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Foreign Investment Controls in Europe: Luxembourg

2020-06-10

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Foreign Investment Controls in Europe: Luxembourg

Introduction

The European Union ('EU') has one of the world's most open investment regimes. Nevertheless, there have been growing concerns in recent years about the impact of certain foreign investments on security and public order. A key issue has been the increasing level of Chinese foreign investment that takes place in the technology sector, with prominent examples in Europe including the takeover of the German robotics manufacturer Kuka by Midea and the attempted takeover of the chip equipment manufacturer Aixtron by Fujian Grand Chip Investment Fund.

Partly as a result of such acquisitions, member states of the European Union (the 'Member States') and EU decision-makers have become increasingly concerned about European know-how and consumer data being transferred to China and related security issues. In early 2017, Germany, France and Italy proposed in a letter to the EU Trade Commissioner that the Member States should be able to block investments from non-EU countries. At the same time, several Member States, including Germany and Italy, tightened or considered tightening their national investment control regimes. As of April 2020, 14 Member States[1] have national screening mechanisms in place aimed at preserving security and public order at national level. In November 2018, a political agreement was reached by the European Parliament, the Council and the Commission on an EU framework for screening foreign direct investment into the European Union and in March 2019 a regulation of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into EU was adopted. In March 2020, as part of the overall response to the economic effects of the COVID-19 pandemic, the European Commission issued guidance to the Member States concerning foreign direct investment and the protection of EU's strategic assets, in particular in healthcare-related industries.

Against this background, Ashurst Guantao (FTZ) Joint Operation Office seeks to give general insights into the foreign investment control regimes in the European Union and in the major European jurisdictions, including Belgium, France, Germany, Italy, Luxembourg, Spain, and the United Kingdom.

Please feel free to contact any of your Ashurst contacts in case of any questions.

The Ashurst Team

Luxembourg

Luxembourg has always been and is very open to foreign investment and maintains a very investor friendly policy. This is in particular demonstrated by the fact that Luxembourg does not differentiate between domestic and foreign investors. Although certain sectors might require specific procedures, this applies to both, domestic and foreign investors. Also, Luxembourg serves as a hub for investment in Europe by many foreign investors, in particular from Asia.

What are the key laws and regulations governing restrictions and controls of foreign investments?

Luxembourg does not apply specific rules differentiating between foreign and domestic investors.

In particular, foreign investors are allowed to establish companies in Luxembourg on the same terms as domestic investors and foreign investors may, on the same conditions as domestic investors, invest in or acquire Luxembourg companies or real estate.

There are no restrictions in terms of currencies used for investments.

How is a foreign investor defined?

Given that Luxembourg does not apply specific rules and regulations to foreign investors but treats them equally to domestic investors, there is no definition for foreign investors.

There are also no specific restrictions for state controlled enterprises either.

Which transactions are scrutinised and which sectors are affected?

Foreign investments are not subject to a specific authorisation procedure, except that operating certain businesses falling under the supervision of the supervisory authority for the financial sector (Commission de Surveillance du Secteur Financier) requires a licence and certain other commercially operating businesses or transactions may also require an authorisation (e.g. securitisation undertakings issuing to the public on a continuous basis, public offers of securities as well as regulated market listings of securities which do not benefit from an exemption from the obligation to publish an approved prospectus or the set-up of specific fund structures). However, there is no discrimination of foreign investments in this respect, i.e. the same rules as for domestic investors apply.

Who is the decision-maker?

If a licence or authorisation is required, which would apply to both foreign and domestic investors (see above), the relevant decision-maker would be the ministry or the supervisory authority for the financial sector (Commission de Surveillance du Secteur Financier), depending on the applicable legal regime for the investment, or in relation to multilateral trading facility listing projects on the Luxembourg Stock Exchange – the Bourse de Luxembourg (Luxembourg Stock Exchange).

Luxembourg administration is approachable and general items can be discussed with them in an efficient manner.

Is filing or approval mandatory?

There are no specific filing or approval requirements except for specific investments/businesses (see above). However, again, there is no discrimination and domestic and foreign investors are treated equally.

What are the assessment criteria?