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New legislation will apply in Denmark from 1 June, screening
foreign investments in the critical infrastructure, defense, IT
security, and dual-use technology (e.g., nuclear power and radio
navigation) sectors. The law was passed by the Danish parliament on
4 May.
Investments in these sectors which exceed a 10% ownership stake
will be subject to mandatory government screening, while
investments deemed by the government to represent a potential
threat to Denmark's national security also are subject to
screening, regardless of the ownership stake. The screenings will
be performed by the Ministry of Industry, Business and Financial
Affairs, granting the government complete control over the
screening process without third-party oversight. The government has
also restricted scope for freedom of information requests related
to the screening procedures, meaning there will be no public record
of the reasoning behind decisions taken.
Companies already operating within the EU will be exempt from
screening unless they are deemed to be under the control of or
heavily influenced by a non-EU government. The new law will not
affect investments made before 1 September 2021.
Significance
The new law is designed to combat threats to Danish national
security and follows similar legislative initiatives in the UK and
some EU countries. The law will increase regulatory obstacles for
non-EU companies to participate in these sectors or participate in
relevant tenders.
The government is likely to favor firms from countries with
long-lasting trade and security partnerships, such as the US,
Norway, and the UK. However, investments from such countries as
Russia and China are highly likely to be subject to government
intervention, especially in cases of large ownership stakes or
companies dealing with particularly sensitive information.
These dynamics were indicated in Norway in March 2021, when
Norway blocked a UK company from completing its planned
USD2.76-billion sale of its Norwegian maritime engine maker to a
Russian company, citing security reasons. Danish government
suspicions of any covert activity by either Russia or China, such
as cyberattacks targeting state institutions, would be highly
likely to result in more stringent application of the controls.
Posted 28 May 2021 by Blanka Kolenikova, Associate Director – Europe & CIS, Country Risk, IHS Markit
