Corporate lawyers have raised concern about a “potential tsunami” of paperwork from new laws against “hostile actors” buying Irish assets, saying more than 300 deals each year may face screening by the Government.
The new Irish legislation is in line with European moves against unwanted foreign takeovers, requiring deal makers to notify the Minister for Enterprise about a huge swathe of transactions with non-EU buyers.
It comes amid European anxiety about big Chinese investment in European ports, which prompted French president Emmanuel Macron to campaign for a crackdown on foreign takeovers in strategically important sectors.
The Irish law allows the Minister to “assess, investigate, authorise, condition, or prohibit third-country investments based on a range of security and public order criteria”, with criminal penalties for noncompliance.
But corporate lawyers say “ill-defined” deal tests cover almost all industries, suggesting far more transactions will go for ministerial screening than are scrutinised under competition law by the Competition and Consumer Protection Commission (CCPC).
Philip Andrews SC, vice-chairman of the Law Society business law committee, said more than 300 deals may be notifiable each year. The Screening of Third Party Transactions Act is scheduled to take force within months after President Michael D Higgins signed it into law last October.
“Three hundred filings is a very significant number if that’s the type of numbers we’re talking about. The example I would give by contrast is that annually 70-80 deals are notified to the CCPC, which has at least 12 full-time officials engaged in processing those deals in a timely fashion,” said Mr Andrews.
“A primary question is whether the department is sufficiently mobilised and resourced to deal with what will be a potential tsunami of filings.”
Asked whether it had capacity for that volume of cases, the department said “sufficient resources will be available as demand requires” to complete screening within the mandatory 90 days or 135 days in exceptional cases.
In a paper to the department on its draft guidance on the new legislation, the Law Society committee said the regime should be streamlined.
“Reflecting that only a small number of investments will raise substantive issues, a proportionate and tailored investment screening system would permit an abbreviated notification form subjecting only transactions that raise material security and public order concerns to more extended notification requirements,” the committee said.
Is Ireland in recession?
Responding to questions, the department cited engagements with stakeholders to “refine” its guidance.
“It is important to note, however, that just because a transaction falls within scope of the screening legislation, this does not mean that any risks to security or public order will be identified,” said a department spokesman.
“The international experience shows that the vast majority of transactions that are screened are permitted to proceed without any restrictions.”
Mr Andrews said the regime will introduce greater regulatory uncertainty for buyers and sellers of businesses, describing the €2 million threshold for notifying deals as “very low”.
He also questioned the test for screening based on the type of transaction, saying the criteria were “much more subjective, less bright line”.
Any deals for infrastructure, data, health or telecoms assets could be deemed to be notifiable as they were defined broadly in the EU regime.
“The reality is, it’s going to catch practically every industry on a precautionary basis because of criminal sanctions for failing to file — and because the deal will be void for any failure to notify,” he said.
“What’s been established is a file and wait system so every deal caught by the threshold has to be notified and the closing of that deal suspended until approval is issued by the Minister.”
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly - Find the latest episode here
