Foreign investments

Estonia to start screening foreign investment backgrounds | News

The bill aims to ensure the transparency of foreign investment, Estonia’s strategic sectors and business areas will not become dependent on foreign investors and the continuity of services will not be compromised, spokespersons from the ministry.

Minister of Entrepreneurship and Information Technology Andres Sutt (Reform) said that under the conditions of the Covid pandemic, global supply chains are under great pressure and the use of foreign investment to achieve national policy goals continues to increase.

“In the crisis situation, Estonia’s small open economy is strongly affected by what is happening in other parts of the world, and in areas that are important for national economic security, such as energy, transport, medicine or communications and IT, it must be assured that investments made in Estonian companies do not pose a threat to our security or public order,” Sutt said.

The project focuses on foreign investment in areas of strategic importance, such as energy, transport and communications, and on businesses, such as providers of vital services, enterprises with public participation, construction companies. infrastructure, providers of television or radio services on a national scale, companies that manage public stocks or own the infrastructure ensuring the operation of the communications of the State.

The bill would introduce an authorization requirement for foreign investment in these areas, as well as measures to eliminate security threats and public threats. Foreign investments by investors of third countries or controlled by them, by which, directly or indirectly, a substantial participation of 10% or more of the voting rights in the target company would be acquired, or the direct or indirect control of the target company obtained, or the target company acquired, will be evaluated.

The impact of a foreign investment on security and public order and the potential risks will be assessed on a case-by-case basis. It will be examined, for example, if the foreign investor is controlled by an institution of a third country or if it is involved in activities that threaten security or public order.

In the case of the target company, its importance in the economic sphere is taken into account and whether changes are to be made to its economic activities as a result of the investment. The availability of substitute products or services will also be reviewed.

“If a foreign investor is financed, for example, by a government agency of a third country, this indicates that the context of the transaction must be analyzed in more detail,” Sutt said. “We must prevent a situation where foreign economic pressure would harm Estonian economic operators or affect the well-being of our people,” he added.

In order to obtain a foreign investment permit, a foreign investor must seek permission from the Consumer Protection and Technical Regulation Authority before the transaction is finalized. The application for foreign investment authorization must be approved beforehand by a foreign investment committee composed of representatives of different government agencies.

The draft law will contribute to the effective implementation of the cooperation mechanism between Member States and the European Commission provided for in the EU regulation on FDI background checks. The FDI screening process is applied in most EU Member States.

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