Bill gives state power to block or reverse risky foreign deals

Cyprus has moved to establish a national framework for screening foreign direct investments (FDIs), aiming to safeguard security and public order while maintaining an open environment for investors.

The Council of Ministers approved the draft legislation on July 2, the Finance Ministry said in a statement issued on Friday. The bill will now be submitted to the House of Representatives for a vote.

Specifically, it seeks to implement Regulation (EU) 2019/452 of the European Parliament and Council, which establishes a mechanism for controlling FDIs into the European Union on grounds of national security or public order.

Under the bill, the Finance Ministry would act as the competent authority, with powers to approve, impose conditions, prohibit, or even reverse investments deemed to pose risks.

To assist in decision-making, a seven-member advisory committee comprising officials from relevant ministries will provide written recommendations, the ministry said.

A foreign investor is defined as any natural or legal person from outside the EU, European Economic Area (EEA), or Switzerland.

Strategic enterprises include those operating in sensitive sectors such as energy, transport, health, defence, communications, tourism, financial services, and dual-use technologies, among others.

Foreign investors will be required to notify the Finance Ministry when acquiring at least 25 per cent of the share capital or voting rights in a strategic enterprise, or when gaining decisive influence over its activities, provided the value of the investment reaches or exceeds €2 million.

The notification obligation will also apply to further acquisitions that raise a foreign investor’s stake from below 25 per cent to 25 per cent or more, or from below 50 per cent to 50 per cent or higher, regardless of the transaction value.

Moreover, investments made by companies in which a foreign investor already holds at least 25 per cent must also be reported if they involve enterprises of strategic importance in Cyprus.

The Finance Ministry may additionally examine any foreign direct investment, even if it falls outside these thresholds, where there are reasonable grounds to believe it could affect national security or public order.

Finally, the ministry added that administrative fines will apply for breaches of the law, while decisions will be open to appeal before the administrative court.