AUSTRIA Law and Practice Contributed by: Martin Schiefer and Christian Richter-Schöller, Schiefer Rechtsanwälte GmbH
clearances and consequences under ongoing clas - sified contracts. In procurement, national security appears in three functions: as an exemption ground (Article 346, TFEU), as an exclusion ground (reliability of the bidder) and as a contract condition (security of supply and of infor - mation). Sanctions law overlies all of these regimes. The instruments are administered by different minis - tries with formal agreement requirements, and there is no one-stop shop; parallel workstreams and the early sequencing of filings are therefore essential in transactions and major programmes. 6. M&A, Joint Ventures and Foreign Direct Investment in the Defence Sector 6.1 FDI Screening Legislation and Regulatory Framework The Investment Control Act, in force since July 2020, governs the screening of FDI; the competent authority is the Federal Ministry for Economy, supported by an inter-ministerial committee, and the EU co-operation mechanism under Regulation (EU) 2019/452 (the “FDI Screening Regulation”) applies. The regime covers acquisitions by natural or legal per - sons from outside the EU, the EEA and Switzerland of Austrian undertakings active in fields relevant to security or public order. Defence goods and defence technologies, as well as the operation of critical infra - structure, belong to the particularly sensitive sectors specified in Part 1 of the Annex to the Investment Control Act, which attract the lowest trigger thresh - olds. Micro-enterprises with fewer than ten employees and less than EUR2 million in turnover are exempt. 6.2 Transactions Subject to FDI Screening The transactions that are subject to FDI screening are: direct or indirect acquisitions of shares reaching 10% of the voting rights in the particularly sensitive sec - tors, including defence, and otherwise 25% or 50%; acquisitions of a controlling influence; acquisitions of essential assets of a covered undertaking; and the establishment of joint ventures where this confers the
relevant influence. The acquisition of decisive influ - ence by other means is equally covered. The 10% threshold means that even minority invest - ments in defence-related targets are notifiable. There are no transaction value thresholds; the test is the combination of sector and influence. Intra-group restructurings can be caught where the ultimate acquirer is a third-country person. 6.3 Mandatory vs Voluntary Notification Notification is mandatory and must occur before clos - ing; the transaction may not be implemented until approval has been granted (standstill obligation). The obligation to file lies with the acquirer; the target must notify where it becomes aware of the transaction and no filing has been made. Closing without clearance is a criminal offence pun - ishable by imprisonment, with higher penalties where clearance was obtained on the basis of false informa - tion, and the transaction remains provisionally ineffec - tive under civil law until its approval. Where it is unclear whether a filing obligation exists, an application for a certificate of non-objection ( Unbedenklichkeitsbe- scheinigung ) is the practical route to certainty. 6.4 Review Process and Timetable The filing to the Federal Ministry for Economy must contain details on the acquirer, including details on the ownership chain up to the ultimate beneficial owner, funding sources and any government links, on the tar - get and its activities, and on the transaction structure. The EU co-operation mechanism is run first; Phase 1 then allows one month for the decision to clear or to open an in-depth review, and Phase 2 allows a fur - ther two months for approval, conditional approval or prohibition. The standstill obligation applies throughout. In prac - tice, information requests extend the overall duration; straightforward defence-adjacent cases complete in roughly two to three months; complex cases take sig - nificantly longer. 6.5 Assessment Criteria The substantive test of whether a transaction poses a national security risk is whether the acquisition may
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