Spain has strengthened its framework for screening foreign investments in sectors deemed strategic, a move that gained momentum with the outbreak of the coronavirus and subsequent legislation. In March 2020, the government introduced what critics called a shield against opacities in acquisitions by non-EU investors. The aim was to reinforce national security and economic stability by tightening oversight over the purchase of large Spanish companies by non-European buyers. The measure was designed to be permanent and has been renewed through successive government decisions, with industry coverage limited to activities requiring entry permits into Spain and faster processing times now reduced from six to three months.
The royal decree published by the BOE this week sets a clear start date and confirms that the rule remains in force as of next September, independent of other European measures adopted in response to the pandemic. A temporary validity that runs through 2024 also exists because of cooperation with other EU member states, which necessitates a preliminary administrative authorization for direct investments in Spain by residents of third countries. Collective investment vehicles and pension funds within the European Union or the European Free Trade Association are also subject to the rule when their stake reaches 10 percent or more of a Spanish company, a threshold widely referred to as the strategic sector standard. The regulation makes a distinction: it does not apply to capital increases by foreign holders who already control more than 10 percent of a company before purchasing additional shares.
As for the scope of application, the framework covers sectors such as energy, transport, water, health, communications, media, data processing and storage, aerospace, defense, elections, and finance. It also includes advanced technologies like artificial intelligence, robotics, and microchips. Some exemptions were added, narrowing the original set of controls. Notably, energy-related transactions are heavily scrutinized but certain purchases may be exempt if they do not alter the status of the company’s dominant operator or involve small trading firms with fewer than 20,000 customers.
Regarding investments in electricity generation assets, the regulation clarifies that non-EU buyers must meet a five percent threshold of installed power for a given technology before triggering permit requirements. Installed power is defined as the investor’s share of total production capacity, including assets that could be acquired in the future and all assets under the investor’s control at the time of the application, measured against the national generation capacity for that technology.
Officials emphasize that electricity generation assets should be assessed according to project maturity and deployment progress, with careful consideration given to the timelines and renewable integration targets outlined in the energy planning framework in force when the foreign investment permit request is lodged. Additional notes specify that acquisitions generating annual income below a certain threshold, real estate purchases unrelated to critical infrastructure, and short-term investments with no meaningful management influence may not be subject to the same pre-authorization requirements. In practice, final authorization remains with the ultimate investors where applicable.
The adoption of this standard aligns Spanish regulation with the broader European framework for screening foreign investments. In October 2020, a framework was established across EU member states to safeguard security and public order. The responsible authority in Spain is the Ministry of Industry, Trade and Tourism, which coordinates the process and ensures consistency with EU-level investment control rules.
In its organizational design, the so-called Foreign Investment Board is intended as a collegiate body. Its presidency heads the process, supported by the Directorate-General for International Trade and Investment. Members include representatives from the National Intelligence Center (CNI), the Operations Department of the President’s Office on Homeland Security, and senior figures from each ministry with the appropriate rank. A dedicated Secretariat, reporting to the head of the Foreign Investment General Sub-Directorate, handles day-to-day administration and coordination as needed.
To ensure ongoing accountability, the board is required to publish an annual report by March 31 each year. The report captures total foreign direct investments within the territory and assesses how the control mechanisms have been applied, including requests received from other EU member states. This process strengthens transparency and allows policymakers and industry stakeholders to gauge the impact of Spain’s strategic investment rules over time. (Source: Ministry of Industry, Trade and Tourism and related EU regulatory documents)