Cyprus Pushes Forward with Legislation for Foreign Investment Scrutiny

The Cypriot government is moving forward with the creation of a National Mechanism for the Screening of Foreign Direct Investments, as outlined in a bill submitted by the Ministry of Finance in August. The revised bill, currently under discussion in the Finance Committee, aims to align Cyprus with European practices by introducing stricter controls on investments of strategic importance.

The bill, which is the transposition of the 2019 EU Regulation into national law, will empower Cypriot authorities to screen foreign investments for potential risks to the country's security, public order, or critical infrastructure.

One of the key features of the bill is the exemption of investors from EU, EEA, and Switzerland from certain controls, as well as ships, excluding floating LNG units, due to the special regime of Cyprus's shipping industry. However, the bill sets a minimum investment notification threshold at €2,000,000.

The mechanism allows for ex officio screening, even without prior notification of the investment, and includes a retroactive screening of investments made within the past 15 months. The bill also includes a consultation process with an advisory committee and the establishment of a competent authority involving various ministries to assess each investor's background.

The bill enjoys majority support from all involved stakeholders, including professional and business associations such as the Cyprus Chamber of Commerce and Industry, the Employers and Industrialists Federation, the Cyprus Bar Association, the Association of Cyprus Banks, ICPAC, CIFA, and the Cyprus Shipping Chamber. However, TechIsland, a technology business association, has expressed a need for an exemption for the tech sector, similar to what was introduced in Belgium.

AKEL, a major political party in Cyprus, has raised concerns regarding potential monopolistic trends in hospitals and safeguarding society's and the Republic's interests through this legislation. AKEL MP Andreas Kavkalias stated that the party is particularly concerned about the bill's potential impact on key sectors such as banking, healthcare, and real estate.

Despite these concerns, AKEL has not publicly revealed its final position on the law concerning the protection of foreign direct investments, and no specific date for announcing its final stance is mentioned in the available search results. The party has, however, stated that it will examine all provisions of the bill before announcing its final position in the coming weeks.

The bill, if passed, is expected to be a significant step in strengthening Cyprus's position as a hub for foreign direct investment in the European Union. The revised bill is scheduled to be concluded within September, marking a crucial milestone in Cyprus's economic development.