Foreign Direct Investment Reviews 2021: Spain

The exceptional circumstances brought about by the COVID-19 epidemic led the Spanish government to promulgate a number of urgent regulations in 2020, establishing a new screening mechanism for certain foreign investments under Decree Law 8/2020, 11 / 2020 and 34/2020.

Under the new regime, foreign direct investments exceeding 1 million euros require prior authorization

The amended Law 19/2003 incorporated, by virtue of these emergency regulations, a new article 7bis, suspending the liberal regime of foreign direct investments in Spain, in particular with regard to a number of critical industries.


Spain’s measures for direct investment abroad ahead of the COVID-19 outbreak included post-investment notification for all foreign investment and prior authorization for a number of limited investments, such as investments from countries considered as tax havens, activities related to national defense and security, and (for non-EU investors only) investments in gambling, airlines and audiovisual media, among other sectors. Regardless of these authorizations, the old Spanish regulations proclaimed a liberal ethic for foreign direct investment in Spain.

In response to COVID-19, and in order to avoid opportunistic investments in sectors critical to national public health and safety, the Spanish government has enacted a number of amendments to Law 19/2003, anticipating the rules of regulations still to be transposed. (EU) 2019/452, of March 2019. The changes created a new filtering mechanism for certain foreign direct investments.

Foreign direct investment is defined as an investment as a result of which a non-EU / non-EFTA resident directly or indirectly acquires control of a Spanish company (listed or unlisted) and / or at least 10 percent of its share capital.

Under the new regime, foreign direct investments exceeding 1 million euros require prior authorization if one of the following criteria is met:

  • The investment is made in a strategic sector, such as critical infrastructure, critical technologies, the supply of critical inputs, food security, sectors with access to sensitive information, the media and any other sector that may have an impact. on public health, safety or public order as determined by the Spanish government
  • The investor is controlled by the government of a third EU Member State
  • The investor has already invested or has been involved in security, public health or public policy in another EU Member State
  • The investor is at serious risk of engaging in illegal or criminal activities

In addition, until 31 December 2021, investors resident in the EU and EFTA are also subject to these restrictions if they make investments through which they acquire more than 10% of the capital and / or control of the capital. ‘a Spanish company, provided that the investment exceeds € 500 million if the company is not listed or € 1 billion if the company is listed on the Spanish stock exchange.

As confirmed by officials of the cabinet responsible for foreign investment, the royal decree-laws adopting the new regime are in the process of enacting legislative processes. The precise content of future legislation is still uncertain, although once enacted into law, further developments and details regarding the filtering mechanism may follow.


For tax haven approval requests, a standard form must be filed electronically at least six months prior to the transaction.

Due to the broad wording of the applicable provisions, it is difficult to determine whether certain investments fall within the scope of the law.

For the application of the 2020 regime and the new screening mechanism, the filing of an authorization prior to making the investment is mandatory when a restricted foreign direct investment exceeds 1 billion euros.

If the restricted foreign direct investment exceeds 1 million euros but does not exceed 5 million euros, the transaction will be processed through the provisional simplified procedure provided for in the 2nd transitional provision (Disposición Transitoria 2ª) of the Royal Decree- law 11/2020. This provision specifies that requests must be addressed to the public official responsible for the competent service of the Spanish government (i.e. the Subdirección General de Comercio Internacional e Inversiones, the “Department of Investments”) who will approve or reject the request. request.

Investments of less than 1 million euros are thus exempt from the obligation to deposit the new filtering mechanism, although the Spanish regulations in this area mention that this point may be subject to an adjustment once the new legislation promulgated.

If the restricted foreign direct investment exceeds 5 million euros, the general regime provided for in article 7bis of law 19/2003 applies. In this case, the investor is required to file the authorization request with the Department of Investments, subject to final approval by the Spanish Council of Ministers.

Once the authorization request is submitted, the Spanish Council of Ministers has up to six months to respond. The absence of a response from the Spanish Council of Ministers six months after the filing of a request will be interpreted as a refusal.

Failure to file the required authorization requests when required will render the transaction null and void, and may also result in the imposition of significant fines, up to the value of the planned investment.


The types of agreements examined are directly linked to the conditions and criteria already stated. The review process varies on a case-by-case basis, depending on the amounts, the investor and the key strategic area where the investments are intended to be made.


Due to the broad wording of the applicable provisions, it is difficult to determine whether certain investments fall within the scope of the law. Consequently, the Investments Department has made available to investors a questionnaire which can be sent informally by e-mail to specify whether the investment is subject to authorization. Once submitted, the relevant department will confirm the need for an authorization request.


The precise scope of the review to be carried out by the Department of Investments and the Spanish Council of Ministers under the new screening mechanism is not yet known. As a general rule, they will consider any security, public health or public order concerns that the investment may pose, and will grant or deny the authorization. More information will be available on the scope of the review once new legislative regulations are enacted.


Foreign investors should be careful when entering into a transaction involving a Spanish company operating in one of the key strategic sectors. The operational strategy of the investment should be reconsidered in the light of the ongoing review process by the Spanish authorities, bearing in mind that a number of laws may restrict investment.

It is essential to anticipate any regulatory changes and obtain the appropriate legal advice, as well as to liaise in a timely manner with the appropriate government authority. Managing the expectations of investors, sponsors and stakeholders, and keeping them all aligned with foreign direct investment restrictions, is also crucial in these uncertain times.


The legally established time limit for examining investments and for granting the required authorization, in accordance with the provisional simplified procedure, is 30 days. The regular Article 7bis process provides for a generic estimated time frame of six months.

Based on conversations with public officials in the Department of Investments, the review as part of the pre-filing assessment can take four to five weeks, depending on the authority’s workload, while the review in the part of the ordinary procedure can take up to three months.


Although limitations have been placed on foreign direct investment and these limitations may persist, government authorities impose a business-friendly approach to these restrictions. They are likely to maintain this approach to the review process, as long as the investments do not pose a significant threat to national security, public health or public order in Spain.

Since these rules were imposed in times of crisis and have not yet been properly crafted and enacted, restricting foreign investment that can bring prosperity and economic growth to the country during a downturn can seem counterintuitive. However, other developments could bring more legal certainty to this barely regulated regime.


  • So far, only 10% of pre-assessments have resulted in the requirement to submit formal investment authorization requests, none of which have been denied at the time of writing.
  • It is recommended to request a pre-appraisal of the investment transaction if it potentially falls within the scope of the law, as the chances of eventually having to request a formal investment authorization are low. In addition, the time spent on pre-assessment may shorten the response time in the event that formal authorization should be requested at a later date.