Chapter 620 – National Foreign Direct Investment Screening Office Act

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE

CHAPTER 620

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE ACT AN ACT to provide for the establishment of an Office to be known as the National Foreign Direct Investment Screening Office, and for the exercise by or on behalf of that Office of regulatory functions regarding the screening mechanism of foreign direct investments in Malta on grounds of security or public order, and to make provisions with respect to matters ancillary thereto or connected therewith.

11th October, 2020 ACT LX of 2020.

ARRANGEMENT OF THE ACT

PART I

PART II

PART III

Preliminary Applicability Establishment, Functions and Conduct of Affairs of the National Foreign Direct Investment Screening Office Notification and the Screening Process

PART IV

PART V

Executive Powers

PART VI

Administrative Penalties

PART VII

Appeal

PART VIII Miscellaneous Provisions

SCHEDULE Activities and Factors to be considered Articles 1-3 5-10 11-13 14-16 19-20

PART I

Preliminary

Art. 1

Art. 2

In this Act, unless the context otherwise requires: "beneficial owner" means any natural person or persons who ultimately own or control the customer and, or the natural person or persons on whose behalf a transaction or activity is being conducted, and: (a) in the case of a body corporate or a body of persons, the beneficial owner shall consist of any natural person or persons who ultimately own or control that body corporate or body of persons through direct or indirect ownership of ten percent (10%) plus one (1) or more of the shares or more than ten percent (10%) of the Short title.

Interpretation.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE voting rights or an ownership interest of more than ten percent (10%) in that body corporate or body of persons, including through bearer share holdings, or through control through other means, other than a company that is listed on a regulated market which is subject to disclosure requirements consistent with European Union law or equivalent international standards which ensure adequate transparency of ownership information:

Provided that a shareholding of ten percent (10%) plus one (1) share or more, or the holding of an ownership interest or voting rights of more than ten percent (10%) in the customer shall be an indication of direct ownership when held directly by a natural person, and of indirect ownership when held by one (1) or more bodies corporate or body of persons or through a trust or a similar legal arrangement, or a combination thereof:

Provided further that if after having exhausted all possible means and provided there are no grounds of suspicion, no beneficial owner in terms of this paragraph has been identified, subject persons shall consider the natural person or persons who hold the position of senior management official or officials to be the beneficial owners, and shall keep a record of the actions taken and any difficulties encountered to determine who the beneficial owner is in terms of this paragraph; (b) consist of: in the case of trusts, the beneficial owner shall (i) the settlor or settlors; (ii) the trustee or trustees; (iii) applicable; the protector or protectors, (iv) the beneficiaries or the beneficiaries, as may be applicable; and where class of (v) any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means; (c) in the case of legal entities such as foundations and legal arrangements similar to trusts, the beneficial owner shall consist of the natural person or persons holding equivalent or similar positions to those referred to in paragraph (b);

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE "Board" means the Board established in accordance to sub-article 5(2); "Chairperson" means the Chairperson of the Board; "Commission" means the Commission of the European Union as established in the Treaty of the European Union; "cooperation mechanism" means such mechanism as established in articles 6 and 7 of the Regulation, as the case may be; "Council" means the Council of the European Union as established in the Treaty of the European Union; "European Union" shall have the same meaning assigned to it by article 2 of the European Union Act; "foreign direct investment" means an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links in order to carry on an economic activity in Malta, including investments which enable effective participation in the management or control of a company carrying out an economic activity and any investments made pursuant to a public procurement process; "foreign direct investment undergoing screening" means a foreign direct investment undergoing a formal assessment or investigation pursuant to the screening mechanism; "foreign investor" means a natural person or an undertaking of a third country intending to make or having made a foreign direct investment in Malta; "General Data Protection Regulation" means Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC; "group company" means, in relation to any company, any body corporate which is that company’s subsidiary or parent company, or a subsidiary of that company’s parent company, and the definition "group" shall be construed accordingly as well as meaning a parent undertaking and all its subsidiary undertakings; "Malta" has the same meaning as is assigned to it by article 124 of the Constitution;   NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE "management or control" means having the possibility of exercising decisive influence on an undertaking, in particular: (a) through ownership or the right to use all or part of the assets of an undertaking; or (b) through rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking; provided that even persons or undertakings not holding such rights or entitled to such rights under the contract concerned are deemed to have acquired control if they have the power

to exercise the rights deriving therefrom; "Member State" means a member state of the European Union; "Minister" means the Minister responsible for investment and includes, to the extent of the authority given, any person authorised to act on his behalf for any purpose of this Act; "Office" means the National Foreign Direct Investment Screening Office established in accordance to article 5(1); "procurement" means acquisition by means of a public contract of works, supplies or services by one or more contracting authorities from economic operators chosen by those contracting authorities, whether or not the supplies, works or services are intended for a public purpose; "Regulation" means Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the European Union; "screening" means a procedure intended to assess, investigate, authorise, condition, prohibit or unwind foreign direct investments; "screening decision" means a measure adopted in application of the screening mechanism; "screening mechanism" means an instrument of general application, such as a law or regulation, and accompanying administrative requirements, implementing rules or guidelines, setting out the terms, conditions and procedures to assess, investigate, authorise, condition, prohibit or unwind foreign direct investments on grounds of security or public order;

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE "Tribunal" means the Administrative Review Tribunal as established by means of the Administrative Justice Act;  "third country" means any country which is not a Member State of the European Union; "undertaking of a third country" means an undertaking constituted or otherwise organized under the laws of a third country; "unwind" means the revocation, modification and, or termination of a foreign direct investment, or part thereof, by means of an order adopted as part of the screening mechanism.

Art. 3

This Act implements the Regulation (EU) 2019/452 of the Eu ropean P arliam ent and o f the Cou ncil of 1 9 March 20 19 establishing a framework for the screening of foreign direct investments into the Union.

PART II

Applicability

Art. 4

Applicability of the Act.

This Act shall not apply to portfolio investments.

PART III

Establishment, Function and Conduct of Affairs of the National Foreign Direct Investment Screening Office

Art. 5

Establishment of the National Foreign Direct Investment Screening Office.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE (ii) a Judge or a Magistrate of the Courts of Justice; (iii) legally incapacitated; (iv) has been declared bankrupt or had entered into a composition agreement or arrangement with his creditors; (v) has committed an offence involving fraud, or has contravened any provision of law designed for protecting members of the public against financial loss due to dishonesty, incompetence or malpractice by persons involved in business activities or in carrying on a profession, or has engaged in any business practice appearing to the Minister to be deceitful or oppressive or otherwise improper (whether unlawful or not) or which otherwise reflects discredit on his methods of conducting business or his profession; or (vi) is otherwise not a fit and proper person to hold such office. (b) In determining whether a person is a fit and proper person under paragraph (a)(vi), the Minister shall have regard to that person’s integrity, to his competence and soundness of judgment for fulfilling the responsibilities of that office, to the diligence with which he is fulfilling or is likely to fulfil those responsibilities and to whether the interests of any person are, or are likely to be in any way threatened by holding that office. (c) Any person whom the Minister has appointed or proposes to appoint as a member of the Board shall, whenever requested by the Minister to do so, furnish to him such information as the Minister considers necessary for the performance of the Minister’s duties under paragraphs (a) and (b).

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE

Provided that the Minister or a representative on his behalf may appoint a substitute secretary in the following cases: (a) in cases of urgency if the designated secretary is, for whatsoever reason, not available to perform his duties; and (b) in cases where the designated secretary abstains for the same reasons that a member of the Board may abstain as mentioned above.

Art. 6

The Office shall be a body corporate having a distinct legal personality and shall be capable, subject to the provisions of this Act, of entering into contracts, of acquiring, holding and disposing of any kind of property for the purposes of its functions, of suing and being sued, and of doing all such things and entering into all such transactions as are incidental or conducive to the exercise or performance of its functions under this Act.

Distinct legal personality.

Art. 7

The legal and judicial representation of the Office shall be vested in the Chairperson of the Board:

Legal and judicial representation.

Provided that the Chairperson may, from time to time, appoint any one or more of the Board members, or any one or more of the officers or employees of the Office, to appear in the name and on behalf of the Office in any judicial proceedings or on any act, contract, instrument or other document whatsoever.

Art. 8

The Board shall meet at least once (1) every calendar

Conduct of the affairs of the Board.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE Functions of the Office.

Art. 9

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE (o) charge any such fee which may be deemed reasonable and justifiable for the carrying out of the functions of the Office; (p) exercise such other functions and duties as may be prescribed.

Furthermore, the Office may also request appropriate expertise from, or collaboration with, third parties, as it may deem necessary and may enter into agreements with public entities in order to carry out its functions in terms of sub-article (1):

Provided that persons engaged in the public sector shall be obliged to provide any information that may be requested from them in terms of this sub-article within ten (10) working days from receipt of request.

Provided that in ensuring the transparency and nondiscrimination of the process, the Office shall not prejudice the commercial sensitivity of the foreign direct investment.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE (b) no such person shall be required to produce to or before any court, tribunal, board, committee of enquiry or any other authority, or to divulge to any court, tribunal, board, committee or any other authority, any matter or thing coming to his notice or being in his possession in the performance of his duties under this Act.

Conflict of Interest.

Art. 10

Any officer or employee of the Office who has any direct or indirect interest in any foreign direct investment made or planned to be made and where the officer or employee is involved in any manner in the determinations made in terms of article 12, shall, as soon as this comes to his knowledge, disclose the nature of his interest with the Board, and the Board shall, at its sole discretion, decide whether the officer or employee may be involved or otherwise in the process leading to the mentioned determination:

Provided that where an officer or employee does not disclose such interest, the Board may at its sole discretion, suspend or dismiss such an officer or employee and impose such penalty as it deems fit while taking into consideration the level of interest of that officer or employee in the foreign direct investment in question.

Notification of foreign direct investment.

PART IV

Notification and the Screening Process

Art. 11

Screening process.

Art. 12

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE Provided that where it deems necessary, the Office may extend the period required to determine whether the foreign direct investment may affect security or public order of Malta.

Art. 13

Notification methods.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE (a) by delivering it to the person on whom it is to be served or to whom it is to be given; (b) by leaving it at the usual or last known place of abode of that person, or at his place of work, or if such person has furnished an address for service, at that address; (c) by sending it by means of a registered letter addressed to that person at the place of abode or the address for service aforesaid; (d) in the case of a body corporate or other body of persons, by delivering it to an officer or employee thereof at the registered or principal office, or by sending it by means of a registered letter addressed to such body at that office; or (e) in any case in which it is not reasonably possible to effect service in any of the foregoing manners, whether on all or on any one or more of the persons on whom service is to be made or notice is to be given, by affixing the notification, decision or any other instrument or document to be served or delivered in a conspicuous place on the property to which it relates and keeping it so affixed for five (5) working days and by publishing the said notification, decision or any other instrument or document in a local newspaper. Where the notification, decision or any other instrument or document to be served or delivered is affixed on the property but is removed before the expiry period of five (5) working days, the reaffixing of the said notification, decision, or any other instrument or document shall only be for the remaining period after the document was removed.

Imposition of conditions.

PART V

Executive Powers

Art. 14

Where an investment is subjected to a condition or a number of conditions as permitted by article 12, the Office shall serve the foreign investor with its decision and shall allow reasonable time for the foreign investor to take all necessary measures in order to satisfy the said conditions:

Provided that should the foreign investor fail to satisfy the conditions imposed by the Office within the prescribed time, the Office shall prohibit or unwind the foreign direct investment.

Unwinding of investments.

Art. 15

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE

Art. 16

Where any of the persons involved in a foreign direct investment fails to notify the Office in terms of article 11, the investment shall automatically be considered to be in violation of the provisions of this Act and the Office may, at its own discretion, take all necessary measures to unwind the said investment.

Failure of notification.

PART VI

Administrative penalties

Art. 17

Provided that the imposition of any administrative penalty shall be without prejudice to any other right or remedy which may be competent to the Office in terms of this Act.

Offences and administrative penalties.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE (b) a summary of the facts upon which the charge of the offence is based; (c) any other matters that the Office may deem relevant to the imposition of the penalty; (d) the amount of the penalty due; and (e) the offender’s right to appeal the administrative decision according to article 17, and shall be endorsed by a reference stipulating the provisions of this article.

PART VII

Appeal

Art. 18

Provided that unless otherwise prescribed by law, an appeal application lodged in terms of this sub-article to the Administrative Review Tribunal shall be filed within twenty (20) days from the receipt of the decisions mentioned in paragraphs (a) and, or (b).

PART VIII

Miscellaneous Provisions

Art. 19

In the performance of its functions and duties under this Act, the Office shall observe the obligations imposed by data protection legislation, including the provisions of the General Data Protection Regulation.

Art. 20

The Minister may, in order to achieve the purposes of this Act, make regulations and issue such orders as may be necessary in order to give effect to the provisions of this Act.

SCHEDULE (Articles 11 and 12) Activities (a) critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data      Data protection legislation.

Powers of the Minister.

NATIONAL FOREIGN DIRECT INVESTMENT SCREENING OFFICE processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure; (b) critical technologies and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No. 428/2009 (15), including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies; (c) supply of critical inputs, including energy or raw materials, as well as food security; (d) access to sensitive information, including personal data, or the ability to control such information; or (e) the freedom and pluralism of the media.

Factors to be considered (a) whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding; (b) whether the foreign investor has already been involved in activities affecting security or public order in a Member State; or (c) whether there is a serious risk that the foreign investor engages in illegal or criminal activities.