Draft of the Royal Decree on Foreign Investments in Spain

The Ministry of Industry, Trade and Tourism (the "Ministry") has published the Draft of the Royal Decree on Foreign Investments (the "Draft"), in order to develop the Spanish Law 19/2003, of 4 July, on the legal regime of capital movements and foreign economic transactions, with regard to investments.

The Draft was submitted for public hearing until 25 November 2021 and is still pending to be approved. However, the Ministry and the General Directorate of International Trade and Investments (the "General Directorate") take into consideration the provisions of the Draft, on an internal basis and for guidance purposes, in order to qualify consultations and applications for the authorisation of foreign investments.

Foreign investment regulations

In particular, the main novelties introduced by the Draft to be taken into account with regard to foreign investments, are the following:

• Non-resident foreign investors, as well as foreign natural persons resident in Spain, are considered to be subjects of foreign investment.
• The General Directorate is entitled to request any additional information that it deems necessary in relation to a foreign investment, for the purposes of qualifying an application for authorisation, and it may consider as withdrawn those investors who do not provide the additional information requested.
• The voluntary consultation procedure is regulated, regarding the submission of the investment to prior administrative authorisation.
• In relation to the sectors subject to authorisation, the concepts of critical infrastructure, critical, dual-use, key to leadership and industrial capacity technologies, technologies developed under programmes of particular interest to Spain, key inputs, and companies with access to sensitive information are defined.
• With regard to investors that may be subject to authorisation, the following are detailed:

1. Requirements to determine whether a foreign investor is controlled, directly or indirectly, by the government of a third country, including public entities or the armed forces;
2. Assumptions for determining whether investments or activities carried out by the foreign investor have been likely to affect security, public order, or public health in another European Union member state; and
3. Situations that determine the existence of a serious risk that the foreign investor may carry out criminal or illegal activities affecting the security, public order, or public health in Spain.

• Foreign investments to be carried out by two or more investors will require a single and joint authorisation application by all the investors.
• Any alteration to the conditions of an authorised investment shall be notified to the administrative body that processed the corresponding application, and if said alteration substantially modifies the conditions of the investment, it shall be resubmitted to the prior administrative authorisation procedure.

Regime exemptions

Foreign investments shall be exempt from the prior authorisation regime in the following cases:

• Investments with null or low impact on public order, public security and public health;
• Investments in the energy sector, in which the investor is not controlled by the government of a third country, nor has it carried out investments or activities that affect public security, order and health in another EU Member State, nor is there a serious risk that it will carry out criminal or illegal activities affecting the public security, health and order in Spain, and provided that:

1. The company or assets acquired do not carry on regulated activities;
2. The investor does not acquire the status of dominant operator in the electricity generation and supply sectors, amongst others, as a result of the investment;
3. The foreign investment involves the acquisition of electrical energy production assets, provided that the investor's quota of installed capacity for resulting technology is less than 5%; and
4. The foreign investment involves the acquisition of companies commercialising electrical energy, and whose number of customers is less than 20,000.

• Investments in which the turnover of the acquired company does not exceed €5,000,000 in the last financial year, and carried out in the sectors of technology (critical and dual-use, amongst others), supply of key inputs, sectors with access to sensitive information, or media, subject to certain additional conditions; as well as
• Investments through which real estate properties are acquired, which are not assigned to any critical infrastructure or which are not indispensable and not substitutable for the provision of essential services.