On March 17, 2020 the Spanish Government approved Royal Decree-Law 8/2020 ("RDL") which contains a number of measures to reduce the impact of the COVID-19 outbreak in Spain.

The RDL amends the existing foreign investment regime applicable to investors resident in countries outside the EU and the European Free Trade Association ("Foreign Investors") by introducing additional limitations. The Preamble to the RDL states that the stock market crash triggered by COVID-19 poses a real threat to Spanish listed and non-listed companies, as they now become targets for foreign investors.

Foreign direct investments ("FDI") are defined as those investments by Foreign Investors to the extent they entail (a) reaching or exceeding the 10% threshold of the share capital of a Spanish company, or (b) obtaining an effective participation in the management or taking control of a Spanish Company. RDL requires previous authorization from the Spanish Government for those FDIs in Strategic Sectors or conducted by Certain Investors, as defined below.

The strategic sectors ("Strategic Sectors") are the following:

• critical infrastructure, whether physical or virtual (including those related to energy, transportation, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial, and sensitive facilities) as well as land and real estate required for the use of such infrastructure;
• critical technologies and dual-use items including artificial intelligence, robotics, semi-conductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies;
• supply of critical inputs, in particular energy, raw materials and basic food;
• sectors with access to sensitive information such as personal data; and,
• media.

FDIs in any sector are also prohibited and subject to an ex ante authorization regime when conducted by certain investors ("Certain Investors"):

• foreign investors directly or indirectly controlled by the government (including sovereign funds, state bodies or the armed forces) of a third country;
• foreign investors that have already invested or been involved in the security, public health or public policy sectors in another Member State, and in particular those sectors listed above; and
• foreign investors subject to administrative or judicial proceedings in another Member State, in their home state or in a third state for engaging in criminal or illegal activities.

Therefore, FDIs in Strategic Sectors or conducted by Certain Investors will now require an ex ante authorization from the Spanish Government. Absence of this prior authorization will result in the FDI being deemed null and void and considered as an infringement. The Government may approve the investment or impose conditions, prohibit it or unwind it. The application for the ex ante authorization will be deemed to be rejected in case there is no decision by the government within six months from the application date. The infringement may be sanctioned with fines ranging between €30,000 and the transaction value.

The expiration of this regime requires a specific decision adopted by the Spanish Government and therefore is not directly linked to the end of the current State of Alarm.

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