A new Act, in force from 1.7.2021 and applicable to investments and agreements completed from 1.9.2021, introduces a mandatory and a voluntary foreign investment screening mechanism to protect Denmark against investments which may pose a threat to national security or public order. All foreign direct investment - including by companies domiciled in Denmark, EU or an EFTA country which are under the control or significant influence of nationals from a country outside the EU or EFTA or by companies, resident in a country outside the EU or EFTA - in particularly sensitive sectors and activities (e.g. defense sector, IT security functions or processing of classified information,production of dual-use items, critical technology, critical infrastructure companies) is subject to mandatory authorisation. A voluntary notification regime applies to non-EU/EEA investment of 25% of shares, voting rights or similar control by other means in other sectors.
On 1 July 2023, Law No. 736 entered into force. The law expands the Investment Screening Act's scope and revises the application procedure. The updated process introduces a two-phase review for foreign direct investment (FDI) applications. Phase 1 entails an initial assessment to ascertain Act compliance. Should an application fail this stage, Phase 2 involves further scrutiny, with the Danish Business Authority potentially requesting additional details. Moreover, the amendments mandate authorization for contracts linked to the North Sea energy island's establishment, co-ownership, and operation.
On 1 July 2024, Law No. 674 of 11 June 2024 amending the Investment Screening Act and the Act on Gas Supply entered into force. The amendment extends the scope of the foreign direct investment screening mechanism to include contracts related to the North Sea Energy Island and changes the Danish Business Authority's investment screening process and deadlines.
"§ 1. The Executive Order applies to foreign direct investments and special economic agreements made or entered into by the following:
1) Foreign nationals pursuant to section 2(1), 1st sentence, of the Investment Screening Act.
2) Companies pursuant to Section 2(2) of the Investment Screening Act.
3) Entities covered by section 2(3) of the Executive Order on the delimitation of the scope of application of the Act on the screening of certain foreign direct investments etc. in Denmark (the Executive Order on Application).
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Contracts regarding the establishment, co-ownership and operation of the energy island in the North Sea
§ 3. With the exception of Chapters 4 and 5, the Executive Order applies to contracts concerning the establishment, co-ownership and operation of an energy island located in the exclusive economic zone in the North Sea, cf. § 3 ai of the Investment Screening Act.
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Phase 1 screening
§ 5. An application for a permit pursuant to §§ 5, 7, 9 a or 9 b of the Investment Screening Act and a notification for approval pursuant to §§ 10 or 11 of the Investment Screening Act must, among other things, contain the information that follows from subsections 2-6 and §§ 6 or 7 of this Executive Order.
Subsection 2. Information pursuant to subsection 1 regarding the application or notification includes, among other things, the following:
1) The purpose of the investment or agreement and a summary.
2) The approximate value of the investment or agreement.
3) Date of completion of the investment or entry into force of the agreement.
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§ 6. Applications pursuant to sections 5, 9 a and 9 b of the Investment Screening Act or notifications pursuant to section 10 of the Investment Screening Act must, in addition to the information stated in section 5 of the Executive Order, include the following:
1) Information on the number of shares acquired as a result of the investment , stated as a percentage and, if applicable, which class they belong to, the size of the shares, their nominal value and the voting rights attached to them.
2) If the investment entails equivalent control by other means, cf. Section 11 of the Executive Order: Information on which rights are obtained through the investment.
3) EU member states where the target company or the company's subsidiaries, etc. have significant business activities.
4) Information about any EU support that the target company has received.
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Phase 2 screening
§ 8. If the Danish Business Authority initiates a phase 2 screening of an application or notification pursuant to section 14 b, subsection 3 of the Investment Screening Act, the Danish Business Authority may, among other things, request the following information:
1) Copy of relevant agreement documents, such as letters of intent or conditional agreements.
2) EU notification form according to the Danish Business Authority's form, if the investment must be notified in accordance with Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 on a framework for the screening of foreign direct investments into the Union, as amended.
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§ 11. By equivalent control by other means pursuant to section 4, no. 4 of the Investment Screening Act, cf. section 5, subsection 1, and section 10, subsection 1 of the Act, it is understood that a foreign investor gains control of or significant influence over a Danish company or other entity covered by section 3, subsection 3 of the Executive Order, by either:
1) the right to dispose of ownership shares or voting rights by virtue of agreements with other investors or group-affiliated companies corresponding to at least a share of the ownership shares or voting rights as stated in Section 5(2) and Section 10(1) of the Investment Screening Act,
2) authority to make or approve decisions on significant management or financial matters or significant development or operational matters in the Danish company or entity covered by section 3(3) of the Executive Order, or in business-critical areas in the company or entity pursuant to an article of association or agreement, including long and non-cancellable loan agreements,
3) the right to appoint or dismiss members of the board of directors, the executive board or management bodies with equivalent competence in the Danish company or entity covered by section 3(3) of the executive order, pursuant to an article of association or agreement or on other grounds,
4) acquisition of all or a significant part of the assets of the Danish company or entity covered by section 3(3) of the Executive Order, or
5) control over all or a significant part of the assets of the Danish company or entity covered by section 3(3) of the Executive Order, by virtue of long and non-cancellable lease agreements." (Executive Order No.958 on procedures for applications for permission for foreign direct investments and special economic agreements as well as notification of foreign direct investments and special economic agreements, effective 1 July 2023, Sections 1, 3, 5, 6, 8, and 11 [google translation])
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"Section 14 e. An application for permission to enter into a special economic agreement pursuant to Section 7(1) may be submitted after the foreign investor has received any notification of having been prequalified, or after the expiry of the tender deadline for the public tender procedure for the agreement, when the following conditions are met:
1) The special financial agreement is concluded with the Ministry of Climate, Energy and Utilities, subordinate authorities or independent public enterprises owned by the Ministry of Climate, Energy and Utilities.
2) Participation in the public tender procedure for the Special Economic Agreement is covered by the Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market." (Investment Screening Act (No. 842 of 10/05/2021), in force 1.7.2021, applies to foreign direct investment and special financial agreements implemented from 1.9.2021, as amended by Act No.736 amending the Investment Screening Act and the Act on the Complaints Board for Public Procurement, §§ 14e [google translation])
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"§ 1. The purpose of this law is to prevent foreign direct investments, special economic agreements and contracts regarding the establishment, co-ownership and operation of the energy island in the North Sea from posing a threat to national security or public order in Denmark, through screening and possible interventions against such investments and agreements.
PCS. 2. The Act does not apply if rules are laid down in other legislation on screening of and possible intervention against foreign direct investments, special economic agreements and contracts regarding the establishment, co-ownership and operation of the energy island in the North Sea for reasons of national security or public order.
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The scope of contracts regarding the establishment, co-ownership and operation of the energy island in the North Sea
§ 3 a. The Act applies to contracts relating to the establishment, co-ownership and operation of an energy island located in the exclusive economic zone in the North Sea, which is included in in connection with certain tenders pursuant to the Act on the design and construction of an energy island in the North Sea, cf. however subsection 2.
PCS. 2. Sections 2 and 3 and chapters 2 and 3 do not apply to contracts covered by subsection 1.
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Chapter 2 a
Application for permission for contracts regarding the establishment, co-ownership and operation of the energy island in the North Sea
§ 9 a. Prior to entering into a contract with a client, a contracting party must apply to the Danish Business Authority for permission to enter into the contract if the contract relates to the establishment, co-ownership and operation of an energy island located in the exclusive economic zone in the North Sea, and is entered into in accordance with Act on the design and construction of an energy island in the North Sea.
§ 9 b. The Minister of Business, Industry and Commerce may, at the request of the Minister of Climate, Energy and Supply, decide that all participants in a tender for a contract pursuant to § 9 a must apply to the Danish Business Authority for permission to enter into the contract.
PCS. 2. The Minister for Business determines the time for submitting applications pursuant to subsection 1.
[...]
Chapter 3 a
Procedures for applying for permission for foreign direct investments and special economic agreements as well as notification of foreign direct investments and special economic agreements
§ 14 a. The Danish Business Authority makes a decision on permission in cases submitted pursuant to §§ 5, 7, 9 a or 9 b and approval of notifications in cases submitted pursuant to §§ 10 or 11, if the applied for or reported situation cannot constitute a threat to national security or public order. Permission or approval according to the 1st point can be given on specific terms, cf. section 16, subsection 1.[...]" (Investment Screening Act (No. 842 of 10/05/2021), in force 1.7.2021, last amended 1.7.2023 by Act no. 736 of 13.06.2023, §§ 1, 3, 9a-9b, and 14a [google translation])
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Previously applied
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"Chapter 1 - Purpose, scope and definitions
§ 1. The purpose of this Act is to prevent foreign direct investments and special economic agreements from constituting a threat to national security or public order in Denmark, through screening and any interference with such investments and agreements.
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§ 2. This Act applies to foreign direct investments and special financial agreements made or entered into by foreign nationals. However, Sections 7, 10 and 11 do not apply to nationals of EU and EFTA countries.
PCS. (2) This Act also applies to foreign direct investments and special financial agreements made or concluded by the following, cf. 3 and 4:
1) Companies that are not domiciled in this kingdom. This also applies even if the company has a permanent establishment in Denmark.
2) Companies domiciled in Denmark if the company is a subsidiary or a branch of a company that is not domiciled in this kingdom.
3) Companies domiciled in Denmark if a foreign citizen covered by subsection 1 or a company that is not domiciled in this kingdom has control over or significant influence over it.
PCS. 3. Notwithstanding paragraph. §§ 7, 10 and 11 do not apply to companies domiciled in an EU or EFTA country, provided that the company is not under the control or significant influence of nationals of a country outside the EU or EFTA or of companies, resident in a country outside the EU or EFTA.
PCS. 4. Notwithstanding subsection 2, the Act applies to foreign direct investments and special economic agreements made or entered into by a company domiciled in Greenland or the Faroe Islands, if foreign nationals or companies domiciled outside the kingdom have control or significant influence over the company.
PCS. 5. The Minister of Business and Industry may, after consultation with the Minister of Finance, the Minister of Foreign Affairs, the Minister of Justice, the Minister of Climate, Energy and Utilities and the Minister of Defense, lay down rules that this Act applies to foreign direct investment and special economic agreements made by legal entities. . 2-4, if the investment or agreement may pose a threat to national security or public order.
§ 3. This Act applies to foreign direct investments in and special financial agreements with companies domiciled in Denmark.
PCS. 2. In addition, the Act applies to the establishment of new companies in Denmark within particularly sensitive sectors or activities covered by section 6.
PCS. (3) The Minister of Business and Industry may, after negotiation with the Minister of Finance, the Minister of Foreign Affairs, the Minister of Justice, the Minister of Climate, Energy and Utilities and the Minister of Defense, lay down rules that this Act applies to foreign direct investment in and special economic agreements with other Danish entities. 1, if the investment or agreement may pose a threat to national security or public order.
§ 4. For the purposes of this Act:
1) National security: Matters concerning Denmark's territorial integrity and the survival of the population. Threats to national security include actions that constitute or could pose a risk of disturbing international relations, the nations' peaceful coexistence or Danish military interests, and actions that intend to cause damage to Denmark, including crimes against the state's independence or crimes against the state constitution and the supreme state authorities.
2) Public order: Matters concerning Denmark's ability to maintain an independent, democratic and secure society, without the circumstances thereby affecting national security.
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Chapter 2 - Authorization for foreign direct investment and special economic agreements in particularly sensitive sectors and activities
§ 5. A foreign investor who intends to make a foreign direct investment by acquiring a qualified share in a company domiciled in Denmark within particularly sensitive sectors and activities covered by § 6, must apply in advance to the Danish Business Authority for permission for the investment.
PCS. 2. Direct possession or control of at least 10 per cent is considered a qualifying share. of the ownership interests or voting rights or equivalent control by other means.
PCS. 3. When calculating ownership interests or voting rights, shares from group-affiliated companies or closely related persons are included, as well as warrants and call options for investments that can currently be exercised or converted.
PCS. 4. Stk. 1-3 shall apply correspondingly to an increase in the share, which means that after the acquisition it will constitute or exceed a limit of 20 per cent, one third, 50 per cent, two thirds or 100 per cent, respectively. of the ownership interest or voting rights in the Danish company.
PCS. 5. Stk. 1-3 apply correspondingly to the establishment of new companies.
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§ 6. Particularly sensitive sectors and activities in relation to national security or public order as mentioned in § 5, para. 1, and § 7, para. 1, includes the following:
1) Companies in the defense sector.
2) Companies in the field of IT security functions or processing of classified information.
3) Undertakings producing dual-use items as defined in § 2 (1) of Council Regulation (EC) No 428/2009 of 5 May 2009, as amended.
4) Companies in critical technology other than Nos. 1-3.
5) Critical infrastructure companies.
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Chapter 3 - Notification of other foreign direct investment and special economic agreements relevant to national security or public order
§ 10. A foreign investor who is not covered by the exceptions in § 2, para. 1, 2nd sentence, and para. 3, may submit a notification to the Danish Business Authority of an intended or implemented foreign direct investment if the investment may constitute a threat to national security or public order and the foreign investor directly or indirectly obtains possession of or control over at least 25 per cent. of the ownership interests or voting rights in a company domiciled in Denmark or equivalent control by other means.
PCS. 2. When calculating ownership interests or voting rights, shares from group-affiliated companies or closely related persons are included, as well as warrants and call options for investments that can currently be exercised or converted.
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§ 13. If the Danish Business Authority finds that a foreign direct investment or a special financial agreement notified in accordance with §§ 10 or 11 does not constitute a threat to national security or public order, the Danish Business Authority approves the investment or agreement.
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§ 14. If the Danish Business Authority receives a presumption that a foreign direct investment or special financial agreement, which is covered by §§ 10 or 11, but which has not been notified to the Danish Business Authority, may constitute a threat to national security or public order, the Agency may decide to initiate an investigation for up to 5 years from the implementation of the investment or agreement. § 12, para. 3-5, and § 13, para. 1-3, shall apply mutatis mutandis.
Chapter 4 - Decision criteria
§ 15. In assessing whether a foreign direct investment or a special financial agreement pursuant to this Act and rules issued pursuant thereto may constitute a threat to national security or public order, in relation to the Danish company, the investment or the agreement, all relevant circumstances and available information shall be taken into account, including the following criteria:
1) Whether the Danish company operates within or affects critical infrastructure.
2) Whether the Danish company processes or has access to classified information or sensitive personal information.
3) The Danish company's position in the Danish market, including opportunities for substitution.
4) Whether the Danish company belongs to the defense industry or produces products with dual use or other critical technology of importance to national security or public order.
5) Whether the Danish company deals with the supply of critical raw materials, including energy, and food safety.
PCS. 2. In assessing whether a foreign direct investment or a special economic agreement pursuant to this Act and rules issued pursuant thereto may constitute a threat to national security or public order, in relation to the foreign investor, all relevant circumstances and available information, including the following criteria:
1) Whether the foreign investor is directly or indirectly controlled by a foreign government, foreign government agencies or foreign armed forces, including through ownership or substantial financing.
2) Whether the foreign investor is or has been involved in activities affecting security or public order in an EU Member State or in other friendly and allied countries.
3) Whether there is a serious risk that the foreign investor participates in or has relationships with illegal or criminal activities of importance to national security or public order.
4) Whether there are indications that the foreign investor is deliberately trying to circumvent the screening rules, e.g. through the use of straw man-like company constructions. [...]" (Investment Screening Act (No. 842 of 10/05/2021), in force 1.7.2021, applies to foreign direct investment and special financial agreements implemented from 1.9.2021, §§ 1-6, 10 and 13-15 [google translation])
Executive Order No.958 on procedures for applications for permission for foreign direct investments and special economic agreements as well as notification of foreign direct investments and special economic agreements, effective 1 July 2023, Sections 1, 3, 5, 6, 8, and 11
Investment Screening Act (No. 842 of 10/05/2021), in force 1.7.2021, applies to foreign direct investment and special financial agreements implemented from 1.9.2021, as amended by Act No.736 amending the Investment Screening Act and the Act on the Complaints Board for Public Procurement, §§ 14e
Investment Screening Act (No. 842 of 10/05/2021), in force 1.7.2021, applies to foreign direct investment and special financial agreements implemented from 1.9.2021, §§ 1-6, 10 and 13-15
Investment Screening Act (No. 842 of 10/05/2021), in force 1.7.2021, last amended 1.7.2023 by Act no. 736 of 13.06.2023, §§ 1, 3, 9a-9b, and 14a
Act amending the Investment Screening Act and Act on the Complaints Board for Tenders, Act no. 736 of 13/06/2023
[<a href="https://www.retsinformation.dk/eli/lta/2023/958">Order</a>],[<a href="https://www.retsinformation.dk/eli/lta/2023/1256">Act</a>],[<a href="https://www.retsinformation.dk/eli/lta/2024/674">Amendment</a>],[<a href="https://www.retsinformation.dk/eli/lta/2023/1256">Act</a>],[<a href="https://www.retsinformation.dk/eli/lta/2023/736">Amendment</a>],[<a href="https://www.retsinformation.dk/eli/lta/2021/842">Act</a>],[<a href="https://www.ey.com/en_dk/law/amendment-of-the-danish-investment-screening-act-is-adopted">Other</a>]