The Screening of Third Country Transactions Act 2023 (the "Act") was signed into law by the President on 31st October 2023. The Act is the first investment screening legislation in Ireland and it is expected to be implemented by Q2 2024. Under the Act, the Minister for Enterprise, Trade and Employment ("Minister") can review transactions involving foreign investment where the investment may pose a risk to the security or public order of the State.

Does the Act apply to your transactions: The following criteria is required for a transaction to be notifiable

Application: This Act will allow the Minister to review notifiable transactions, or the Minister can 'decide' to review a transaction whether notifiable or not [1]. The Minister in reviewing a transaction will consider whether or not it would or would be likely to affect the security or public order of the State. 

Transactions which require a mandatory notification are:

• When a third country undertaking or connected persons with that undertaking;
  1. acquires control of an asset or undertaking in the State or
  2. changes the percentage of shares or voting rights it holds in an undertaking in the State from 25% or less to more than 25% or from 50% or less to more than 50%; and
• the cumulative value of the transaction and each transaction between the parties to the transaction or connected person with third country undertakings, in the period of 12 months before the date of the transaction is equal to or greater than €2m; and
• the same undertaking does not directly, or indirectly, control all the parties to the transaction e.g., internal reorganisation; and
• the transaction relates to or impacts upon one or more of the matters referred to in Article 4 (1) of the Investment Screening Regulation (EU) 2019/452 (namely infrastructure, energy, transport, water, health, communications, media, critical technologies and dual use items such as artificial intelligence, robotics, cybersecurity, defence, raw materials, food security, freedom and pluralism of the media). 

• The Minister can review a transaction that has not been notified or is not notifiable if the Minister has reasonable grounds for believing the transaction affects or would be likely to affect the security or public order of the State.

Notification

• All parties to a notifiable transaction have an obligation to notify the Minister not less than 10 days prior to completion unless they are unaware of the transaction.
• Detailed information is required to be disclosed to the Minister. 
• The Minister will consider whether the transaction will affect security or public order of the State. Issues to be considered are prescribed in Section 13.
• The Minister shall as soon as practicable after commencing a review issue a screening notice to the parties and anyone the Minister considers appropriate. The screening notice will summarise the reasons for which the transaction is being reviewed.
• The Minister shall having reviewed the transaction, make a decision known as a screening decision, as to whether or not the transaction affects or is likely to affect the security or public order of the State. 
• Once a screening notice is issued, a transaction cannot complete until a decision is made to the effect that the transaction has not affected or would not be likely to affect the security or public order of the State (Section 17).

Timing for Transactions

• Transactions could experience delays as a result of a review.  
• The Minister shall 'as soon as practicable' after commencing a review of the transaction issue a screening notice.
• The Minister has the later of 90 days from the date on which the screening notice is issued, or such date (being not more than 135 days from the date of the issue of the screening notice) as the Minister may specify in a notice in writing to the parties to make a decision.
• However, these dates can be suspended where the Minister issues a notice for further information (Section 20). 

Key terms

• Third Country – is a state other (i) Ireland (the State), or (ii) a Member State or (iii) a contracting party to the Agreement referred to in 2(1)(C) of the Act (Austria, Finland, Iceland, Liechtenstein, Norway and Sweden) or (iv) Switzerland.
• Third Country undertaking – is an undertaking that is governed by (i) the law of a third country, or (ii) controlled by at least one director, partner or member or other person that is a person constituted or otherwise governed by the laws of a Third Country or is a Third Country national. 
• Third Country National – is (i) a natural person who is ordinarily resident in a Third Country or (ii) an unincorporated group or partnership of national persons at least one of whom is ordinarily resident in a Third Country     
  1. So, the Act applies to (but not limited to) undertakings governed by UK laws or the US or undertakings controlled by persons governed by law of the UK or US. 
• Essentially investments and transactions by entities incorporated in or controlled by persons governed by the Third Country will be caught. 

Questions to ask at the commencement of the Transaction

• Is the Transaction caught by the criteria? All transactions with entities from outside EU need to be considered. 
• What concerns would be of issue in the areas of public order/security? What remedies could be offered in the notification.
• Will parties be willing to provide the required detailed information?
• Are conditions required in the transaction documents?
• Is a transaction about to close pre commencement of the Act and if so is it at risk of review by the Minister?

With the Act anticipated to be implemented in Q2 of 2024, only time will tell how much of an effect it may have on transactions in Ireland. However, the Act certainly has the potential to influence a wide variety of transactions and parties will need to factor the Act into the transaction timetable.