, and minerals covered by the FDI Act are set out in Annex 1 to the FDI Ordinance;
• Large-scale processing of sensitive personal data or location data in or through a product or service. Sensitive personal data refers to data as defined in Article 9(1) of the EU General Data Protection Regulation, and location data means data processed in a public mobile electronic communications network indicating the geographic position of an end-user, or data in a public fixed electronic communications network indicating the physical address of the network termination point;
• The manufacture, development, research into, or supply of military equipment under the Military Equipment Act, or the provision of technical support related to such equipment;
• The manufacture, development, research into, or supply of dual-use items, or the provision of technical assistance related to such items. The products that qualify as dual-use items are defined in the EU Dual-Use Regulation; and
• Research into or supply of products or technologies within the scope of emerging technologies, or other strategically protected technologies or activities capable of developing or producing such products or technologies. The relevant technologies are specified in Annex 2 to the FDI Ordinance.

Notification under the Swedish FDI legislation is mandatory, and an acquisition or investment may not be completed until clearance has been obtained from the screening authority.

According to the FDI Act, when conducting its assessment, the screening authority must take into account (a) the nature and scope of the business activities, and (b) the circumstances relating to the investor or acquirer. These factors must be taken into consideration both when the screening authority assesses whether a notification should be dismissed without further action (Phase 1) and during a potential review of an investment (Phase 2).

1. Target activities: The assessment of the nature and scope of the business activities must be based on the actual protection value of the activity in question. Depending on this, the screening authority may also consider circumstances relating to the investor. This includes evaluating the sensitivity and significance of the target entity’s activities for Sweden. The screening authority may also assess whether the activity is conducted at the local, regional, or national level, and how many individuals in Sweden are dependent on or affected by it.
2. Investor/acquirer: In relation to the circumstances surrounding the investor, the screening authority must consider whether:
   • the investor is directly or indirectly, wholly or partially, controlled by a state outside the European Union through ownership structure, significant financing, or otherwise;
   • the investor or any party within its ownership structure has previously been involved in activities that have adversely affected or could have adversely affected Sweden’s security or public order or public security in Sweden or in another Member State of the European Union; and
   • there are other circumstances relating to the investor that could adversely impact Sweden’s security or public order or public security in Sweden.

Swedish FDI proceedings are administered by the Swedish Inspectorate of Strategic Products (the “ISP”). The ISP is a government agency that handles matters related to Sweden’s defence, security, and foreign policy.

The investor or acquirer is responsible for filing.

The ISP must, within 25 business days from the date a notification is deemed complete, either dismiss the notification without further action or initiate a review of the investment. This initial 25-day period constitutes the screening phase (“Phase 1”). A notification is considered complete only once all the information requested in the notification form has been provided. A dismissal means the ISP has concluded that the investment does not warrant further investigation or review.

From the moment the ISP decides to initiate a review, it has three months to conduct the review and decide whether to prohibit or approve the investment. This period constitutes the review phase (“Phase 2”). If there are special circumstances, the decision may instead be made within six months.

It should also be noted that there are no provisions allowing for a preliminary decision regarding a notification.

The Swedish FDI legislation is deliberately broad in scope and its notification requirement aims to avoid circumvention. However, it is only intended to cover investments by non-EU investors that could undermine Sweden’s security, public order or public security in Sweden. Hence, prohibition or conditional approval is expected to affect only a limited number of transactions.

There are no administrative fees for FDI notifications in Sweden.

FDI proceedings are not public, and the ISP does not publish any information on individual cases. It does not publish a list of pending cases and does not publish its decisions.

However, it should be noted that all Swedish authorities are subject to the constitutional principle of public access to official records, meaning that, in principle, everyone has the right to access documents held by the authorities. This applies only to documents designated as public, and some documents, or parts thereof, are confidential. The Swedish Public Access to Information and Secrecy Act (2009:400) (Sw. offentlighets- och sekretesslagen) applies to information handled in cases under the FDI Act. If a request for disclosure is made, or information needs to be shared with another authority, region or municipality under the FDI legislation, the ISP will assess whether the content is confidential and redact any parts covered by confidentiality.

If a notifiable investment or acquisition is completed without approval, the acquirer risks being subject to an administrative fine ranging between SEK 25,000 (approx. EUR 2,239) and SEK 100 million (approx. EUR 8.96 million).

The ISP may decide to impose an administrative fine on a party that:

1. failed to submit a mandatory notification despite being required to do so;
2. completed an investment before the ISP issued a final decision;
3. completed an investment in violation of a prohibition;
4. acted in breach of a condition attached to an approval decision; or
5. provided false or misleading information in connection with the notification or the fulfilment of any associated obligations.

When assessing whether an administrative fine should be imposed and determining the amount, special consideration shall be given, among other things, to the actual or potential harm to Sweden’s security or to public order or public security in Sweden, whether the violation was intentional, and any profit gained as a result of the violation.

If an investment is prohibited, any legal action that forms part of, or is intended to carry out, the investment becomes invalid once the prohibition decision is final. However, this invalidity does not apply to investments made on regulated markets or trading platforms specified by law, through purchases at enforcement auctions, or involving the transfer of real property. In such cases, the ISP may instead require the investor to sell the acquired assets.