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Sweden threw its hat into the foreign investment arena in December last year. While slow off the starting block compared to most other EU countries, anyone who thought the late start would result in a more limited regime was mistaken. The regime is sweeping, expansive, and already making waves across a broad range of transactions.
We anticipated that the Inspectorate of Strategic Products, the authority responsible for enforcing the regime, would face a tidal wave of notifications. We also expected that this could lead to delays in the review process. Fast forward nine months, and it's time to check the rearview mirror to see how our predictions panned out.
The regime’s extensive scope, covering a wide range of activities, acquirers and deal structures (including internal restructurings), along with vague definitions, has resulted in a very high number of filings (many of which are precautionary). There is also no procedure in place to receive informal confirmation or guidance from the authority as to whether a transaction is in scope. The message from the regulator is clear: when in doubt, file. Few, if any, precautionary filings are rejected for lack of jurisdiction.
Against this background, the number of filings submitted so far is close to 900 (i.e. almost 100 filings / month). This surpasses the total number of FI filings in major EU economies like Germany, France and Italy during the whole of 2023.
While filings are frequent, interventions are rare. As of September 2024, more than 97% of cases have received unconditional Phase I clearance. Only 20 matters have triggered an in-depth investigation (i.e. a Phase II review).
Remedies have been exceptional, with just two cases being subject to conditions – both involving U.S. investors and one including a Gulf State co-investor. To date, the authority has not blocked a transaction.
The FI regime is mandatory and suspensory, meaning that notifiable deals cannot be closed until cleared. The authority conducts a two-stage review procedure, with 25 business days in Phase I to either clear the transaction or initiate a Phase II investigation, which can extend the review period by another three months (six months in exceptional cases).
The authority often uses close to the full 25 business days in Phase I. This also applies in clearly unproblematic transactions (e.g. where the investor is EU based). The 25-day countdown begins once the authority considers the filing to be complete. RFIs before the clock starts ticking are common, and should be reflected in deal timelines.
For Phase II, the average review period from the decision to launch an in-depth review until the final decision, is approximately 11 weeks.
The Swedish FI filing form is straightforward, and the information required generally aligns with other EU regimes. In some instances, it is even lighter. For example, input on limited partners is generally not required and there are no broad requests in relation to data on competitors or market shares. It is also less strict in relation to supporting documents, e.g. certificate of incorporation or list of board members of the investor.
The Swedish FI regime has generated a sizeable volume of filings, but the authority has maintained a steady hand, guiding transactions through a straightforward review process and taking the statutory time limits seriously. The initial concerns that the new regime would make Sweden a less attractive investment destination are heard less today.
Still, the very high number of filings, weighed against the very low intervention rate, nevertheless suggests that the net has been cast too wide.
It remains to be seen if Sweden will consider measures to narrow and refine the regime. Many would welcome a more targeted regime focused on investments that pose real security threats, but no radical shake-up is in the pipeline. The need to obtain FI approval is likely to remain a standard feature of Swedish M&A deals and internal restructurings for many years to come.
12 September 2024
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