Nina Boteva Law Office

Legislative changes to the Investment Promotion Act

At the beginning of March2024 were made legislative changes to the Investment Promotion Act (IPA). The changes in the IPA are provoked by Regulation (EU) 2019/452 of the European Parliament and of the Council, which creates a framework for screening foreign direct investments in the Union. The purpose of the legislative changes is to harmonize the national legislation with the European one, with a specific focus on the Bulgarian economy and the security of the European Union.

The changes in the IPA cover investments in critical infrastructure, including physical and virtual infrastructure related to energy, transport, water, health, communications, media, data processing or storage, aviation, defence, electoral or financial infrastructure. They also cover sensitive facilities, land and real estate that are critical to the use of such infrastructure. Critical technologies and dual-use items are covered as well, including artificial intelligence, robotics, semiconductors, cyber security, aerospace and defense technologies, energy storage technologies, quantum and nuclear technologies, nanotechnology and biotechnology. The adopted normative texts in the IPA aim to give protection against investments with "corrosive capital", which can harm national security, public order and the security of Bulgaria's European and Atlantic partners. This also includes issues such as access to sensitive information, personal data and media freedom.

According to the amendments to the IPA, foreign direct investment, as defined under the Act, should only take place after obtaining permission from the Screening Board. This authorization is mandatory if the investments meet the following cumulative conditions:

1. Инвестициите се отнасят до области на дейност, които са посочени в член 4, буква „Т“ от Регламент (ЕС) 2019/452 на Европейския парламент и на Съвета за създаване на рамка за скрининг на преки чуждестранни инвестиции в Съюза.

2. The value of the investments exceeds the threshold of 1,000,000 Euros or their equivalent in Bulgarian leva.

Foreign investors who wish to make a foreign direct investment meeting the above conditions must apply for a permit. It is important to note that making such an investment is prohibited before the Screening Board issues the relevant permit.

When considering applications for the issuance of a permit for direct investments, the Interagency Council for the Screening of Foreign Direct Investments Related to Security or Public Order shall be guided by the criteria specified in Article 4 of Regulation (EU) 2019/452. After analysis according to these criteria, the board makes a decision to issue a permit, conditional permit, or denial.

The amendments to the IPA aim to create a mechanism for the implementation of Regulation (EU) 2019/452, covering a wide range of investments. This mechanism applies to investors from third countries, including state entities and enterprises that maintain permanent and direct links with the country and all EU member states. When analyzing investments, the criteria defined in Article 4 of the Regulation are taken into account. This includes checking whether the foreign investor is directly or indirectly controlled, as well as whether there is a risk that the foreign investor is involved in illegal or criminal activities.

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