The cabinet approved legislation Wednesday establishing a national screening mechanism for foreign direct investments.
“The government continues with stability to implement planned decisions, which it had announced,” Finance Minister Makis Keravnos said in statements after the cabinet meeting.
Keravnos said the body has adopted legislation for implementing a National Foreign Direct Investment Screening Mechanism in accordance with relevant European Union regulations for protecting national security and public order.
“It is a very important decision because it has direct relation to safeguarding national interests,” the minister said, noting the proposal had previously been submitted to parliament where discussions took place. “Today, after consultations and revision of this proposal, it has been approved by the cabinet,” he said.
Investment screening framework
The legislation designates the Finance Ministry as the competent authority. “The powers of this competent authority are to approve, prohibit or reverse investments for reasons of public order or security,” Keravnos said.
He defined foreign investor as “any natural or legal person from European Union countries, European Economic Area or Switzerland.” Foreign direct investment “is considered any investment by a foreign investor aiming at stable participation and substantial influence in the management of an enterprise of strategic importance in the Republic of Cyprus,” he added.
Keravnos clarified that strategically important enterprises operate in particularly sensitive sectors as defined in the bill’s annex, citing energy, tourism, transport, health, communications, defence, financial services and dual-use technologies.
“There is a notification obligation for these foreign investors and it is required from investors whose foreign direct investment value is more than 25% or if there is differentiation from 25% to 50% or more,” he said.
“The notification obligation applies when foreign direct investment performs exactly this activity, according to which it holds at least 25% of share capital,” the minister said.
Exemptions and committee structure
He noted exemptions from the proposal concern foreign direct investments involving ships under construction or ships subject to purchase and sale, excluding floating storage and regasification units for natural gas.
The advisory committee established under this decision will comprise representatives from Finance, Defence, Commerce and Energy, Foreign Affairs, Interior, Justice and Public Order, and Transport and Communications ministries, according to Keravnos.
“For preparing the revised bill, beyond consultation, best practices applied by all other European Union member states were also taken into account,” he said.
Implementation context
Asked about the measure’s scope, Keravnos said: “What is happening today is strong encouragement from the European Commission for Cyprus to introduce this institution that exists in all European Union member countries, precisely for safeguarding national interests.”
When asked which countries the screening affects, the minister said it concerns countries mainly outside the European Union, but also that an EU company in which a foreign investor from a third country participates with 25% and above falls under this procedure.
Regarding existing investment oversight, Keravnos said institutions including the Finance Ministry, Securities and Exchange Commission, and Central Bank previously conducted screening. “With this proposal now this procedure is specified with specific competencies and specific bodies, which will be able to impose and monitor this procedure,” he added.
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