Following the recent amendments to the Investment Promotion Act ("IPA"), which introduced the foreign direct investment (“FDI”) screening mechanism provided for in Regulation (EU) 2019/452 ("the Regulation(s)"), the Council of Ministers has submitted two new draft decrees to regulate the implementation of the Regulation at the sub-legislative level, namely:
(i) adopting the Statute on the Organization and Operation of the Inter-ministerial Council for Screening of Foreign Direct Investment ("the Statute"), and
(ii) amending and supplementing the Regulations for the Implementation of IPA (“IPA Regulations").
Adoption of the above amendments would also represent the logical step towards bringing the new FDI screening regime into actual application in the country. The screening prior to the implementation of the investment plan is conditioned to the existence of certain criteria and thresholds. These criteria are related to certain fields of activity, the size of the investment (general threshold of EUR 2 million), as well as its origin (non-EU country, including financing by a third country state authority). With regard to the criteria, the assessment is based on whether a FDI is likely to affect security or public order, taking into account the potential impact of the investment on, for example:
(a) critical infrastructure, including that related to energy, transport, water, health, communications, media, data processing or storage, aviation, defence, electoral or financial infrastructure, sensitive facilities, as well as land and real estate that is critical to the use of such infrastructure;
(b) critical technologies and dual-use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace and defence technologies, energy storage technologies, quantum and nuclear technologies, and nanotechnologies and biotechnologies;
(c) the supply of critical resources, including energy or raw materials, and food security;
(d) access to sensitive information, including personal data, or the ability to control such information; or
(e) freedom and pluralism of the media.
The additions provided for in the IPA Regulations are mainly related to the procedure for submitting an application for a permit for FDI. The foreign investor should submit an application for the issuance of a permit to the Bulgarian Investment Agency in written form on electronic or paper medium in Bulgarian language with English translation.
Relevant documents should be attached to the application, including: i) up to date articles of incorporation of the foreign investor's; ii) documents containing information on the structure and ownership of the investor and of the enterprise in which the FDI is planned to be made; iii) documents containing information on the ultimate investor and its participation in the applicant's capital, including information on the size and type of the participation; (iv) documents containing details of the estimated value of the FDI and the date on which it is planned to be made; (v) documents containing details of the financing of the FDI and its source; (vi) a description of the management and organisational structure, (ix) documents concerning the target enterprise, etc.
The submitted application together with the accompanying documents shall be registered by the Bulgarian Investment Agency. The Inter-ministerial Council shall take a decision on (i) allowing the investment to be made without due diligence or to carry out due diligence. In cases where due diligence has been ordered, the final decision shall be taken after the due diligence has been carried out and the whole process shall be completed within the statutory 45-day period.
The adoption of a completely new Statute is also foreseen, which regulates the functions of the Inter-Ministerial Council, which include the examination of FDI applications, the issuance of permits, as well as the official initiation of proceedings for the verification of new or already made investments, identifying the risks that the investment may pose to national security and public order. Furthermore, the composition of the Inter-Ministerial Council is regulated, as well as the way of holding meetings and taking decisions - the meetings are closed and held in compliance with the requirements for the protection of classified information and the requirements for network and information security. In addition, the Statute regulates the activities of the so-called Secretariat of the Inter-Ministerial Council, which provides administrative, technical, expert and organisational services and assists the Inter-Ministerial Council in its cooperation with the European Commission.
The new regime is essential for the foreign investments made in the country when they meet the screening criteria, and it remains to be seen how the actual implementation of the new requirements will proceed in practice in Bulgaria.
