North Macedonia moves toward first national FDI screening regime

The proposed legislation introduces mandatory pre-closing screening for investments of at least 10 % of share capital and/or voting rights, but in an amount of not less than EUR 50,000, in "commercial companies, sectors or critical infrastructure". It covers a broad range of sensitive sectors and activities.

A screening process allows retrospective ex officio review of certain completed investments for up to five years, suggesting that investors should already consider the Macedonian FDI framework when planning a transaction.

The Law is expected to be adopted in the coming weeks.

Which transactions will require clearance?

The Law would require mandatory pre-closing clearance for an FDI involving the direct or indirect acquisition of at least 10 % of the share capital and/or voting rights in a "company, sector or critical infrastructure", provided that the value of the investment is at least EUR 50,000.

Either the foreign investor or the Macedonian target company may submit FDI notification.

Investments in designated sensitive sectors would require clearance, while investments in other sectors may be reviewed ex officio where they raise national security, public order or strategic-interest concerns.

Sensitive sectors and activities

The Law identifies a broad range of sensitive sectors and activities, including:

·       defence and military goods, including production, research, trade and armament;

·       critical infrastructure, such as energy, transport, water, healthcare, communications, media, data processing and storage, aviation, defence, electoral and financial infrastructure, sensitive facilities, and real estate essential for the use of such infrastructure;

·       network and information-system security operators;

·       sensitive and dual-use technologies, including artificial intelligence, biotechnology, semiconductors, quantum technologies, robotics, cybersecurity and space technologies;

·       critical inputs, including energy, raw materials and matters affecting food security;

·       access to sensitive information, including personal data; and

·       audio, audiovisual and media services, including broadcasters, on-demand providers, video-sharing platforms and public electronic communications network operators.

The Government will detail the relevant critical-infrastructure sectors and screening criteria through secondary legislation.

Process and timing

Preliminary procedure – determining whether the investment is in scope

The investor or target company would first submit a preliminary notification to the Ministry of Foreign Affairs and Foreign Trade. The Ministry would then have up to 15 days to determine whether the investment falls within the scope of the Law and, if it does, the investor would be required to proceed with a request to obtain consent for FDI.

Full screening procedure

Once the request for obtaining consent for FDI is filed, the Ministry of Foreign Affairs and Foreign Trade would have seven days to determine whether it is complete; otherwise, it will allow parties to supplement the filing. Following confirmation of completeness, the substantive screening may last up to 60 days, with the possibility of a further 30-day extension.

Following completion of the screening, the Ministry would submit its recommendation to the Government of North Macedonia, which would adopt the final decision.

According to the explanatory note accompanying the Law, the full screening process is expected to last at least 90 days, with the time required for the Government to adopt its final decision coming on top of that period.

Government outcomes and mitigation

The Government may:

·       approve the investment, where no national-security or public-order risks are identified;

·       conditionally approve the investment, subject to specific obligations intended to mitigate identified risks. Such measures may concern: protection of critical infrastructure, continuity of supply, protection of sensitive information, compliance with competition rules, guarantees of operational independence, restrictions on the export, brokering, transit, transfer or related services involving dual-use goods and technologies, and other measures relevant to the protection of national interest; or

·       prohibit the investment where the FDI is considered to pose a real and serious threat to national security, public order or the strategic interests of North Macedonia, and such threat cannot be eliminated or sufficiently mitigated through the imposition of conditions or obligations.

Retrospective and ex officio review risk

The Law also empowers the Ministry of Foreign Affairs and Foreign Trade to initiate an ex officio review of certain already completed investments, including investments that would otherwise fall outside the ordinary screening regime, where there are indications that the investment may pose a threat to national security or strategic interests.

Such a review may be initiated for up to five years following completion of the investment, if the foreign investor did not conduct prior consultations with the Ministry.

Potential triggers for an ex officio review include:

·       newly established facts concerning the ownership or control structure of the foreign investor;

·       links to restrictive measures, sanctions, sanctioned persons or entities, or other security-risk subjects;

·       evasion or circumvention of the screening procedure, or the submission of inaccurate, incomplete or misleading information;

·       new security, geopolitical or economic circumstances that materially alter the risk assessment; or

·       changes in the control, ownership or influence over the foreign investor or the target company.

Sanctions

Sanctions range from (i) temporary bans on carrying out activities for periods of three months to one year, (ii) fines of up to EUR 30,000 per infringement, and (iii) more serious measures, including a prohibition on further investment, restrictions on ownership or voting rights, and compulsory divestment of the target company, target assets or relevant shares.

Entry into force and delayed application

The Law provides for an 18-month transitional period, allowing the authorities and market participants sufficient time to prepare for the implementation of the new FDI screening regime.

Authors: Srdjana Petronijevic, Danijel Stevanovic and Filip Zafirovski