The Croatian Ministry of Finance introduces draft of new Foreign Direct Investment Screening Act

The Croatian Ministry of Finance has introduced a draft of the new Foreign Direct Investment Screening Act (FDI Act), aimed at establishing a comprehensive framework for the screening of foreign direct investments. The proposal seeks to align national legislation with EU Regulation 2019/452, ensuring consistency with European standards on security and public order.

Note that the comments below are based on the published draft of the FDI Act, which is currently in the public consultation process. Changes may occur during the regular legislative process. We will continue to provide updates as more details become available.

Scope of application

The proposed screening covers foreign investments and acquisitions into Croatian companies and other commercial enterprises from specific sectors including energy, finance, transport, healthcare, public security, media, food supply and digital infrastructure, where the investment may impact security or public policy. The FDI Act does not define or prescribe any criteria for assessment of what security or public policy includes. Instead, the FDI Act imposes an obligation to 15 individual governmental authorities (and, in addition, each grantor of a concession) to determine a list of Croatian commercial enterprises expected to be subject to screening under the FDI Act. Detailed criteria for determination will be prescribed by the government in its implementing regulations. Each commercial enterprise included on the list will be notified accordingly.

Screening is required in cases of direct or indirect acquisition of at least 10% of equity or voting rights in Croatian entities, whether acting independently or in concert with others, as well as concessions and public-private partnerships where the investor is a foreign entity. In addition, the Act will require screening of any increase in the equity or voting rights in such entities.

Investments made by any non-EEA companies, directly or indirectly, will be captured; this includes cases where an EEA or Croatia-based subsidiary of a non-EEA company is used to carry out the acquisition. In the case of individuals, investments made by persons with non-EEA citizenship will be captured even where such individuals hold EEA citizenship (dual citizenship).

Competent authorities and procedure

The approval of foreign investment will be provided by the Ministry of Finance following consultations with the national Commission for the Screening of Foreign Investments, as well as consideration of any comments provided by the EU Commission or other EU Member States.

The request must be submitted by either the prospective foreign investor or by the Croatian commercial enterprise included on the list of screening subjects. The approval process is expected to take up to 150 days under normal circumstances; however, the legislation provides for an extension of up to 210 days.

Ownership rights in commercial enterprises included on the list of screening subjects cannot be acquired without prior approval. In addition, the Ministry has broad authority to re-assess and revoke any previously granted approvals in a limited set of situations (e.g. where the foreign investor acts contrary to the intent of the FDI Act). If approval is revoked, the Ministry of Finance will order the foreign investor to divest its ownership rights.

Coming into force and impact on prior investments

The FDI Act is expected to come into force following the expedited legislative procedure in the Croatian Parliament, potentially as early as the end of 2025.

The FDI Act mandates that all previously completed foreign investments into Croatian commercial enterprises included on the list of screening subjects must undergo a full screening process within three years as of the FDI Act coming into force, irrespective of when the foreign investment occurred. This may create a substantial workload for the competent authorities and result in delays in processing both legacy and new investment screenings. The proposal for retroactive application has raised concerns during the public consultation process, particularly due to the unclear timeframe to which the review of completed transactions would apply.