On 4 July 2023, the Spanish Government approved Royal Decree 571/2023 on Foreign Investments (“Royal Decree”), with immediate effect from 1 September 2023, which introduces amendments to and provides further details on the screening mechanism for certain foreign direct investments (“FDI”) in Spain. The main changes to the screening mechanism are summarised below:

Review process

The Royal Decree includes the following amendments:

  • Introduction of a new consultation regime: The investor may submit a voluntary consultation to the Directorate General for International Trade and Investment (“DGCII”) if there is uncertainty as to whether the investment requires an authorization before its completion. The DGCII must issue a decision within 30 working days, which will be binding. During the consultation review period, the investor may not submit a formal notification. After this period, if the DGCII does not issue an express decision, the consultation may not be considered to have been answered, although the investor will be entitled to request authorisation for the transaction.
  • Reduction of the current review period: The legal term for issuing a decision has been reduced from 6 to 3 months. The investment will be deemed to have been rejected if the relevant authority does not respond within the statutory term.

Objective criteria – critical sectors

The Royal Decree provides clarifications on how to interpret the list of sectors to be considered strategic that may have an impact on national security, public health or public order:

  1. Critical infrastructures are understood to be those listed as such in the National Catalogue of Strategic Infrastructures.
  2. Key technologies for industrial leadership and capacity building. This category covers investment in key enabling technologies for the future in accordance with the Horizon Europe Research and Innovation Framework Programme (advanced materials and nanotechnology, photonics, microelectronics and nanoelectronics, life sciences technologies, advanced manufacturing and processing systems, artificial intelligence, digital security and connectivity).
  3. Technologies developed under programmes and projects of particular interest to Spain. This category includes investments involving significant funding from the EU or Spain.
  4. Supply of essential inputs. The Royal Decree sets forth a list of sectors that will be considered essential, including (i) inputs provided by companies that develop and modify software used in the operation of critical infrastructures in the energy, water, telecommunications, financial and insurance, health, transport and food security sectors; as well as (ii) the supply of water, energy, priority raw materials, telecommunications or transport services, health services, food security, research or the financial and tax system.
  5. Sectors with access to sensitive information. The Royal Decree narrows the scope of “companies with access to sensitive information” to the following: (i) those with access to data on strategic infrastructures which, if disclosed, could be used to plan and carry out actions aimed at causing the disruption or destruction thereof; (ii) those with access to databases related to the provision of essential supply services; (iii) those with access to official databases that are not publicly accessible; and (iv) those carrying out activities mandatorily subject to a personal data impact assessment in accordance with Article 35. 3 of Regulation (EU) 2016/679.

Exceptions to the screening mechanism

The Royal Decree specifies that the following investments do not trigger the screening mechanism:

  • Internal reorganizations within a group of undertakings or share increases by a shareholder already holding more than 10% when there is no change of control.
  • Investments in which the turnover of the target company in the last financial year does not exceed EUR 5 million, provided that its technologies have not been developed under programmes of special interest for Spain or the investment is not related to research activities and exploitation of mineral deposits of strategic raw materials. Additionally, certain investments in electronic communications operators are also exempt from the de minimis exception.
  • Investments in the energy sector, irrespective of the amount, provided that the investor does not meet the subjective criteria and the following circumstances are met: (i) the companies or assets acquired do not carry out regulated activities; (ii) as a result of the investment, the company does not acquire the status of dominant operator in the sectors of generation and supply of electricity, production, storage, transport and distribution of fuels or biofuels, production and supply of liquefied petroleum gases or production and supply of natural gas; (iii) when the investment involves the acquisition of production assets, the share of installed capacity by technology is less than 5%; and (iv) the investment consists of companies engaged in the marketing of electricity with fewer than 20,000 customers.
  • Investments in real estate not assigned to critical or essential infrastructures for the provision of essential services.
  • Short-term investments (hours or days) where the investor does not have the ability to influence the management of the acquired company in the case of underwriters and underwriters of share issues and public offers for sale or subscription of shares. In such cases it is the ultimate investor who should submit the notification.
  • Investments with no or little impact on national security, public health and public order.

Although there are still some unresolved matters that continue to generate legal uncertainty, the approval of the Royal Decree certainly provides a more solid legal framework and represents positive steps towards the practical consolidation of the FDI screening mechanism in Spain and its long-term application.