The Macedonian parliament adopted the Law on Registration and Verification of Foreign Direct Investments”. The law envisages the establishment of a national mechanism for screening foreign direct investments through which reporting and verification will be carried out in critical and sensitive sectors, if there are serious indications that the investment realization would have a negative effect on national security, public order or strategic interests.
The covered sectors are broad and include defence, energy, transport, healthcare, communications, financial infrastructure, sensitive and dual-use technologies, critical inputs, personal data and certain media and telecom activities. The screening regime can also apply to other sectors and activities related to projects or programs of interest of the European Union.
The competent authority for reporting and verification is the Ministry of Foreign Affairs and Foreign Trade, which, after a prior consultation procedure with the competent institutions will submit a proposal to the Government whether a certain investment should be permitted, permitted under certain conditions or rejected.
The Ministry first conducts a preliminary review of up to 15 days. At this stage, the Ministry examines:
- whether the applicant qualifies as a foreign investor;
- whether the proposed investment qualifies as an FDI under the law; and
- whether the investment concerns a company, sector or critical infrastructure falling within the scope of the law.
In case the procedure continues, the substantive screening may last up to 60 days, with a possible additional 30-day extension in exceptional cases.
Upon proposal by the Ministry, the Government may issue a:
🟢 positive decision;
🟡 conditional approval, including mitigation measures; or
🔴 negative decision.
Certain completed investments may be reviewed ex officio, in some cases up to five years after completion. Fines up to 30 000 € can be issued.
The Ministry may also propose measures including restrictions on further investment, restrictions on ownership or voting rights and, where necessary, even mandatory divestment of the target company, assets or shares.
A foreign direct investment can be realized with a previously adopted positive or conditionally positive decision by the Government if
- at least 10% of the share capital and/or voting rights are acquired, and
- the value of the acquisition is not less than 50,000 euros in a trading company, sector or critical infrastructure specifically determined by Article 8 of the law.
The law introduces the obligation to notify investments. In practice, this means that transactions will require the prior completion of a screening procedure and the obtaining of approval from the competent authorities.
The draft aims to align the local framework with EU Regulation 2019/452, but there are a few points that immediately stand out. The definition of foreign direct investment appears broader in some respects than the EU Regulation. While Regulation 2019/452 refers to investments establishing or maintaining “lasting and direct links”, the Macedonian draft expressly covers direct and indirect links.
Against the Government’s decision, the investor has the right to initiate an administrative dispute before the competent court in accordance with the Law on Administrative Disputes. There are delays for the government to answer on a screening request, but they can be extended.
Similar laws exist in most countries, but they have more stringent criteria which sectors are concerned, shorter delays to block transactions and higher thresholds. The law was introduced with very strong support of the US with the initial intention to allow a tighter control of Chinese investments. If abused, the law can serve as instrument to manage market access in favor of national investors.
More information here.
In view of the low threshold of 50 000 €, nearly every foreign investment will fall under the new law. Sectors like energy, transport or infrastructure will be considered “critical”, so that a large insecurity exists for foreign investors how the government will decide along criteria which are “flexible” at best. Potential investors should plan at least for more time.
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