On 30 October 2019, Israel announced the establishment of an "Advisory Committee on Foreign Investment" by the Security Cabinet. The Committee, which is not established by legislation, became operational on 1 January 2020. It is headed by the Ministry of Finance and involves several other Ministries. It is mandated with examining national security aspects in the process of approving foreign investment. The Committee would only consider investments that require government approval, in the fields of finance, communications, infrastructure, transport and energy, and only upon voluntary referral by the respective responsible regulators; investors or acquisition targets are not subject to any notification obligation.
On 12 October 2022, Israelian authorities published Resolution B/41, a Decision by the Ministerial Committee on National Security Affairs on the Amendments of the Process and Mechanism for Evaluating National Security Aspects. This Resolution replaces Resolution No. 372/B while also including, among its modifications, a reduction in the minimum foreign ownership threshold, enabling the screening committee to assess an investment (from 25% ownership to 20%). Furthermore, this Decision instructs the Chief Economist's Department to compile and update an advisory committee led by the Ministry of Finance on information regarding foreign investments each year. Section 13 instructs various government agencies to advance "amended legislation in order to regularise the authority of regulators to take national security considerations under advisement when deciding whether to approve a foreign investment."
"Terms
"Foreign Entity" – An entity for which one of the following applies: [...]
2. For a body of persons– A body of persons where control is in the hands of someone who is not a citizen or resident of Israel; or if at least 20% of the means of control are in the hands of someone who is not a citizen or resident of Israel; and in unusual cases where the advisory committee believes that there is reason for concern that there could be considerable harm to interests related to national security aspects, someone who is not a citizen or resident of Israel who is a stakeholder in the body of persons." [...]
"Foreign Investment" – A transaction or activity by a foreign entity whose execution requires the approval of the regulators by law.
[...]
13. Further to the recommendations of the report submitted to the Cabinet by the advisory committee on June 2, 2020, regarding regulators' authority to take national security considerations under advisement when approving foreign investments, to instruct the minister of finance, together with the Ministries of Justice, Economy and Industry, Foreign Affairs, and Energy, and other government ministries and relevant regulatory bodies, to advance amended legislation in order to regularize the authority of regulators to take national security considerations under advisement when deciding whether to approve a foreign investment, subject to the State of Israel's international obligations."
(Resolution B\41 by the Ministerial Committee on National Security Affairs (State Security Cabinet) (October 12, 2022) [unofficial translation])
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"Definitions
"Foreign party" – A party fulfilling one of the following, whichever relevant:
(1) For a natural person – someone who is neither an Israeli citizen nor a resident of Israel;
(2) For a body of persons – a case in which control is not in the hands of an Israeli citizen or resident of Israel, including an enterprise incorporated outside of Israel and which does not have a controlling stake and in which no Israeli citizen or a resident of Israel holds 25% ownership or more. For this purpose, "control" has the same meaning as in the Banking (Licensing) Law – 1981.
"Regulators" – the Bank of Israel; Israel Securities Authority; Capital Market, Insurance, and Savings Authority; and ministers and parties in the Ministry of Finance, the Ministry of Transport and Road Safety, the Ministry of Communications, and the Ministry of National Infrastructure, Energy, and Water Resources including the Israel Water and Sewage Authority, the Public Utilities Authority (Electricity), and the Israel National Gas Authority, which are legally authorized to approve foreign investments.
"Approval" – a permit for controlling or holding a concession or license.
"Foreign investment" – a transaction or activity by a foreign party for which approval by the regulators is legally required in order to carry it out.
"The interests in national security aspects" – the following interests:
(1) Preventing the creation of a position of substantial influence on the object of the foreign investment by a foreign party that might detract from the state's security or its foreign relations;
(2) Preventing the exposure or disclosure of information, the exposure or disclosure of which to a foreign party might detract from the state's security or its foreign relations;
to the extent that these interests affect the national security of Israel.
"Defense, foreign relations, and cyber security agencies" – the Israel Security Agency, the Mossad, the Ministry of Defense, the Ministry of Foreign Affairs, and the National Cyber Directorate.
[...]
The Advisory Board Headed by the Ministry of Finance
1. To establish, at the Ministry of Finance, an advisory committee for the purpose of evaluating national security aspects of foreign investments (hereafter – the advisory committee), headed by the Chief Economist in the Ministry of Finance or a senior representative on its behalf, with participation of a senior representative from the National Security Council (hereafter – "NSC") and a senior representative from the Ministry of Defense. The committee's functions shall be as set forth in paragraphs 2-5 below.
2. An inquiry submitted to the advisory committee concerning a foreign investment:
A. Before granting approval for a foreign investment, the regulators may, at their discretion, subject to their legal authority and to the extent that they believe that granting such approval may create concerns about negatively affecting interests in national security aspects, to address an annotated inquiry to the advisory committee for the purpose of receiving its assessment.
B. In exceptional cases, the advisory committee may, subject to the agreement of its members, to actively request a regulator to submit an inquiry to the committee in order to receive its assessment concerning an approval of a foreign investment. For avoidance of doubt, such a request by the advisory committee does not obligate the regulator and any inquiry is at the regulator's discretion.
3. An assessment by the advisory committee to an inquiry it received:
A. The advisory committee may send to the regulator its detailed response to an inquiry regarding interests in national security aspects pertaining to approval of the foreign investment.
The response will be subject to Israel's international commitments, taking into account also relevant economic aspects. [...]
D. The advisory committee shall send its detailed response to the regulator who made the inquiry within 30 days of the date on which the inquiry was received. The advisory committee is may notify the regulator within 10 days of receiving the inquiry that it does not intend to send a response to the regulator's query. For the avoidance of doubt, it is hereby clarified that the submission of an inquiry by the regulator need not delay its approval of the foreign investment.
E. If the advisory committee did not send its assessment by the end of the period cited in subparagraph D, or if it announced that it did not intend to send an evaluation, as cited in subsection D above, the advisory committee shall be considered as having given an assessment that it did not find a reason for the regulator not to continue the procedures for approving the foreign investment. [...]
7. For the avoidance of doubt, it is hereby emphasized that nothing in this decision authorizes the regulator to weigh national security considerations when he has not been granted the legal authority to do so. Furthermore, nothing in this decision shall derogate from the legal authority of the regulator who submitted an inquiry to the advisory committee, including its authority to make the final decision about approval of a foreign investment, including when its final decision conflicts with the committee's assessment.[...]" (Resolution B\372 by the Ministerial Committee on National Security Affairs (State Security Cabinet): Establishment of a Process and Mechanism for Evaluating National Security Aspects of Foreign Investments (October 30, 2019) [unofficial translation])
Resolution B\41 by the Ministerial Committee on National Security Affairs (State Security Cabinet) (October 12, 2022)
Resolution B\372 by the Ministerial Committee on National Security Affairs (State Security Cabinet): Establishment of a Process and Mechanism for Evaluating National Security Aspects of Foreign Investments (October 30, 2019)
[<a href="https://www.gov.il/en/departments/policies/resolution-b-41">Amended Resolution</a>],[<a href="https://www.gov.il/BlobFolder/pmopolicy/dec372_2019/he/372.pdf">Resolution</a>],[<a href="https://www.gov.il/en/departments/policies/foreign-investment-board">Resolution_Eng</a>]