New Austrian FDI Guidance: What Investors Need to Know Now

Since the Austrian Investment Control Act (ICA) entered into force on 25 July 2020, Austria’s FDI regime has posed significant challenges for cross-border M&A transactions, largely due to its broad scope and application. According to the European Commission's latest fifth Annual Report on the screening of foreign direct investments into the Union, Austria ranks among the top four EU Member States for notifications to the EU cooperation mechanism. Alongside Spain, Italy, and France, these Member States accounted for around 76% of all notifications. This underscores the highly proactive and expansive approach of the Federal Ministry for Economy, Energy and Tourism (BMWET) to FDI control. Recognising the practical challenges for investors, the BMWET has recently issued new guidance to clarify the scope of application of the ICA, in particular regarding the interpretation of sensitive sectors. This blog post examines the key issues for investors and contextualises the core takeaways from the new guidance.

Overview: Investments requiring approval under the ICA

An investment requires approval under the ICA if all of the following conditions are met:

• a person or entity that is not a citizen of, or does not have its registered seat or headquarters within the EU, the EEA, or Switzerland (Foreign Investor),
• directly or indirectly acquires (i) a company registered or headquartered in Austria (Austrian company), (ii) control over substantial assets of an Austrian company (asset deal), (iii) control over an Austrian company, or (iv) voting right shares reaching or exceeding the sector-dependent thresholds of 10% or 25%, or the general threshold of 50% of the voting right shares in an Austrian company, and
• the Austrian company operates in a sector falling within the scope of the ICA.

In addition, the ICA contains specific rules on the aggregation of voting rights. However, an FDI filing obligation can be excluded if the de-minimis exemption applies.

Reasons for the significant number of FDI proceedings under the ICA

Austria’s significant volume of FDI notifications stems from the broad regulatory framework and its interpretation by the BMWET, in particular:

1. Interpretation of sensitive sectors: The BMWET applies a broad interpretation to the list of sensitive sectors. The list is non-exhaustive and can also capture upstream and downstream activities.
2. Far-reaching “Foreign Investor” criteria: A filing can be triggered even if neither the direct acquirer nor the ultimate beneficial owner is considered a Foreign Investor. If a non-EU/EEA/Swiss entity or person is present anywhere in the acquisition structure, an FDI filing may be required.
3. Aggregation of voting right shares: The ICA applies rules for the aggregation of voting right shares. Even when an investor does not individually meet the 10% or 25% minimum thresholds (which are sector-dependent), an FDI filing may still be required. This typically applies when Foreign Investors are affiliated in a certain way, undertake a joint acquisition, or conclude an agreement on the joint exercise of voting rights.

Clarification of the relevant sectors

Part 1 of the Annex to the ICA sets out an exhaustive list of "highly sensitive sectors", such as defence equipment and technologies, energy infrastructure, or systems ensuring the data sovereignty of the Republic of Austria (e.g., data centres), for which an approval requirement is already triggered at a 10% voting-rights threshold. By contrast, Part 2 of the Annex to the ICA, which applies a 25% voting-rights threshold, is non-exhaustive. The new guidance confirms that sectors not explicitly listed in Part 2 of the Annex to the ICA may still be deemed critical and mentions security services as an example. In addition, the BMWET´s guidance provides specific examples to simplify the interpretation for various highly relevant sectors, in particular:

• Health is clarified as referring exclusively to human medicine and therefore does not include veterinary medicine. By way of example, the BMWET mentions that packaging for medicinal products/medical devices falls within the scope of the ICA where it concerns products that are subject to statutory packaging requirements.
• Finance continues to be interpreted broadly. Remarkably, according to the new guidance, even gambling-related activities are now classified under finance. This means that not only explicit financial activities like, for example, money supply services, card-based payment transactions, or electronic trading platforms are covered.
• Traffic and transport remains a highly relevant sector as it includes not only activities related to passenger transport, freight, railways, road transport, shipping, and aviation, but also motor vehicles and cable cars. To limit the scope of relevant upstream and downstream activities, the BMWET clarifies that the distribution of paints and coatings, smart repair and dent removal technology for motor vehicles are excluded.

The guidance also provides useful clarity by identifying certain activities that fall outside the ICA’s approval requirements, such as pure marketing and communication services. 

Substantial assets of an Austrian company

The acquisition of substantial assets (asset deal) is subject to approval under the ICA if a Foreign Investor acquires control over such assets. In its new guidance, the BMWET states that the acquisition of substantial assets can lead to a transfer of market position to the acquirer, which, in certain cases, could pose a threat to security or public order. Substantial assets remain broadly defined and include, for example, contractual obligations to take over employment relationships and/or customers of an Austrian company, or the acquisition of marketing authorisations for medicinal products, inventory, and business books and records, including customer lists. Consequently, the "substantiality threshold" remains relatively low.

Acquisition of Control

In its practice, the BMWET applies a concept of "control" that is broader than under the EU Merger Regulation (EUMR). While legislative materials suggest an orientation towards the EUMR's Article 3 definition of control, the BMWET interprets this reference as merely an orientation, not a directive for identical interpretation. According to the BMWET, this allows for a lower threshold of control under the ICA, despite an almost identical definition, further supported by the distinct protective objectives of the EUMR and the ICA.

The new guidance, however, falls short of clarifying the precise extent to which control is interpreted more broadly under the ICA. Instead, it generally indicates that

• a controlling influence exists when an acquirer can decisively intervene in the activities of the Austrian company, whether alone or together with others, even without meeting the voting-rights thresholds.
• the influence does not need to be, and may never be, actually exercised.
• control is understood to include situations such as veto rights over strategic matters like the budget, as these could be used to discontinue supplies to customers in Austria.

De-minimis exemption

Under the de-minimis exemption, an Austrian company is exempt from the approval obligation if it has (i) fewer than 10 employees and (ii) an annual turnover or a balance sheet total of less than EUR 2 million in two consecutive financial years. In its new guidance, the BMWET confirms its practice of assessing the de-minimis exemption on a stand-alone basis for each Austrian company and of applying the test to the target company as a whole, rather than to individual assets or business units. In practice, the de-minimis exemption therefore remains the simplest and most reliable way to rule out an FDI filing obligation. However, given the complexity of the underlying rules, investors should continue to exercise caution when calculating the relevant figures.

Conclusion 

While the BMWET’s new guidance provides helpful orientation through examples in selected areas, the overall scope of the Austrian FDI regime remains broad. Among other challenges, (i) the precise interpretation of many listed sectors – as well as of activities not covered by the non-exhaustive list – remains unresolved. The guidance also does not (ii) address the application of the rules on the aggregation of voting rights, (iii) the determination of voting right shares in case of indirect acquisitions, and (iv) the exact definition of "control" continues to be unclear. In addition, (v) the new guidance does not include further clarification on internal reorganisations.

Against this background, investors should continue to adopt a cautious, case-by-case approach when assessing whether a transaction may trigger an FDI filing requirement. The BMWET expressly notes that the published interpretative decisions relate to individual cases and do not preclude similar cases from being assessed differently. Early scoping of potentially relevant sectors, careful analysis of the acquisition structure and voting rights (including possible aggregation), and a thorough assessment of control rights therefore remain essential. Until further guidance provides greater legal certainty, Austrian FDI screening will continue to be a key workstream in cross-border M&A transaction planning, and the number of FDI filings in Austria is likely to remain high.