On 25 July 2020, amid Covid-crisis, a new law governing foreign investment review in Austria entered into force. The new law – under the title Investment Control Act (“ICA”) – significantly broadened the scope of foreign investment review in Austria. The ICA now applies to direct and indirect acquisitions of Austrian companies (including Austrian subsidiaries), asset deals or acquisitions of voting rights (starting with a threshold of only 10% in particularly sensitive sectors).
After almost six months of application, we can draw some first conclusions, on how the Austrian Government applies the new rules and the implications on the transaction practice.
The new rules leave a lot of open questions, in particular as regards the scope of review:
What kind of business activities of the Austrian target company trigger review, in view of the broad sector definitions in the new law (e.g. health, information technology, food)?
How is the threshold for the acquisition of voting rights calculated in the case of indirect acquisitions?
To what extent do the new rules apply to intra-group restructuring?
There is yet no clear-cut answer to many of the open questions, even though the Austrian Government launched a website (general information in German language only) designed as a guide for companies on how to apply the new rules and request the FIR approval.
First experience showed, however, that the Austrian Government construes the new rules broadly, in particular when it comes to the definition of the relevant sectors. Against this background and in view of the far-reaching potential consequences of a failure to notify (penalties and nullity), a precautionary finding will often be the best way to obtain legal certainty.
Finally, the EU coordination process, which entered into force only two months ago, again led to procedural changes, in particular regarding the time line. As the period for national review only starts to run after the EU coordination process is completed, it now takes two to three months – instead of one month as before – to obtain a (first phase) approval for Austria.