Concerns have been voiced by corporate lawyers regarding a potential surge in documentation due to new regulations inhibiting “adversarial entities” from acquiring Irish resources. These concerns suggest that over 300 transactions per year may be subject to government scrutiny. This new regulation in Ireland aligns with European efforts to prevent undesired overseas acquisitions. According to this, those involved in transactions are required to inform the Minister for Enterprise regarding a multitude of transactions involving non-EU acquirers.
This has been influenced by the apprehension within Europe triggered by substantial Chinese investments in European ports. French leader Emmanuel Macron hence advocated for tougher measures on overseas acquisitions in sectors of strategic significance. The Irish legislation enables the Minister to evaluate, probe, approve, restrain or prohibit foreign investments centering on specific security and public order provisions. Those not abiding by the measures would face legal sanctions.
However, corporate lawyers argue that these vaguely specified transaction examinations encompass nearly all industries. They suggest that this will likely result in more transactions being subjected to ministerial review than are examined under competitive law by the Competition and Consumer Protection Commission (CCPC). Philip Andrews, vice-chairman of the Law Society’s business law committee, disclosed that more than 300 transactions could be deemed noteworthy each year. The Screening of Third Party Transactions Act is due to be implemented in the coming months after getting signed into law by President Michael D Higgins.
To compare, “Annually, only 70-80 transactions are flagged to the CCPC, which employs at least 12 dedicated officials to manage those transactions efficiently” said Mr Andrews. There is uncertainty as to whether the department is adequately equipped or has sufficient resources to handle the potential onslaught of filings. In response to the question of capacity, the department replied that “needed resources will be allocated based on demand,” to fulfil the compulsory screening within 90 or 135 days for extraordinary situations.
In relation to the proposed guidance on the new legislation, the Law Society committee advised simplification. The committee proposed that for transactions raising notable security and public order concerns, a brief notification form would allow a screening system customised to these issues. The department has recognised this feedback, suggesting stakeholder interactions to further “fine-tune” its guidance.
A representative from the department emphasised that while a transaction might fall under the screening legislation, there’s not an automatic assumption of risks to safety or public order. International data suggests that the vast proportion of transactions that undergo scrutiny are allowed to progress unimpeded.
Mr Andrews indicated that this new setup introduces more regulatory uncertainty for both buyers and sellers in the business world. He expressed his concern about the €2 million threshold for deal notification, calling it exceptionally low. Furthermore, he called into question the screening test’s nature, highlighting its subjective criteria and its lack of clear demarcation.
All transactions involving sectors such as infrastructure, data, health or telecommunications could potentially be seen as needing notification, due to the European Union regime’s broad definition.
According to him, this system will likely affect just about every industry preemptively, due to the risk of criminal penalties for neglecting to file, and any failure to notify would invalidate the deal. The newly established rule entails notifying every deal that meets the threshold and halting its closure until the Minister’s approval is secured.
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