FDI enforcement in Europe continues to increase, with authorities focusing on acquisitions relating to strategic assets and infrastructure. Companies and advisors should take this increased scrutiny into account when drafting corporate documents, and ensure that they have a clear strategy in place to obtain FDI clearances in a timely manner.

The two major FDI investigations in Europe in September both concerned share acquisitions of strategic assets. First, in the face of concerns raised by national politicians, the Spanish Ministry of Industry, Commerce and Tourism scrutinized an acquisition by a Saudi Arabian company of a non-controlling stake in Telefonica, a Spanish telecommunications operator. Second, the German government prohibited the acquisition of additional shares in ‘KLEO Connect’, a German satellite start-up, by a Chinese company, which already had a controlling shareholding in KLEO Connect.  

These enforcement developments should be seen in the context of wider concerns over investments in strategic assets and infrastructure in Europe, in particular relating to telecommunications and satellites. These decisions provide two useful insights for companies to consider when assessing transactions from a foreign investment screening perspective in Europe:

Be cautious when the target company has strategic assets, even if the share acquisition is limited and does not give rise to control within the meaning of merger control.

On 6 September 2023, Nadia Cavino, the economy minister of Spain, confirmed that the government was investigating a USD 2.25 billion investment in the Telefonica group by the Saudi Arabian group ‘Saudi Telecom Company’ (STC). The Spanish government raised strong concerns over potential risks to national security and cyber defence: Telefonica supplies systems and equipment to the military division and satellite services to the aerospace division of the Ministry of Defence.

STC intends to acquire a 9.9% shareholding in Telefonica, which will make it the largest individual shareholder. Although the stake will not give rise to any control rights for STC and the 10% share threshold was not reached, the transaction is still subject to Spanish foreign investment review, as any increase in voting rights above 4.9% in key ‘strategic’ defence companies constitutes a triggering event.

At the time of publication of this post, the Spanish government was considering imposing behavioural conditions on the transaction, potentially including limits on asset sales, proposals to take the company private, and dividend payments. As such, companies should be aware that even investments of a limited shareholding (i.e., less than 10%) in a sensitive sector can give rise to significant scrutiny, potentially resulting in behavioural conditions, under FDI rules.

Be cautious when the target company has strategic assets, even if the share acquisition comes from an existing majority shareholder.

On 13 September 2013, the German government prohibited the acquisition of ‘KLEO Connect GmbH’, a satellite start-up, providing global satellite data communication services by ‘Shanghai Spacecom Satellite Technology’ (SSST), a Chinese company.  SSST already held a 53% majority stake in KLEO Connect, and the proposed transaction would have resulted in SSST acquiring a further 45% minority stake held by another German company, ‘EightyLEO Holding GmbH’. A German foreign investment review was triggered on the basis that a non-EEA-shareholder is required to notify the acquisition of additional shares when its shareholding reaches 75%.

This acquisition was prohibited by the German authority on the basis of the strategic importance of the emerging space sector, and its potential use of satellites for military purposes. If the acquisition had been allowed to proceed, the Chinese investor would have owned 98% of KLEO Connect. In response to the prohibition decision, KLEO Connect announced that the acquisition by SSST was a “defensive measure” in a shareholder conflict initiated by the minority shareholders.

Practical Tips

When undertaking an acquisition requiring a foreign investment filing, companies and advisors should take into account the likely response by other shareholders and major customers of the target business. If other shareholders, or major customers of the target business are likely to object to the transaction this may result in delays in obtaining clearance, or potentially lead to either remedies being required or the transaction being prohibited by an FDI authority.


Paul Johnson is a partner in Baker McKenzie Brussels' European & Competition Law Practice. He is an English qualified solicitor and has been practicing in Brussels and the UK for almost 15 years. Paul regularly represents clients on competition matters before the European Commission and has provided competition law advice with respect to over 100 jurisdictions around the world. Paul has extensive experience in all areas of EU competition law, including multi-jurisdictional and EU merger control (notifications and third party complaints), foreign investment review, joint ventures, cartels, abuse of dominance, distribution and other commercial relationships.


Beau is an Associate in the Antitrust and Competition Practice in Belgium.


Pavlo is a Junior Associate in the Antitrust and Competition Practice in Ukraine.