Greece joins the club: a new FDI screening regime is born

Foreign investment into Greece is now subject to mandatory and suspensory review in certain sectors, as a new national FDI screening regime has come into force. With timelines that could exceed five months for complex cases, the new regime is expected to add a further layer of complexity to M&A transactions which have a Greek nexus. 

Which activities are caught by the new regime and what are the thresholds? 

The scope of the new regime comes with a catch - it captures not only entities incorporated under Greek law but also those that are “otherwise subject to it”. This suggests a broad scope, which hopefully will be clarified via secondary legislation or future guidelines. Regarding the specific activities covered, a two-tiered system is to be introduced, which distinguishes between “sensitive” and “highly sensitive” sectors:

• Sensitive sectors concern activities relating to the energy, transport, healthcare, IT, telecommunications or digital infrastructure sectors. This category appears to draw inspiration from the Commission Delegated Regulation (EU) 2023/2450 on essential services. Examples of what might be considered “sensitive” activities include the generation, supply and distribution of electricity, the operation of airports, the operation of data centres as well as the provision of software, maintenance services or other necessary inputs (e.g. raw materials) to undertakings engaged in sensitive activities. Foreign investments relating to the above sectors, which result in a shareholding equal to or in excess of 25%, must be notified to the Greek government and will require its approval to close. Subsequent increases in the foreign investor’s shareholding to 30%, 40%, 50% or 75% would also trigger a pre-closing notification obligation. 

• Highly sensitive sectors concern activities that relate to defence and national security (which is defined broadly to include activities relating to EU dual-use items), port infrastructure, cybersecurity, artificial intelligence, critical underwater infrastructure or tourism infrastructure in the Greek borderlands. A lower threshold of 10% applies to foreign investments in these sectors. Subsequent increases in the foreign investor’s shareholding to 20%, 25%, 30%, 40%, 50%, 60%, 70%, or 75% would also trigger a pre-closing notification obligation.

The legislation includes exemptions for internal restructurings and portfolio investments by natural persons (even where an investment exceeds the above thresholds). 

The exemption for portfolio investments, defined as financial investments made without the intention or ability to influence the management of the target, is an interesting novelty in European FDI screening (although it is unclear why it has been limited to natural persons) – it reflects the distinction in the ECJ’s case law between portfolio investments, which fall under free movement of capital, and more far-reaching investments, which fall under freedom of establishment. Whilst the former also applies to non-EU investors, the latter is reserved for EU nationals only, meaning that non-EU investors may be subject to more intense scrutiny.

Are EU investors off the hook? Not quite. 

The new regime mainly targets foreign investments by non-EU investors. However, investments by EU investors are also caught where (i) an activity in a “highly sensitive” sector is concerned and (ii) a non-EU person (including both private and state-linked companies) controls at least 10% of the shares of the EU investor or holds similar influence, inter alia, by virtue of the provision of “significant funds”. In practice, EU investors in the “highly sensitive” sectors will be judged by the company they keep. This approach, likely inspired by the German FDI regime and aimed at blocking any indirect influence by non-EU actors, will inadvertently lead to significant uncertainty when the nationality of a shareholder cannot be definitively determined, or where the significance of non-EU funding needs to be assessed. 

Process and timeline 

The newly established Interministerial Committee for the Control of Foreign Direct Investment (ICC-FDI) and the Minister of Foreign Affairs (MFA) will manage the review process. Foreign investors must notify an acquisition to the MFA before transaction implementation, or risk fines of up to EUR 100,000 and a call-in. While the potential financial sanctions are moderate in comparison to other jurisdictions, investors should note that a missed filing can also constitute grounds for the unwinding of a deal. Upon complete notification, the 30-day Phase I begins. The ICC-FDI can either clear the transaction in Phase I or initiate an in-depth investigation (Phase II), which can last up to 140 days. If a Phase II is initiated, the MFA will trigger the EU Cooperation Mechanism – this more selective approach in triggering the EU Cooperation Mechanism isn’t followed by all Member States but is a good means of applying a filter and allowing straightforward cases to be cleared within a comparably short initial review period. Note that if another Member State or the European Commission communicates its intention to submit comments or opinions, the clock stops until those elements are received. 

What comes next? 

While the new regime is already in force, several practical elements of its implementation, such as the information required from notifying parties and the average speed of the review process, are still awaited. It is, however, already clear that this new legislation marks a major shift in Greece’s approach to screening foreign investments, especially for non-EU investors. Investors should bare this in mind for deals with a Greek nexus, and make sure their transaction documents and timelines duly consider the additional regulatory hurdle.