Today, the Amendments and Supplements Act to the Investment Promotion Act was promulgated. The Act comes into force on Monday, 11.03.2024, and introduces for the first time a mechanism for screening foreign direct investments in accordance with Regulation (EU) 2019/452 in order to ensure measures for the Bulgarian economy against investments that could endanger national security or public order in Bulgaria.
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In brief, the new mechanism is an authorisation regime through which certain investors specified in the Act have to pass when intending to make a new investment or expand an existing one in the country. For example, if a company incorporated in Switzerland, which has a production base in Bulgaria, wants to invest BGN 10 million in the opening of a new production line in the base, it will fall under the new regime. Similarly, if a Turkish national investor wishes to acquire 20% of the capital of a Bulgarian company that develops technologies based on artificial intelligence, the proposed transaction will be subject to screening under the new provisions.
In line with the recent trend in the transposition of European acts into Bulgarian legislation, the fact that the legislator has exceeded the scope of the measures compared to those provided for in the cited EU Regulation is also impressive here, as the new regime is yet to be refined through amendments to the implementation of the Act and other bylaws. The requirements and procedure are discussed in more detail below.
The definition of a foreign direct investment is broad and covers investment of any kind by a foreign investor, including:
The Act specifies three alternative hypotheses when there is a foreign investor. What is common to all three categories of foreign persons is that they are:
Foreign investors within the meaning of the Act are:
The Act provides that a foreign investor intending to make a foreign direct investment is required to apply for authorization in advance.
In order to be subject to prior authorization, the foreign investment must have as its object the following fields of activity:
In addition to the above general condition, the investment must meet at least one of the following conditions:
The Act also provides for foreign investments that do not meet the above general conditions but are nevertheless subject to prior authorization:
In addition, the Act seemingly prescribes that foreign investors originating from countries that are included in a special list approved by the National Assembly, as well as for the United States of America, the United Kingdom of Great Britain, Canada, Australia, New Zealand, Japan, the Republic of Korea, the United Arab Emirates and the Kingdom of Saudi Arabia, remain outside the scope of the national screening mechanism. They are subject to the screening rules for European Union Member States.
The Act provides that no application for prior authorisation shall be made in respect of foreign direct investment commenced after its entry into force and pending compliance with the bylaws. Although rather vague, this provision essentially postpones the starting point of application of the new regime by up to 6 months, as the deadline for the adoption of the regulations on the organisation and operation of the Interagency Screening Council and the amended regulations for the implementation of the Act is 6 months.
The proceedings are initiated by means of a sample application (which will be available in Bulgarian and English) submitted by the foreign investor through the Bulgarian Investment Agency to the Interagency Screening Council. It may also be initiated ex officio when an opinion from the European Commission or an alert is received, in which case screening may also be carried out on an investment already made and started up to two years before the opinion or alert was received.
The period for consideration of the investment is 45 days, which may be extended once for up to 30 days by decision of the Interagency Screening Council.
The proceedings shall result in a decision of the Interagency Screening Council on one of the following options:
There is also an option for tacit consent, i.e. in the absence of a decision within the time limit in one of the above-mentioned ways, the investment is considered approved.
The decision constitutes an individual administrative act, in view of which it is subject to appeal under the procedure of the Administrative Procedure Code.
For violations, the new Act provides for substantial penalties - a fine or pecuniary sanction of 5% of the value of the investment, but not less than BGN 50,000. The types of violations include:
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