Five years with the Spanish FI regime: Key takeaways from our interview with the Deputy Head of Unit for Foreign Investments, Santiago Conde Lara

Last month, the managing partner of our Madrid office, José Giménez, had the pleasure of sitting down with Santiago Conde Lara, Deputy Head of Unit for Foreign Investments (Subdirección General de Inversiones Exteriores (SGIE)), to discuss the Spanish FI regime five years since its inception. Mr Conde Lara spoke about how the Spanish FI regime has evolved, how the SGIE seeks to promote investment in Spain, and what investors can expect in the future. To listen to the discussion, be sure to head over to our podcast episode for the full interview. In this blog, we highlight five key takeaways that came out of that discussion.

1. Spain remains a great destination for investment – FI screening has not stopped that

It has been five years since the Spanish FI regime came into force, and Mr Conde Lara was proud to pronounce that the regime is now at a point where it can provide an efficient screening process which is not a burden for investors. He noted in particular that Spain was one of the first countries to establish an FI regime in Europe, a factor that gave it a comparative advantage vis-à-vis other jurisdictions. Its five years’ experience has given it an understanding of what works, what doesn’t and what needs to change.

The effects of this experience can be seen in the numbers. SGIE has shortened the screening process from 6 months to 3 months, although in practice SGIE typically takes even less time to issue a decision. Guidance provided to investors has given them confidence on what to expect in the voluntary consultation process, leading to fewer consultation applications each year. Moreover, SGIE remains in close communication with the private sector to resolve any uncertainties, such as through its online platform. The overall effect of SGIE’s efforts is that the Spanish FI regime is not an obstacle for investors looking to do deals in Spain. As a result, Spain remains a great destination for investors – it is among the top 5 FI recipients within the EU and is the 4th largest recipient of greenfield investment. This positions Spain above major countries like China and France as a leading recipient of FI in renewable energies. Additionally, Spain has experienced impressive growth in FI in sectors such as R&D and AI.

2. If you want a faster screening process, apply for voluntary consultation

Mr Conde Lara highlighted Spain’s voluntary consultation process as its secret weapon in getting fast outcomes for investors – a process that also provides a binding interpretation of Spain’s FI regime, giving investors welcome certainty.  

The voluntary process is also less burdensome for the investor than the formal approval process as it entails less paperwork (one form, versus two). The time limit for a response from the SGIE is shorter (30 days) and, in practice, the SGIE prioritises consultation cases over formal approval applications due to timing restrictions. 

Should a transaction fall in scope - which is decided throughout the consultation process - the review is then “upgraded” to the formal approval process; the time required for review would then become 1 month plus 3 further months (i.e. the maximum time to resolve the voluntary consultation plus the maximum time to resolve the formal approval process). Still, if a transaction had begun its review under the voluntary consultation process, much of the analysis will already have been completed, making the subsequent formal approval process faster.

3. Collaboration, good faith and a forward-looking mindset

Whilst certainty helps investors navigate the Spanish FI regime, Mr Conde Lara acknowledged that the SGIE adopts a flexible approach as to which sectors are considered “sensitive”, with five sectors always retaining this status (e.g. critical physical or virtual infrastructure, critical technologies and dual-use products, supply of critical inputs, sectors with access to confidential information and media). The SGIE classes the remaining sectors in line with global trends, coupled with a forward-looking mindset. For example, telecommunications technology and cybersecurity are two areas which the SGIE is focused on currently.

When reviewing problematic transactions, SGIE adopts a collaborative approach. This means working with other Ministries or entities that can provide technical input in relation to any given sector which may be useful for the SGIE’s analysis. The SGIE will also happily receive proposals from transaction parties on any mitigation measures in respect of a transaction under review. Should a transaction be called in for review (e.g. if the transaction parties self-assessed and opted not to submit the transaction for voluntary consultation or formal approval), SGIE will always take good faith into consideration.

4. Remedies where possible

Mr Conde Lara was hesitant to identify any remedies or conditions that the SGIE would typically impose since remedies are always considered on a case-by-case basis. In any case, he noted that remedies tend to address the transaction parties’ behaviour. The SGIE aims to be proportionate in its mitigation measures - its number one goal is to make the investment happen if at all possible, and it does not want FI screening to be an obstacle to that. 

In exceptional circumstances the investment may not be possible, and that would typically be due to national security concerns, the reasons for which are highly confidential. Nevertheless, even in these rare cases, the risk to national security typically relates to the investment itself rather than the investor. If the SGIE does prohibit a transaction, that does not necessarily mean that any future investments by the investor would likewise lead to the same outcome.

5. Waiting for revisions to the EU FDI Screening Regulation

In order to strengthen the EU’s economic security, the European Commission has adopted a number of initiatives, one of which is a legislative proposal to revise the current FDI Screening Regulation. This means that Spain’s FI regime will need to change and adapt. Among the possible changes are proposals for call-in powers to cover 15 months post-closing, changes to the scope of sensitive sectors, as well as changes to the review process.

In the meantime, don’t expect any further guidance from the SGIE on its FI regime. Whilst it waits to see what the changes to the FDI Screening Regulation will be (see here for the latest position), it would simply not be helpful for any guidance to be published now, only for it to require amendment following changes agreed by the EU.