Malta’s FDI screening framework amendment: Key changes under Bill No. 172

Bill No. 172 (the “Bill”) has been published to amend the National Foreign Direct Investment Screening Office Act (Chapter 620 of the Laws of Malta) (the “FDI Act”). The Bill primarily integrates the National Foreign Direct Investment Screening Office (the “Office”) within the Malta Business Registry and introduces clarifications to the FDI Act. These changes are intended to provide greater certainty to investors considering investments in Malta and to streamline the framework in line with EU principles.

The key proposed changes are set out below:

1. clarifying the meaning of “portfolio investment”, which is an activity which falls outside the scope of the FDI Act. By means of this proposed amendment, a “portfolio investment” will be defined as an investment in securities (including bonds, shares and similar instruments) intended for financial return, without any intention to influence the management or control of the company. The proposed definition broadly aligns with definition of portfolio investment provided by the European Court of Justice in is judgment of 28 September 2006 in Commission v Kingdom of the Netherlands (Joined Cases C-282/04 and C-283/04); and
2. aligning the notification trigger with the EU FDI Regulation. The Bill replaces Article 11 of the FDI Act so that a foreign direct investment must be notified to the Office where it affects the activities listed in Schedule 1. The factors in Schedule 1 are thus brought into play where there is an investment relates to those activities. Under the current wording of the FDI Act, a foreign direct investment must be notified where it impacts either the listed activities or the associated factors.

Additional proposed amendments to the FDI Act include:

1. clarifying the composition of the FDI Board (which is responsible for the affairs of the Office) through a replacement of Article 5. The amendments specify (among other matters) eligibility for appointment, remuneration of the Board, expand on fit-and-proper requirements, and create a new role of secretary to the FDI Board;
2. clarifying the conduct of the FDI Board’s affairs, including meeting procedures and quorum requirements;
3. confirming that, during the screening process, the Office may request information and statements from any person involved in the foreign direct investment; and
4. extending the applicability of the Holders of Public Office and Public Entities (Responsibility) Act to the Chairperson, members of the FDI Board, and officers and employees of the Office.

The Bill is a welcome step towards greater clarity in Malta’s FDI screening framework, particularly by distinguishing portfolio investments from notifiable foreign direct investments and clarifying the notification trigger.