Sweden's New Foreign Direct Investment Regime Part 5 - The Prohibition Era

Today marks one week since the Swedish FDI regime entered into force on 1 December 2023. For the final part of this week's closer look at the new regime, we are going to take a look at the material decisions the ISP can issue as a result of a filing and the procedural sanctions.

As we mentioned in yesterday's post, filings are assessed in two phases. In the first phase, the Inspectorate for Strategic Products (the “ISP”) may only make one of the two decisions: It can either decide not to take further measures or initiate a review. Neither of these decisions can be appealed.

If a review is initiated, however, the ISP can issue a final decision entailing that the investment

• is authorised,
• is authorised with conditions, or
• is prohibited.

An unconditional authorisation cannot be appealed. Conditional authorisations and prohibition decisions can, however, be appealed to the Swedish government ― which highlights the political nature of the substantive decisions taken by the ISP.

What do these various decisions entail then? As follows from its wording, an authorisation decision means that the investment is permitted. Conditions are only loosely regulated in the act but can, for example, include a duty for the investor to report regularly to the ISP or restrictions on who may serve on the board of the target company. However, structural conditions are also possible ― whereby the investor may be obligated to divest all or part of the sensitive activities. A violation of a condition may either lead to an administrative fine being issued or to the investment being prohibited.

Finally, a prohibition generally entails that the investment is null and void. This does not apply to investments made on a regulated market or a multilateral trading facilities, at an executive auction, or by acquiring real property, in which case the investor must instead be obligated to divest the business. Prohibition decisions can also be combined with orders, directed to the investor, the target, and/or the seller, so as to prevent the investment from causing any harm to the protected interests.

As mentioned, breaches of the FDI Act, such as not filing a transaction, breaching a condition, or providing false information to the ISP, can result in the ISP imposing an administrative fine. The maximum amount of the fine is SEK 100 million (approximately EUR 8.8 million) as of the day of writing, although the ISP has indicated that the upper half of the fine span (i.e. SEK 50–100 million) may only come into question for serious breaches. Imposing an administrative fine is also voluntary on the ISP's part, and it can be waived if the breach is negligible.

With that, we have reached the end of this week's deep dive into the specifics of the new Swedish FDI regime. If you want to know more or think your company might be in scope of the new regime, don't hesitate to reach out to us via the contact details below.