Spain's Royal Decree 571/2023 and the energy sector

The new decree clarifies which parts of Spain's energy sector are subject to foreign direct investment controls.

Royal Decree 571/2023 of 4 July on foreign investments (RDFI) has been passed to cover a significant gap in the regulation of the control of foreign direct investment in Spain (Article 7bis of Law 19/2003).

Up until the publication of the decree, the process for obtaining government clearance for foreign direct investments was regulated by outdated legislation passed in 1999.

The RDFI defines a more efficient, streamlined process, aimed at providing a higher degree of certainty to companies and transactions. It also includes specific provisions in relation to foreign investment in the energy sector.

Article 7bis of the Law 19/2003 was criticised because of its lack of clarity in defining the sectors subject to control.

RFDI helps clarify what areas are within scope by including several references relevant to the energy sector.

Under the RFDI, investments in energy will fall within the mandatory clearance obligation in the following cases:

1. Investments on energy assets that are considered critical infrastructure, if they fall within the definition of Law 8/211 and are listed in the National Catalogue of Strategic infrastructure.


2. Investments in essential inputs related to the energy sector, including, specifically, software used in the operation of critical energy infrastructure, inputs essential for ensuring the integrity, safety and operation of energy-critical infrastructure.


3. Investment in companies or assets providing access to (i) sensitive data related to critical infrastructure, and (ii) databases on the provision of essential energy supplies.

Article 17 of the RDFI provides for specific exemptions applicable to the energy sector that apply regardless of the amount involved in the transaction.

Under this Article, foreign investment in the energy sector will be exempt from prior authorisation under Article 7bis in the following cases:
 

1. The company or the acquired assets do not engage in regulated activities, such as the operation of the electricity system and electricity market; the transport and distribution of electricity; the supply of electricity in non-peninsular territories; the technical management of the gas system; and the regasification, basic storage, transmission and distribution of natural gas.

 

2. The company does not acquire, as a consequence of the transaction, the role of dominant operator in the sectors of generation and supply of electrical energy, production, storage, transport and distribution of fuels or biofuels, production and supply of liquefied petroleum gases or production and supply of natural gas.

 

3. The foreign investment involves the acquisition of electrical power production assets, and the share of installed power by technology is below 5%. The article includes the calculation criteria for the share of installed power. The RDFI provides some indications on how to calculate this market share.

 

4. The foreign investment involves the acquisition of companies that carry out the activity of commercialisation of electricity, and the acquired company has less than 20,000 customers.

It is important to note that these exemptions apply to transactions that might fall under the situations set forth in Article 7bis.2 (which identify sectors), but not under the situations set forth in Article 7bis.3 (which are subject to notifications certain transactions in relation to the nature of the investors).

As a result, for example, acquisitions made by publicly owned foreign companies are notifiable in all cases.

The RDFI will enter into force on 1 September 2023.