Lithuania was quick to adopt a strict attitude towards the scope of FDI screening. Practice and forthcoming legal changes simply reinforce that position
Lithuania implemented its ‘FDI Screening Regulation’ well before the intended deadline. Not only was it transposed early, but it also introduced a strict approach to the scope of FDI screening.
Current practice and forthcoming legal changes further reinforce this stance. To begin with, Lithuania chose not only to apply screening mechanisms to a closed-end list of objects and entities, but also to include strategically important sectors such as energy, transport, high-tech, IT and telecommunications, credit and finance, and military equipment. Although those sectors which are outlined within the legal act were meant to be more precisely defined by a subsequent government decision, this decision did little to narrow the scope.
Despite criticism from analysts and other governmental institutions, the definitions for key sectors – such as energy, transport, high-tech, IT and telecommunications, and credit and finance – remain extremely vague. This means that many activities which, at first glance, appear far removed from national interests and security can still be interpreted as requiring FDI screening.
Moreover, the ‘Governmental Coordination Commission’ which is responsible for implementation and actual screening has done little to narrow down the scope or provide interpretive guidelines.
New amendments to the ‘Law on the Protection of Objects which are Important to the National Security of the Republic of Lithuania’ will come into force on 18 October 2024. These changes are related to the updated ‘Law on Cyber-Security for the Republic of Lithuania’ and implement the NIS2 Directive. The new legislation introduces the term ‘essential cybersecurity entities’, placing such entities within FDI screening requirements. Again, the term ‘essential cybersecurity entities’ is described in a broad and vague manner. It needs to be seen how many entities with little to no connection with national security interests will in practice fall under the purview of screening mechanisms.
What does this mean for investors? In any M&A transactions, non-EU investors should not overlook the potential need for FDI screening, even if the target does not initially appear to be related to national security or to be of national importance (perhaps due to its perceived small scale, for instance). The process, especially for participants who are not included in the closed-end list of objects or entities which are important in terms of national security, is generally simple and fast.
Therefore, in ambiguous situations, it is better to be safe than sorry.
Source:
https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.189498?jfwid=oou0hj98m