On Wednesday, the Cabinet adopted a bill to implement a National Mechanism for Screening Foreign Direct Investments, in line with EU regulations to protect national security and public order.

“The government continues steadily to implement its programmed decisions,” stated Finance Minister Makis Keravnos after the Cabinet meeting, noting that the bill complies with the European Union’s relevant regulation aimed at protecting national security and public order.

“It is a very important decision because it is directly linked to safeguarding national interests,” he emphasized. He reminded that this proposal had previously been submitted to Parliament, where discussions were held. After consultations and revisions, it has now been approved by the Cabinet, he said.

The Minister explained that the Finance Ministry will be the competent authority for overseeing this mechanism. “This authority will have powers to approve, prohibit, or reverse investments on grounds of public order or security,” he clarified.

A “foreign investor” is defined as any natural or legal person from an EU country, the European Economic Area, or Switzerland. He added that a foreign direct investment is considered any investment by a foreign investor with the aim of achieving stable participation and significant influence in the management of an enterprise of strategic importance in the Republic of Cyprus.

He specified that “strategic importance” refers to businesses operating in highly sensitive sectors as listed in the bill’s annex, including energy, tourism, transport, health, communications, defense, financial services, and dual-use technologies.

There will be a notification obligation for these foreign investors, especially when their investment represents more than 25%, or if it increases from 25% to 50% or more. “This notification obligation applies whenever a foreign direct investment results in holding at least 25% of a company’s share capital,” the Minister explained. He added that exceptions include foreign direct investments involving ships under construction or ships being bought and sold, except for floating natural gas storage and regasification units.

A new Advisory Committee will also be established, composed of representatives from the Ministries of Finance, Defense, Commerce and Energy, Foreign Affairs, Interior, Justice and Public Order, and the Ministry of Transport and Communications.

In preparing the revised bill, beyond the consultation process, best practices applied by other EU member states were also taken into account, he noted.

Responding to a question, Mr. Keravnos said this move reflects the strong encouragement from the European Commission for Cyprus to adopt such a mechanism, already in place in all other EU member states, “precisely to safeguard national interests.”

When asked which countries are covered, the Minister explained that it mainly concerns countries outside the EU, but also includes EU-based companies in which a foreign investor from a third country holds 25% or more, thus falling under this screening process.

On a question about how foreign investments have been monitored so far, the Minister stated that institutions such as the Finance Ministry, the Securities and Exchange Commission, and the Central Bank were performing such controls. “With this proposal, the process is now being specified with clear powers and defined bodies, which can impose and monitor this procedure,” he added.