Bill submitted to amend the Danish Investment Screening Act

Background

In March, the Danish government submitted a draft bill for consultation to amend the Danish Investment Screening Act.

The draft bill proposed, among other things, an extension of the scope of the mandatory authorisation scheme, whereby all contracting parties to public contracts concerning critical infrastructure would in future have to apply to the Danish Business Authority for authorisation to enter into the contract prior to its conclusion. Furthermore, the draft bill proposed a new process for the Danish Business Authority's case handling under both the mandatory authorisation scheme and the voluntary notification scheme.

You can read more about the draft bill in our previous Insight.

The draft bill gave rise to a series of critical responses, including a response from the Association of Danish Law Firms (Danske Advokater), to which Plesner contributed.

Screening of contracts for the establishment, joint ownership and operation of the North Sea Energy Island

Based on the consultation responses received, the Danish government has chosen to significantly restrict the proposed extension of the scope of the Act. The requirement for prior authorisation from the Danish Business Authority is thus only extended to apply to parties to contracts concerning the establishment, joint ownership and operation of the North Sea Energy Island.

The authorisation requirement will apply to all contracting parties, i.e., it will not only apply to persons and companies outside the EU and EFTA (as is the case for special financial agreements under the current rules), but to all persons and companies, including persons and companies from Denmark and other EU and EFTA countries.

Generally, only the contracting party or parties intending to enter into a contract for the establishment, joint ownership and operation of the North Sea Energy Island must apply for authorisation from the Danish Business Authority. However, it is also proposed that the Minister for Industry, Business and Financial Affairs may, at the request of the Minister for Climate, Energy and Utilities, decide that all participants in the tender for the establishment, joint ownership and operation of the North Sea Energy Island must apply for authorisation.

Furthermore, the authorisation requirement will not only apply to the direct contracting party, but also to any sub-contractors. It is thus proposed that the Danish Business Authority, when applying for authorisation, may require the contracting party to provide information about any sub-contractors that are expected to be engaged in the performance of the contract. If the sub-contractors are not identified at the time of contract award, the Danish Business Authority may make it a condition of its authorisation that a separate application for authorisation is made for the sub-contractors when appointed. If the obligation to apply for a separate authorisation for sub-contractors is not fulfilled, the Danish Business Authority may revoke its authorisation to the contracting party.

New process for the Danish Business Authority's case handling

The bill maintains the original proposal for a new 2-phased application process for the Danish Business Authority.

The bill implies that the Danish Business Authority in future shall process uncomplicated cases within 45 days from the time when the Danish Business Authority declares the application complete (phase 1). The case processing in phase 1 will be based on a simplified application form that will require less information than under the current rules.

If the Danish Business Authority assesses that further investigations are needed, the Danish Business Authority shall initiate a supplementary assessment phase of up to 125 days (phase 2). This will require additional information and documents, including the EU notification form in case of a foreign investment. The 125-day deadline is calculated from either the time when the Danish Business Authority initiates phase 2 or, if the Danish Business Authority requests additional information, from the time when the Danish Business Authority declares the additional information complete.

Overall, the Danish Business Authority's application process could take up to 170 days or more in the future. It is explicitly stated in the explanatory notes to the Act that - as is the case today - there will be no consequences if the Danish Business Authority fails to meet the deadlines.

Expected effective date

The Act is expected to come into force on 1 July 2023.

Plesner's comments

The original draft bill to amend the Danish Investment Screening Act entailed a significant extension of the current rules, which gave rise to practical and legal challenges for both contracting authorities and private participants in public tenders. In light of the (critical) consultation responses received, it is therefore positive that the Danish government has chosen to significantly restrict the proposed extension of the scope of the Act, so that the requirement for prior authorisation is only extended to apply to contracting parties to contracts concerning the establishment, joint ownership and operation of the North Sea Energy Island.

In relation to the new process for the Danish Business Authority's case handling, it is generally positive that a shorter deadline (up to 45 days) is set for processing uncomplicated cases than is the case today, and that the processing of these cases must be based on a simpler application form. Conversely, there is a relatively long deadline (up to 125 days) for processing cases that give rise to further investigations, which may be partly due to the fact that the Danish Business Authority has not received any feedback from the relevant authorities within the general deadline.

In addition, the Danish Business Authority's case handling may in practice be extended beyond the deadlines. This is caused by the fact that the deadlines do not run from the Danish Business Authority's receipt of the application or any supplementary information, but from the time when the Danish Business Authority notifies the applicant that the application or the supplementary information is complete. Further, there are no legal consequences associated with the Danish Business Authority's failure to meet the deadlines. Overall, the new process could lead to significantly longer periods between signing and closing in connection with investments.

Want to learn more?

Read the submitted bill (in Danish).