The Council of Ministers will be finally introducing the much talked about Foreign Direct Investments ("FDI") Bill to Parliament for approval, aiming to screen foreign investments that may pose risks to national security or public order in compliance with EU Legislation.
Scope of the new mechanism
The proposed law applies to foreign direct investments in enterprises operating in strategic sectors, such as:
- Energy
- Transport and communications
- Health and biotechnology
- Defence and national security
- Financial services
- Digital infrastructure and dual-use technologies
When does an Obligation to notify arise?
A notification obligation will arise when a Foreign Investor acquires at least 25% of the share capital of a strategic enterprise, or increases an existing shareholding to or beyond 50%.
Who is considered a Foreign Investor?
The definition of "foreign investor" includes both:
- Natural or legal persons based outside the EU/EEA/Switzerland, and
- EU-based entities that are 25% or more owned or controlled by third-country investors.
This ensures that indirect or structured investments via EU jurisdictions remain within the scope of the law, closing potential loopholes.
Review process and oversight
The Ministry of Finance will serve as the competent authority, responsible for receiving notifications and conducting risk assessments. It will have the legal authority to:
- Approve the investment;
- Prohibit it, if risks are identified; or
- Unwind a completed transaction in exceptional cases.
Limited exemptions
The mechanism includes certain exemptions to avoid undue interference in routine transactions. Notably, it excludes investment in vessels under construction or subject to sale, except for floating storage and regasification units (FSRUs), which are classified as critical to national energy infrastructure and remain subject to review.
Strategic and legal implications
This development is not a move toward protectionism but a measured step to enhance resilience and ensure Cyprus remains aligned with the EU's evolving approach to foreign investment governance, in accordance with EU legislation.
What businesses should do
Foreign investors and companies engaged in M&A or strategic partnerships in Cyprus should take early steps to evaluate whether their transactions may fall within the scope of the screening mechanism. This includes reviewing ownership structures, transaction thresholds, and industry classification.
Advance planning is especially important, as transactions cannot proceed without clearance once the law is in force. Timing, documentation, and regulatory coordination will be key factors for successful execution.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
