Changes to Norway's foreign investment control regime proposed

The current regulation governing ownership control, and thereby FDI, is found in the Security Act of 2019. The Security Act is in many ways of limited scope, and there are only few instances in practice where foreign investments in Norwegian companies will be subject to regulatory scrutiny by the authorities.

Some changes to the Security Act have come into force during 2023, with further amendments pending, which incrementally seek to bring Norway's FDI regime up to international standards. However the Commission's proposal now is, in many respects, to totally overhaul the system.

Investment control to protect national security interests

Last year, the government appointed the Investment Control Commission to assess whether Norway has a sufficient legal framework in place to handle the risks that may result from foreign investment in Norwegian enterprises. The Commission has now presented its report, which can be read in its entirety (in Norwegian) here.

According to the Commission, the changes it proposes are intended to address what they see as significant challenges with the current investment control system, in particular that the system is too narrow and fragmented, entailing that relevant investments are not detected systematically or to a sufficient extent. The Commission underlines the need to increase transparency regarding which investments may be subject to screening, to establish suitable legal bases for intervening against proposed investments, and to provide for the uniform processing of cases in a manner consistent with international principles.

Proposal for a new legal framework for foreign investment control

The Commission's main proposals are:

• A new legal framework for investment control should be developed through specific legislation and appurtenant regulations.
• There should be a single authority responsible for screening investment control cases.
• An obligation to notify certain foreign direct investments in "sensitive sectors" should be established. Sensitive sectors include suppliers of important infrastructure, companies producing or controlling critical technology, and companies producing or controlling certain raw materials. Media companies or companies processing large amounts of personal information or personal data, or real estate, are not included in the proposal.
• The obligation to notify should arise where there is an acquisition of shares or voting rights in a company subject to the legislation exceeding ten percent, a third, or two-thirds. Investors should however be able to increase their ownership within each interval without triggering a new notification obligation. However, upon exceeding a new interval, renotification may be required.
• A distinction should be made between EEA-based investors and "third country" investors. While there would be a notification obligation on all investors in certain sensitive sectors, other obligations would only be placed on investors from third countries.
• A voluntary notification regime should be introduced, applying to all sectors, where the investment is not covered by an obligation to notify but may still constitute a security risk.
• For notifications to the designated screening authority, there should be an initial timeline of 25 working days for the authority to assess whether the investment is approved. If the investment is not approved within 25 working days, the authority can look at the case further, but its assessment should not, in general, exceed 90 working days from when the notification was submitted.
• The authority should have the power to make its approval conditional on certain steps being taken, and the ability to prohibit or annul an investment if it poses a not insignificant threat to national security interests.
• Fixed criteria for how the authority should assess cases should be developed.

Our comments:

Norway is trailing its Nordic and European neighbours when it comes to regulating FDI. Sweden's new legal framework came into force on 1 December, completely overhauling Sweden's approach to FDI. Denmark introduced new rules in 2021.

Implementing the proposals from the Commission would bring Norway closer to the current European standard when it comes to FDI control. However, it remains unclear whether there is sufficient political will to implement a total reform of the system at this stage. Several amendments to the Security Act came into force only earlier this year, and further changes are yet to be implemented. We wrote about those proposals earlier this year.

However if there is a will to make further, more far reaching, changes, implementing the proposals of the Commission would provide more legal certainty for investors and – critically – more transparency over how cases should be dealt with. That, in itself, should be enough reason to consider supporting these proposals, and we look forward to any public consultation process that might follow the Commission's work.

For any questions regarding the current framework or the proposed changes and how they may affect your business, our team of FDI experts is ready to assist.