Spain leads the way in restrictions on foreign investment imposed after the coronavirus within European countries, according to a study by Andersen European restrictions on foreign investment due to the Covid-19 crisis, This can take its toll on the inflow of capital into the country and limit the ability of domestic companies to manoeuvre if they need to increase their capital to overcome a lack of liquidity or a balance sheet imbalance. In particular, "Spain is at the forefront of restrictions because of the breadth of sectors it covers; other countries have been much more selective in talking only about sensitive sectors, such as health or information," Ignacio Aparicio, Corporate Director of Andersen in Spain and Coordinator of Corporate and M&A of Andersen in Europe explains.

During the first weeks after the spread of the coronavirus throughout Europe and the continuous stock market bleeding of listed companies, the large EU governments began to worry about the possibility that a non-EU company would take advantage of the situation to buy certain critical companies for their respective countries at a bargain price, perhaps with the intention of emptying it of its most profitable assets or copying its know-how to replicate its business model in a third country with lower labour costs, which is why many of them introduced restrictions on the purchase of national companies by foreigners. However, "these additional barriers to foreign investment are a disincentive because contracts must be subject to government approval," warns Aparicio.

Discretion

"This list does not send out the message that Spain is a good country to invest in without hindrance. It is said that these are very strategic sectors, but the protection is so exhaustive and extends to so many sectors that they cannot all be strategic," Aparicio argues. In addition, Royal Decree Law 8/2020, of 17th March, which suspends the regime of liberalisation of certain direct foreign investments in Spain, where these measures are included, also introduces a high component of government discretion, since "practically all businesses handle personal data", which opens the door to control of all types of investments by the government, and this has a greater discouraging effect. "It would be better to know in advance what the formulas are for denying investment. And they have to be very well defined, because otherwise they are always going to be applied and that does not help to give legal certainty to investors," stresses Aparicio, who adds that, despite everything, the regulation has some holes, such as the possibility of buying certain assets of a company without having to buy a stake in it.

You can read the full article in Expansión.