Lithuania

• 15/10/2020
• Jurisdictions

Lithuania notified the Law on the Protection of Objects of Importance to Ensuring National Security of the Republic of Lithuania (the Lithuanian Act) to the European Commission. Screening is carried out as a precondition for certain transactions and not limited to transactions involving foreign investors. The Lithuanian Act is enforced by the Commission for Coordination of Protection of Objects of Importance to Ensuring National Security (the Lithuanian Commission), a coordinating body composed of representatives from the Lithuanian government’s ministries and the security services.

Scope

The mechanism applies to all investors except for certain state owned or controlled entities and companies (whether by Lithuania, EU, EFTA, OECD or NATO states). The scope and mandatory or discretionary nature of the screening mechanism differs according to the target asset and the type of transaction. The Lithuanian Act applies to (i) economic sectors important to national security; (ii) protection zones of enterprises and facilities important to national security; (iii) enterprises important to national security, divided into Category I, II and III in decreasing order of importance; and (iv) facilities important to national security. The screening mechanism is triggered by (i) transfer, pledging, or mortgage of facilities or property of importance to ensuring national security; (ii) acquisition independently or jointly through the acquisition of shares or agreements on the transfer of voting rights of at least 25% of the votes of a Category I or Category II enterprise; or at least one third of the votes of a Category III enterprise; or (iii) transfer, pledging or mortgage of property indicated in the security plan of an enterprise of importance to ensuring national security.

Review criteria

The Lithuanian Commission examines whether the investor is in conformity with Lithuania’s national security interests. The Lithuanian Act provides a list of circumstances in which the investor is deemed not to conform to national security interests.

Application procedure

The Lithuanian Act subjects certain transactions to mandatory ex ante screening and provides the possibility for ex post facto screening, on a discretionary basis. The ex post screening can be launched by the government or an individual minister, institutions ensuring national security, the Bank of Lithuania, the Lithuanian Radio and Television Commission, or state or municipal executive bodies.

Filing fees

The Lithuanian Act does not specify a filing fee for the submission of a notification.

Implementation and government practice

Phase 1: The Lithuanian Commission requests and collects opinions from various governmental agencies and then adopts a conclusion on whether the investor is in conformity with national security interests taking into account these opinions. The Lithuanian Commission can impose a full or partial investment ban, compulsory requirements, or conditions which, if complied with, would prevent the investment from posing a threat to national security interests.

Phase 2: The Lithuanian government takes a final decision. A prohibition decision prevents the transaction from being performed or the acquired shares from granting voting rights.

In 2018, the Lithuanian government blocked a contract between the Lithuanian national railway company and Skinest Baltija, a winning bidder in a contest for the delivery of railway sleepers. It found that the owner of Skinest “maintain[ed] relations with institutions of foreign States or natural or legal persons from those States which increase the risk or pose a threat to national security".

Due process

The final decision on the investor’s conformity with national security interests must be substantiated. The investor may apply for a new decision under certain conditions. A final decision may be appealed before the Vilnius Regional Administrative Court. This administrative court decision can also be appealed.

Time limits

In a discretionary screening procedure, the investor must submit the mandated documents within ten days of receiving the request. In Phase 1, the governmental agencies must submit their opinions within 15 days after the notification (which can be extended by five days). The Lithuanian Commission’s conclusion must be notified to the investor and, in the case of a discretionary procedure, to the entity initiating the procedure within 20 days (and can be extended by 5 days ) from the date when the screening procedure was launched. The Phase 2 decision must be taken within 14 days. The decision can be appealed within 45 days and the resulting court decision can be appealed within 30 days.

Confidentiality

The Lithuanian Act requires the Lithuanian government and the Lithuanian Commission to treat information as confidential where the entity submitting an application or requesting a screening procedure indicates that it constitutes a commercial/ industrial secret or is confidential.

Sanctions

The relevant legislation does not provide for specific sanctions for violations of the above obligations or non-compliance with the procedure.

Legislative developments

Currently, there are no legislative developments in Lithuania in relation to FDI screening.

 

The above information is a summary that does not constitute legal advice. For exhaustive information, advice, and assistance please get in touch with our lawyers.