The Foreign Investment Regulation Review: Ireland
The location of choice for investment by multinational corporations, Ireland very much remains open for business as the English-speaking gateway to the lucrative European market. Ireland continues to lead the world in attracting high-value foreign direct investment (FDI) projects and its ability to attract such projects in key sectors – such as information and communications technology (ICT), life sciences, and financial and business services – has been globally acknowledged.2 Leading US companies in the technology and social media sectors with EMEA headquarters in Ireland, such as Google, LinkedIn, Dropbox, Airbnb, Microsoft, Salesforce, Facebook, Indeed and Twitter are a testament to Ireland's continued success in this regard. Indeed, nine of the top 10 US ICT companies are located in Ireland and this has earned the country a reputation as the 'CPU of ICT' in Europe. One third of multinationals in Ireland have had operations in the country for over 20 years, illustrating the commitment of these companies to Ireland.
Ireland also remains attractive as a holding company jurisdiction for large US-listed multinational corporations seeking to achieve an appropriate balance between the practicalities of day-to-day management, solid shareholder rights and robust corporate governance within a stable and well-developed legal and regulatory environment.
The Irish economy consistently ranks as one of the most competitive in world and Ireland is fifth in the world when it comes to business efficiency.3 The full extent of the financial fallout caused by the covid-19 crisis remains to be seen, but a sizeable government stimulus package has been announced to aid economic recovery.
In light of Britain's exit from the European Union on 31 January 2020, Ireland's position in and access to one of the world's largest markets is now even more significant. Already, Bank of America, Morgan Stanley, Barclays and S&P Global are among the many financial services groups to have relocated to Ireland to retain access to the European market. Brexit has no effect on Ireland's status as a full EU Member State and both the Irish government and the Irish people are committed to Ireland's continued membership of the European Union and the eurozone.
Ireland is home to a cutting-edge research and development sector, ranking first in the world in immunology, second in agricultural sciences and third in nanotechnology research. These rankings are underpinned by an exceptional level of collaboration between industry, academia, state agencies and regulatory authorities.4
Ireland's attractiveness as an investment location can be attributed to a number of factors The positive approach of successive governments to the promotion of inward investment was underscored in the June 2020 Programme for Government, which reaffirmed the new administration's commitment to FDI and which pledged to defend existing, and attract new, foreign investment. The development of Ireland as a location of choice for resilient supply chains is a stated government priority. Ireland's EU membership and a highly educated, skilled and flexible labour pool are also recognised as key factors that bring foreign investors to Ireland.
In the mid 1990s, the government embarked on a series of reforms to ensure that the level and structure of taxation, cost and quality of infrastructure and the effectiveness of training and education were given greater emphasis.
Irish governments have used Ireland's tax infrastructure to facilitate the establishment and expansion of overseas companies and have continually enhanced and refined the tax system to ensure that the country remains attractive to foreign investors. Ireland has maintained a corporate tax rate of 12.5 per cent for active business and has an extensive double taxation treaty network.
The government aims to maintain an open and free market for investors, but, in the wake of the covid-19 crisis and developments at EU level (outlined below), it is considering whether to introduce some form of foreign investment screening in strategic sectors. There are currently no general restrictions governing FDI in Ireland,5 no limits on the percentage of foreign ownership permitted, no requirements that shares in Irish companies must be held by Irish citizens and no restrictions on the purchase of land for industrial purposes by foreigners. Private investment, whether domestic or foreign, is not permitted in the arms industry, but at present there are no other foreign investment restrictions for public policy or security reasons. Indeed, Ireland scored favourably in the Organisation for Economic Co-operation and Development's (OECD) FDI regulatory restrictive index, which measures statutory restrictions on FDI in 69 countries.6
The Irish legal system, similarly to that of the United States, is based on the English common law tradition. It is modified by Irish legislation and case law and is further influenced by Ireland's membership of the European Union. In the area of company law, government policy has been 'to establish a legal framework that is among the world's best – an efficient and effective framework that ensures that Ireland is a less bureaucratic place to do business, for both indigenous and foreign-owned companies'.7 Indeed, Ireland was ranked as the 11th best country in the world in which to do business in a recent study carried out by Forbes.8 The study, for which 161 countries were surveyed, was based on analyses of 15 factors, including innovation, taxes, property rights, technology, corruption, infrastructure, market size, political risk, workforce, freedom (personal, trade and monetary) as well as red tape, investor protection and quality of life, with each category being equally weighted.
As part of its active promotion of foreign investment, the government operates a grant aid system administered by the Industrial Development Agency (IDA Ireland), which provides grant incentives to companies meeting certain criteria (linked to job creation and investment commitment with respect to specific locations). IDA Ireland is responsible for the promotion and development of foreign investment into Ireland and targets sectors that produce sophisticated and high-value products and services, such as the technology, online and pharmaceutical sectors. IDA Ireland, which has offices across the globe, can offer invaluable and practical advice and should certainly be a first port of call for companies evaluating Ireland as a potential location in which, and from which, to do business.
Ireland currently does not have a single overarching body responsible for regulating investment into the country. However, depending on the circumstances of the investment and the nature of the industry, compliance with a regulatory regime and approval from a regulatory body may be required.
Foreign investment regime
The government is keen to ensure that there are no significant barriers to international trade or foreign investment in Ireland. However, certain types of investment and industries are subject to approval, regulation or both under Irish law.
i Mergers, joint ventures and acquisitions
Mergers, joint ventures and acquisitions are subject to antitrust legislation in Ireland and the European Union.9 The main Irish legislation in relation to antitrust law is the Competition Acts 2002–2017. Any merger, joint venture or acquisition that qualifies for notification must be notified to the Competition and Consumer Protection Commission (CCPC), which has the power to refuse to allow the transaction to proceed or to impose restrictions on it. A merger will qualify for notification to the CCPC when certain turnover thresholds are met. A merger control notification may be required to be submitted to the European Commission, instead of an Irish notification, where the jurisdictional thresholds of the EU Merger Regulation10 are triggered.
Media mergers are treated separately, however, and must be notified regardless of the turnover of the undertakings involved. Media mergers are subject to an additional review by the Minister for Media, Tourism, Arts, Culture, Sport and the Gaeltacht (the Minister), who must have regard to certain public interest criteria, the extent to which ownership and control of media business is spread among individuals and undertakings and the extent to which the diversity of views prevalent in Irish society is reflected through the activities of the various media businesses in the state.
Acquisition of a stake in an insurance or reinsurance undertaking or a credit institution may also be subject to prior approval from the Central Bank of Ireland (the Central Bank). Investors seeking to acquire a shareholding or other interest that would either give them a qualifying holding in an insurance or reinsurance undertaking or in a credit institution (authorised or licensed in Ireland), or that increases their control above certain levels (20, 33 or 50 per cent), must first obtain the approval of the Central Bank. A qualifying holding is defined as a direct or indirect holding that represents 10 per cent or more of the capital of, or voting rights in, a target entity, or that confers a right to appoint and remove members of the board of directors or management or otherwise allows that person to exercise a 'significant influence' over the direction or management of the target entity.
ii Public takeovers
Public takeovers11 are principally regulated by the Irish Takeover Panel Act 1997 (as amended), the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 and the Irish Takeover Rules (the Rules). The Rules operate to regulate the orderly conduct of public takeovers in Ireland and, inter alia, to ensure that no takeover offer is frustrated or unfairly prejudiced and, in the case of multiple bidders, that there is a level playing field (e.g., frustrating actions are not permitted without target shareholder approval and due diligence information provided by a target company to one bidder must be provided to all bona fide bidders). The Rules are not concerned with the financial or commercial advantages or disadvantages of a takeover.
The Irish Takeover Panel (the Panel) is responsible for making the Rules and monitoring and supervising takeovers. It works through the office of the Director General, who deals with the general administration of the Rules and is responsible for monitoring dealings in relevant securities. The Director General is also available for consultation and to give guidance before and during takeovers. The Panel has the sole power to make rulings and give directions during the course of a takeover. It also has the right to enquire into the conduct of any person involved in a takeover and the power to admonish or censure a person for non-compliance with the Rules.
iii Regulated industries
Particular industries in Ireland are subject to regulation and supervision by various regulatory bodies. Some of the key industries are set out below.
International financial services
The European Central Bank (ECB) is the lead regulator of credit institutions in the European Union and the European Securities and Markets Authority (ESMA) is the lead regulator of non-bank financial services entities. Both the ECB and ESMA are assisted by competent national authorities in each of the EU Member States. The Central Bank is the national competent authority in Ireland for both credit institutions and non-bank financial services entities. To operate a banking business12 in Ireland, a licence or authorisation is required from the Central Bank or the ECB in respect of a credit institution that is a 'significant' institution.
Following the introduction of the ECB's Single Supervisory Mechanism (SSM) in November 2014, the Central Bank is the regulator (home state regulator) for 'less significant' institutions operating within Ireland, while the ECB is the home state regulator for significant institutions and works with the Central Bank to supervise these bodies. A credit institution will be considered significant if any one of the following conditions is met:
- the total value of its assets exceeds €30 billion or – unless the total value of its assets is below €5 billion – exceeds 20 per cent of national gross domestic product;
- it is one of the three most significant credit institutions established in a Member State;
- it is a recipient of direct assistance from the European Stability Mechanism; or
- the total value of its assets exceeds €5 billion and the ratio of its cross-border assets and liabilities in more than one other participating Member State to its total assets and liabilities is above 20 per cent.
Failure to fulfil these criteria notwithstanding, the SSM may declare an institution significant to ensure the consistent application of high-quality supervisory standards.
The SSM designates the licensing of significant institutions as a 'core' activity that is the responsibility of the ECB, though the Central Bank must confirm to the ECB that the requirements set out in Irish legislation have been met by the applicant bank before a licence will be granted.
To obtain a licence for either a significant or a less significant credit institution, the undertaking must satisfy several criteria, including capital requirements and having appropriate and proper procedures in Ireland. Entities wishing to carry on an insurance or reinsurance business also require an authorisation from the Central Bank.
The Central Bank is also the competent authority for the regulation of the securities market in Ireland. In addition, if the securities are listed on the Irish Stock Exchange, they will also be subject to regulation by the Stock Exchange.
Once authorised in Ireland, banking and other services (including investment services under MiFID and payment services under PSD2)13 can be passported throughout the European Union in reliance on the Irish authorisation. The home state regulator (i.e., the Central Bank in the case of less significant credit institutions and non-bank financial services entities) retains responsibility for the prudential supervision of the entity while the host state regulator (i.e., the regulator in the other EU Member State) will supervise the passported entity's business conduct in that EU Member State.
The communications industry is governed by the Communications Regulation Act 2002 (as amended) and a number of regulations14 that implement the EU electronic communications reform package (the communications regime). Any entity intending to provide an electronic communications service or electronic communications network in Ireland must notify ComReg, the Irish telecommunications regulator, prior to commencing those services under the general authorisation regime and be in possession of a general authorisation. Authorised entities must comply with the conditions that are part of their general authorisation, including various wholesale access obligations and consumer law requirements, and more generally with the communications regime. Wireless telegraphy licences are also required for the use of radio frequencies in Ireland.
The broadcasting industry is primarily governed by the Broadcasting Act 2009 (as amended) and is regulated by the Broadcasting Authority of Ireland (BAI).
Certain activities carried out in the life sciences sector are subject to regulation by the Health Products Regulatory Authority (HPRA). The HPRA's role is to protect and enhance public and animal health by regulating medicines, medical devices and other health products. Manufacturers of human and veterinary medicines are required to hold a manufacturing authorisation granted by the HPRA.15 Manufacturing includes activities such as total and partial manufacture, dividing, packaging and repackaging, as well as importing medicinal products into Ireland from a country outside the European Economic Area (EEA). The HPRA will only grant a manufacturing authorisation if an applicant has at its disposal suitable and sufficient premises, equipment, facilities, staff, manufacturing operations and arrangements for quality control, record-keeping, handling, storage and distribution.
Subject to some minor exceptions, all medicinal products must be authorised before being marketed in Ireland. An application for a marketing authorisation must be made to the HPRA or the European Medicines Agency, where appropriate.
The HPRA is the competent authority for general medical devices, in vitro diagnostic medical devices and active implantable medical devices. The role of the HPRA is to ensure that all medical devices placed on the Irish market meet the requirements of national and EU legislation and to monitor the safety of medical devices in Ireland after they are placed on the market.
Export of dual-use items
The control of the export of 'dual-use' items and military goods is governed by the Control of Exports Act 2008 and the Control of Exports (Dual Use Items) Order 2009 (as amended), which gives effect to Council Regulation (EC) No. 428/2009 (as amended) setting up an EU regime for the control of exports, transfer, brokering and transit of dual-use items. Dual-use goods and technologies are goods and technologies (including software) that are normally used for civilian purposes but may have military applications. The legislation and requirements are complex and cover a wide range of common products produced by industries dealing with electronics, computers (including software), telecommunications and aerospace technologies. This notably includes products that have some forms of cryptographic functionality. The Export Licensing Unit is the division within the Irish Department of Business, Enterprise and Innovation that is responsible for managing controls on exports of dual-use items and other restricted exports, such as those destined for countries to which trade sanctions apply.
Typical transactional structures
The following transactions structures are commonly used by foreign investors establishing a presence in Ireland.
The simplest and most popular form of setting up a business in Ireland is by incorporation of an Irish company under the Companies Act 2014 (the Companies Act), which consolidated the 1963–2013 Companies Acts, as well as introducing some innovations. There are two basic types of company in Ireland: private and public. There are two types of private limited company: the model private company (LTD) and, alternatively, the designated activity company (DAC). The vast majority of companies registered in Ireland are private companies limited by shares. Public limited companies are typically used where securities are listed or offered to the public.
The main advantage of the private limited company is that shareholder liability is limited to the amount paid for its shares in the relevant company. Once certain decisions are made (e.g., type of company, company name, company location, persons who will act as directors or company secretary), a company can be incorporated in Ireland within five working days. In addition, all companies must have a registered address in Ireland. An LTD must have at least one director and a separate secretary. An LTD has no objects clause and therefore has unlimited corporate capacity once acting within the law. Other company types must have a minimum of two directors and a secretary (but in this case, the latter can also be a director). Generally speaking, at least one director must be resident in the EEA unless an insurance bond is put in place. Other company types require an objects clause, but a third party dealing in good faith with the company will not be prejudiced if the company exceeds its corporate capacity.
The procedure for establishing a public limited company is similar; however, a public limited company is subject to minimum capitalisation requirements.
All company types can be incorporated with a single shareholder.
ii Acquisition of assets and companies
A foreign investor may also acquire an existing Irish company or acquire the business and assets of an existing Irish company.
Acquisitions can be structured as a share purchase, in which case the shares of the Irish company are acquired directly from the shareholders. All the assets and liabilities of the target company are acquired in a share purchase. The transaction is documented by a share purchase agreement that, if it includes any warranties, will typically be supplemented by a disclosure letter and an instrument of transfer of the shares.
In an asset acquisition, the purchaser can choose which assets and liabilities it wishes to acquire. The parties will typically enter into an asset transfer agreement that documents the assets to be transferred and the consideration payable. Depending on the asset profile of the business, specific additional transfer documents may be required to perfect the transfer of the assets in question. If the nature of the assets and liabilities being transferred is such that the transfer constitutes a transfer of undertakings, there will be an automatic transfer to the purchaser of the rights and obligations of the target company towards its employees by virtue of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations, 2003.
Prior to an acquisition of either the assets or shares of an existing company, an extensive due diligence exercise will typically be carried out. Third-party consents may also be required in advance of the acquisition. The acquisition of shares in a public limited company may also be subject to compliance with the Irish Takeover Rules.
In addition to the above, the European Communities (Cross-Border Mergers) Regulations 2008 (as amended) introduced a legal framework to enable cross-border mergers between public or private limited companies from different Member States of the EEA. All the assets and liabilities of one or more companies are transferred to another company by way of universal succession and the transferor company is dissolved without going into liquidation. The merger can be effected by acquisition, by formation of a new company or by absorption (which involves the assimilation of a wholly owned subsidiary into the surviving company).
The Companies Act introduced a domestic statutory regime for Irish private companies modelled on the European Cross-Border Merger regime. At least one of the entities involved in the transaction must be an LTD. The transaction involves either a court approval process or use of the Summary Approval Procedure (requiring shareholder consent and the making of a declaration of solvency by the directors). Under the Companies Act, a private company limited by shares can also be split (by division) between two other Irish companies (one of which must be an LTD and neither of which can be a public limited company). Divisions are conducted through a court-approved process and the Summary Approval Procedure cannot be used. Mergers and divisions of public limited companies are also regulated under the Companies Act.
iii Joint ventures
Foreign investors may establish a joint venture in Ireland. In this regard, the following three structures are commonly used:
- a corporate joint venture involving the incorporation of a limited liability company to carry out the joint venture business (potentially a DAC with a specified objects clause);
- a partnership formed under the Partnership Act 1980 or the Limited Partnerships Act 1907. The partnership may be limited or unlimited and will be subject to one level of tax; and
- a contractual arrangement whereby the terms of the joint venture and the legal relationship between the parties will be governed by contract law. Each party will be subject to separate tax.
There may also be notification requirements if the joint venture comes within the scope of the Competition Acts 2002–2017 or the Irish Takeover Rules.
iv Migrations and redomiciliations
Ireland also remains a potentially attractive destination for corporate groups choosing to redomicile their ultimate holding company (commonly referred to as 'inverting' or an 'inversion'). Redomiciliations or inversions of US companies were prominent between 2012 and 2016, primarily driven by the US corporate tax regime. More recently, following the introduction of new regulations by the US Treasury Department, inversions have become less commonplace, although NYSE and NASDAQ listed companies such as Aon, Cimpress and Steris have continued to redomicile to Ireland from jurisdictions such as the United Kingdom and the Netherlands.
There are a number of ways in which a foreign corporate group may structure a redomiciliation into Ireland. One option is to migrate the existing holding company's tax residence to Ireland (i.e., by the transfer of its central management and control to Ireland). This structure can present difficulties, however, as many jurisdictions impose a tax charge on a migration of tax residence. It can be a particularly unfeasible route for US companies, as the United States does not have a separate concept of tax residence as distinct from the place of incorporation. For public companies incorporated in a common law jurisdiction, a more common form of inversion structure involves the incorporation of a new Irish parent company between the existing parent company and the public stockholders that engages in a court-approved cancellation scheme of arrangement or a share-for-share exchange. Under a court-approved cancellation scheme of arrangement, the public stockholders agree to having their shares in the existing parent company either cancelled or swapped for shares in the new Irish parent company. Reverse mergers are also used, whereby the US purchaser merges into a subsidiary of the Irish target and the Irish target issues new shares to the stockholders of the US company. For EU-incorporated public companies, an inversion may also be achieved by re-registering the existing parent company as a European public company16 and then transferring its place of registration to Ireland. EU parent companies can also redomicile to Ireland by merging with an Irish public company under the cross-border merger regulations; however, this option is not available to US parent companies.
Because of US anti-inversion rules, most inversion opportunities for US companies seeking to redomicile to Ireland are now arising in an acquisition context, where the US company undertakes a strategic acquisition or merger with a foreign company, with the ultimate holding company of the merged group being located in Ireland. The Irish holding company may subsequently list on a US stock exchange, such as NYSE or NASDAQ.
v Branch operations and place of business
It is usually preferable to establish a separate legal entity in Ireland; however, in some cases it may make sense from a regulatory perspective for the foreign entity to establish a branch in Ireland. Any foreign limited liability company trading in Ireland that has the appearance of permanency, an independent Irish management structure, the ability to negotiate contracts with third parties and a reasonable degree of financial independence is considered a branch under Irish law and must register the branch within one month of establishment. Under the Companies (Accounting) Act 2017 (the Accounting Act), branch registration requirements were extended to a foreign unlimited company that is a subsidiary undertaking of a body corporate whose members have limited liability.
Under the Companies Act, 'place of business' registrations are no longer required or recognised in Ireland.
The review procedure that will apply to a merger, acquisition or joint venture that comes within the scope of the CCPC's jurisdiction is set out below. There is no specific review procedure in respect of public takeovers.17
i Financial thresholds
Mergers, acquisitions and full-function joint ventures that meet the financial thresholds in the Competition Acts 2002–2017 must be notified to the CCPC before they are put into effect.
The financial thresholds that trigger the requirement to notify the CCPC have recently been revised pursuant to the Competition Act 2002 (Section 27) Order 2018.18 As of 1 January 2019, the CCPC must be notified of a proposed transaction where, for the most recent financial year:
- the aggregate turnover in the state (i.e., Ireland) of the undertakings involved is not less than €60 million; and
- the turnover in the state (i.e., Ireland) of each of two or more of the undertakings involved is not less than €10 million.
The new thresholds ensure that firms that fall between microenterprises and small enterprises are not required to mandatorily notify unnecessary mergers and acquisitions and bring Ireland's financial thresholds closer to international norms.
These thresholds are disapplied for 'media mergers'.
The CCPC also has jurisdiction under Sections 4 and 5 of the Competition Acts 2002–2017 to investigate mergers that fall below these thresholds (i.e., if it believes that the merger could have as its object or effect the prevention, restriction or distortion of competition or involves the creation or strengthening of a dominant position).
As for the geographical allocation of turnover, for the purposes of the above-mentioned turnover thresholds, a guidance note by the CCPC provides that 'turnover in the state' means sales made or services supplied to customers within the state.
The substantive test for assessment of competition issues by the CCPC is whether 'the result of the merger or acquisition would be to substantially lessen competition in markets for goods or services' in Ireland (referred to as the SLC test).19
Merging parties can notify the CCPC of a proposed merger once they can demonstrate that 'a good faith intention to conclude an agreement or a merger or acquisition is agreed'.20 A filing fee of €8,000 is payable to the CCPC for all mergers. Under the Competition Acts 2002–2017, there is an obligation on 'each undertaking involved' to notify the CCPC (i.e., the seller and the purchaser).21 In practice, joint filings are submitted and the purchaser tends to lead on the drafting of the notification.
The Competition Acts 2002–2017 provide for a two-phase review process. The CCPC has an initial 30 working days (Phase I) from notification to decide whether to allow the merger to be put into effect on the grounds that the merger does not trigger the SLC test or that it will not carry out a more detailed investigation. During Phase I, the CCPC may also issue a formal request for information (RFI) from the parties, in which case the 30 working days run from the time of receipt by the CCPC of the RFI (i.e., it has the effect of stopping and restarting the clock and the review period does not restart until the RFI has been complied with). If the CCPC has concerns about the likely effects of a transaction, it will initiate a more detailed second-phase investigation. In this case, it has a total of 120 working days from notification (known as Phase II) within which to decide whether the merger should be allowed unconditionally, allowed subject to conditions or prohibited. As in Phase I, the CCPC may 'stop the clock' on its merger review by making a formal RFI.
As noted above, media mergers are treated separately. While one notification in respect of a media merger must be submitted to the CCPC, the Competition Acts 2002–2017 require a second, separate notification to be submitted to the Minister. If the CCPC determines at the end of a Phase I investigation that the media merger does not trigger the SLC test, it must inform the Minister, who then has 30 working days to consider the media merger, commencing 10 days after a CCPC determination clearing the merger. If the Minister is concerned that the media merger may be contrary to public interest in protecting plurality of the media, the Minister will request the BAI to carry out a Phase II examination. Once in receipt of a BAI report, in these circumstances the Minister has 20 working days in which to make the final determination on the media merger and has the power to prohibit the merger or impose stricter conditions, again based on public interest criteria.
Of the 47 notifications received by the CCPC in 2019 (a 52 per cent decrease compared with 2018, attributable to the above-noted change in jurisdictional thresholds), 9 (19 per cent of cases) required an extended Phase I review (i.e., a formal RFI was issued by the CCPC) and there were two Phase II reviews (compared with three in 2018). In 2019, the CCPC took an average of 24.7 working days to issue a Phase I decision in a standard (non-extended Phase II) case. To date, only three mergers have been blocked by the CCPC: IBM/Schlumberger,22 Kingspan/Xtratherm23 and Kerry/Breeo.24
iv Failure to notify
Failure to notify a transaction that falls within the scope of the Competition Acts 2002–2017, or to supply information requested by the CCPC within the specified time limit, can constitute a criminal offence punishable by a fine of up to €250,000, plus €25,000 per day for a continued breach. In 2019, following a year-long CCPC investigation, the first successful gun-jumping prosecutions were secured in Ireland. Both Armalou Holdings Ltd and Airfield Villas Ltd (formerly Lillis-O'Donnell Motor Company Ltd) pleaded guilty to six charges arising out of their failure to notify the CCPC of Armalou's takeover of Lillis-O'Donnell Motor Company Ltd in December 2015. The parties were ordered, pursuant to the Probation Act 1907, to each make a charitable donation of €2,070 instead of paying criminal fines, because the District Court was satisfied there had been no wilful breach of the law as neither company had been aware of their obligation to notify the merger.
In addition, transactions that are put into effect without the approval of the CCPC are void under Irish law. To date, the CCPC has not taken legal action against any parties to a merger where a transaction has been put into effect prior to clearance, although it has publicly condemned this type of behaviour.
v Mergers below notification thresholds
Mergers below the notification thresholds can also potentially limit competition. The Competition Acts 2002–2017 provide for a voluntary merger notification system for mergers that do not meet the thresholds but still raise antitrust issues. Once notified, voluntary notifications are dealt with in the same way as mandatory notifications.
A determination by the CCPC to prohibit a merger, or permit a merger subject to conditions, can be appealed to the High Court by the parties to the transaction. Complainants and third parties do not have a right of appeal but may apply to the High Court for judicial review of a CCPC determination.
vii Confidential information
As a public body, the CCPC is subject to the Freedom of Information Act 2014. Notwithstanding, the Act provides for exemptions for the release of commercially sensitive information by public bodies. In general, the CCPC handles commercially sensitive information in accordance with its strict confidentiality obligations. Following receipt of a merger notification, the CCPC will publish a standard notice on its website stating that the transaction has been notified to it and detailing the parties and industry involved.
The merger notification form submitted by the parties will not be made public; however, the CCPC's decision (which may contain information from the notification form) will be published. In practice, the CCPC will allow the parties an opportunity to request the removal or redaction of any commercially sensitive information from the determination prior to publishing a non-confidential version of the determination on its website.
viii Coordination with other jurisdictions
The Competition Acts 2002–2017 enable the CCPC to enter into arrangements with antitrust bodies in other jurisdictions in relation to the exercise of its merger control function. One of the questions on the standard notification form requires the parties to identify the other jurisdictions where the transaction has been or will be filed. In certain circumstances, the CCPC seeks the consent of the notifying parties to enable it to discuss the case with antitrust officials in other jurisdictions when a notification is made and to share information with them.
The CCPC is greatly influenced by the work of the International Competition Network and the European Competition Network, of which it is an active member. The CCPC also maintains regular contact with competition authorities in other jurisdictions, in particular the UK Competition and Markets Authority and the European Commission, as well as the antitrust bodies in the United States, regarding cases that are subject to parallel reviews in those jurisdictions that may affect Ireland.
ix Third parties
Generally, a 10-day working period is provided for by the CCPC during a Phase I review (and a 15-day working period for a Phase II review) for third parties to submit comments expressing their views on the likely effects of a proposed transaction on competition in the market.
Foreign investor protection
There is no general regime per se regarding the protection of foreign investment. Investors from both within and outside the European Union receive the same treatment as domestic investors under Irish law.
However, various protections are contained within the statutory frameworks referred to above. Pursuant to the Companies Act, shareholders, directors or creditors of a company have the legal standing to bring an action to the High Court against a company or an officer of a company for failure to remedy a breach of the Companies Act. This provision does not discriminate between foreign and domestic shareholders. In addition, under Irish law, directors of Irish companies are subject to a range of extensive duties (common law fiduciary duties having been codified in the Companies Act) and can be held personally liable for certain breaches under the Companies Act.
The Office of the Director of Corporate Enforcement (ODCE) encourages compliance with the Companies Act and brings to account those who disregard the law. The ODCE has investigative and disciplinary powers and can act on complaints from auditors, professional bodies and the public.
Foreign investors may also be entitled to appeal a decision taken by a regulatory body. For example, the Competition Acts 2002–2017 set out the circumstances where a right of appeal exists against a decision taken by the CCPC. In addition to a right of appeal, there is a general right25 to a judicial review by the High Court against a decision made by any person or body (usually set up by means of legislation) exercising a public function. Accordingly, judicial review will lie in respect of decisions of government departments, tribunals, regulators or other persons or bodies making decisions by public or statutory authority.
Ireland provides strong, enforceable protection for all aspects of intellectual property (IP). The Irish Commercial Court was established as a division of the High Court in 2004 to deal with major commercial and IP cases. It offers a fast-track process to quickly and efficiently deal with IP disputes (usually within one year). In relation to interlocutory applications, costs are awarded at the interlocutory stage, which provides a very powerful tool to combat IP infringement. The Commercial Court provides investors with a strong platform for protecting their assets.
Ireland also promotes alternative dispute resolution. The government has incorporated the United Nations Convention on International Trade Law Model Law on International Commercial Arbitration into Irish law and the Arbitration Act 2010 provides the legislative framework supporting the conduct of arbitration in Ireland. The Rules of the Superior Courts also promote the use of mediation. The Rules of the Superior Courts have also been amended since the introduction of the Mediation Act 2017. The Rules encourage the use of mediation and even allow the courts of their own motion to suggest the use of mediation and to adjourn matters at hearing to facilitate this.
Foreign investors will benefit from Ireland's membership of the European Union, as there are a number of bilateral trade agreements in place. Ireland also has an extensive tax treaty network to eliminate or reduce double taxation. To date, Ireland has signed 74 double tax treaties, 73 of which are in effect. Ireland's Revenue Commissioners act as Ireland's 'competent authority' under double tax treaties and as a competent authority it assists Irish taxpayers in requests for competent authority assistance, mutual agreement procedures and advance pricing agreements.
Other strategic considerations
Ireland offers investors a low corporation tax environment that does not breach harmful EU or OECD tax competition initiatives. As a member of both organisations, Ireland is actively involved in forums for discussing and reviewing international tax changes. In addition to the low corporation tax rate, Ireland has an extensive and expanding double taxation treaty network.
Once a decision has been made to invest in Ireland, it is important for each individual case to be assessed to determine the most efficient structure for the foreign investor. Investors must also consider whether any regulatory regime will apply to the investment. For example, when effecting a merger or acquisition, it is useful to engage with antitrust law issues early in the process, particularly in relation to timing considerations, which need to take account of any applicable timetable for merger review. Depending on whether there are antitrust law issues to be addressed, it may be necessary to draft an appropriate condition precedent in the purchase agreement or public offer to deal with clearance prior to closing the transaction. Similar considerations will apply when the company being acquired is subject to the Irish Takeover Rules.
Ireland was ranked as the 11th best country in the world in which to do business in a recent study carried out by Forbes26 and this is supported by the influx of foreign direct investment into Ireland in recent years.
Indeed, Ireland's competitiveness improved dramatically after the 2008 global financial crisis. Ireland was ranked the 12th most competitive country in the world in 2020.27 The Dublin region was ranked second in the fDi's European Cities and Regions of the Future 2020/21 report, which acknowledges that the region continues to go from strength to strength as an FDI hub. Galway, a harbour city on Ireland's west coast, was awarded the top ranking in the micro cities classification in the FDI Strategy category and recognised as a global hub in the medical technology sector.28
The covid-19 pandemic has dominated public discourse since early 2020 and resulted in several pieces of emergency legislation under the Health Act 1947, restricting travel and the operation of business. As in other countries, corporate governance challenges for Irish companies operating in the new business environment are many and varied, ranging from practical difficulties in holding shareholder and board meetings to executing contracts remotely and filing documents in the Companies Registration Office. Many of these issues can be overcome by practical workarounds and the government has also introduced certain temporary changes to company law (some of which may outlast the crisis) to ease these difficulties for companies.29 Managing insolvency risks and employment issues at a time of acute financial pressure is likely to be a key concern for companies and directors in the foreseeable future.
Brexit creates both challenges and opportunities for all industries and sectors in the Irish economy. While the focus remains on securing an orderly and agreed Brexit, the Irish government published a Brexit Contingency Action Plan30 setting out its approach in the event of a no-deal scenario at the end of the transition period. More specifically, the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 outlines the provisions of a variety of new laws that will be enacted in Ireland if no Brexit deal is agreed. The Irish government's approach combines full participation in the overall EU framework for managing a no-deal outcome with further specific challenges and responses at national level and is consistent with the overall objectives of seeking to minimise the impact on trade and the economy and to reinforce Ireland's commitment to and participation in the European Union.
The Industrial Development (Amendment) Act 2019 was one of a wide range of measures introduced to get Irish business Brexit-ready. The measures were originally contained in the omnibus Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019. The government decided, however, to accelerate the introduction of this element of the legislative response to Brexit, given the strategic importance of state business support to the Irish economy. The overall capital funding allowance that can be provided to IDA Ireland, Enterprise Ireland (the state agency responsible for the development and growth of Irish enterprises in world markets) and Science Foundation Ireland, in their combined lifetimes, has been increased from €7 billion to €14 billion. Enterprise Ireland can now offer enhanced support to client companies involved in research, development and innovation and has increased flexibility to support enterprise development.
Ireland's robust legal and regulatory landscape provides certainty for investors. Regulators across different sectors have experience in dealing with multinationals and the Data Protection Commissioner continues to take a leading role in regulating the numerous multinational technology companies that are headquartered in the state, through a dedicated multinational unit.
Ireland continues to adapt and enhance its offering to ensure that it remains a key location for FDI. IDA Ireland's strategic blueprint for attracting FDI into Ireland set out key objectives for 2015–201931 and, in conjunction with its various stakeholders, the agency is now developing a new five-year strategy. This strategy will map the future of FDI jobs growth and transformation in Ireland, setting ambitious targets for the coming years. A critical element of IDA Ireland's strategy is a continued strong focus on the traditional key sectors of technology, media and content, business services, biopharmaceuticals, medical devices, engineering, ingredients and financial services.
In 2019, the European Union introduced a new set of rules designed to protect its interest in strategic sectors while remaining open for investment as the world's largest single market, but the covid-19 crisis has pushed this issue even higher up the Commission's policy agenda. Regulation (EU) 2019/452 on establishing a framework for the screening of foreign direct investments into the European Union (the FDI Regulation) came into force on 11 April 2019 and will apply from 11 October 2020. The FDI Regulation coordinates the scrutiny of investments by third (non-EU) countries to ensure that those investments do not threaten security or public order and is focused on areas such as critical infrastructure and technologies, food security and press freedom. The Commission issued guidance to Member States on 25 March 2020 warning of the increased risk of attempts to acquire healthcare capacities (for example, for the productions of medical or protective equipment) or related industries such as research establishments (for instance, developing vaccines) via FDI during the covid-19 crisis.32
Ireland, like half of the EU Member States, does not have an FDI screening framework, but these states are now being urged by the Commission to introduce screening. While individual Member States retain discretion as to whether they implement a screening system, any such system must meet basic criteria concerning confidentiality, transparency and the application of review time frames. Ireland recently took its first steps in this direction by establishing an Investment Screening Unit within the Department of Business, Enterprise and Innovation alongside a public consultation process in April 2020 on the issue. A key practical point to watch will be whether the timeline for any new FDI regime will run in parallel or subsequent to the existing competition and media plurality timelines, where applicable. At present, the Irish 'media merger' review timeline only commences after conclusion of the Irish competition review timeline. The government is actively engaging with EU partners to understand existing EU screening models, bearing in mind the importance of maintaining the attractiveness of the European Union as an FDI location.
Most corporate and other legal entities in Ireland are required to gather information on individuals who are their underlying beneficial owners and to establish and maintain a beneficial ownership register containing this information, pursuant to regulations introduced in 2016 (the 2016 Regulations). The 2016 Regulations came about as a result of the EU Fourth Anti-Money Laundering Directive, which was aimed at increasing transparency in relation to the real ownership of corporate vehicles. The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (the 2019 Regulations) came into force on 22 March 2019 and repealed, restated and expanded the scope of their predecessor 2016 regulations to introduce an additional requirement for such entities to file their beneficial ownership details on a central beneficial ownership register maintained by the Irish Companies Registration Office.33
Ireland offers investors a stable corporation tax environment and a low corporation tax rate. Ireland is currently participating in the OECD's ongoing work to address the tax challenges of the digitalisation of the economy and it was an active participant in the OECD's base erosion and profit shifting (BEPS) project.
As a result of that participation, Ireland has implemented country-by-country reporting rules and a BEPS-compliant 'knowledge development box', which applies a lower tax rate (6.25 per cent) to income earned through commercialising certain qualifying intellectual property that is developed in Ireland. Since the final BEPS reports were issued, Ireland has separately participated in EU negotiations with a view to implementing (EU-wide) a number of the BEPS recommendations. These changes were agreed under the Anti-Tax Avoidance Directive34 and a subsequent amending directive (the Tax Avoidance Directives), which require EU Member States to implement domestic legislation and measures to tackle tax avoidance practices. The Tax Avoidance Directives lay down controlled foreign company (CFC) rules, an exit tax, rules regarding anti-hybrid mismatches within the European Union and with third countries, general interest limitation rules and a general anti-abuse rule, all to be implemented over a number of years. The required exit tax rules were implemented in Ireland on 10 October 2018 and the CFC rules were introduced in the Finance Act 2018, taking effect for accounting periods beginning on or after 1 January 2019. Ireland has confirmed that no changes are required to Irish law to implement the general anti-abuse rules. The required anti-hybrid rules have been implemented in Ireland (with the exception of the reverse hybrid rules, which must be implemented by 1 January 2022) and apply to payments made on or after 1 January 2020. Ireland expanded its transfer pricing legislation for accounting periods beginning on or after 1 January 2020 following the release of the 2017 OECD Transfer Pricing Guidelines. Certain non-trading transactions now fall within the ambit of these rules.
It is intended that Ireland will remain a highly attractive location for international business. This is reflected in a document published by the Department of Finance following Ireland's consultation on BEPS:35 'Ireland now needs to place itself in the best position possible to become the country of choice for mobile foreign direct investment in a post-BEPS environment.'
1 Pat English is a partner and Grace Murray is a senior associate at Matheson.
2 IBM Global Location Trends 2019 Annual Report.
3 IMD World Competitiveness Ranking 2019.
4 Science Foundation Ireland Annual Report, 2018; Department of Business, Enterprise and Innovation, 2019.
5 The Minister for Finance can restrict transfers between Ireland and certain designated countries provided that the restrictions conform with EU law.
6 The FDI index gauges the restrictiveness of a country's FDI rules by looking at the four main restrictions on FDI: foreign equity limitations, discriminatory screening or approval mechanisms, restrictions on key foreign personnel and operational restrictions (e.g., restrictions on branching and on capital repatriation or on land ownership). Ireland scored 0.043, with zero representing an open market and 1 representing a restrictive market. www.oecd.org/investment/fdiindex.htm (most recent).
7 Department of Enterprise, Trade and Innovation, 2010, Trading and Investing in a Smart Economy: A Strategy and Action Plan for Irish Trade, Tourism and Investment to 2015, p. 34.
9 Undertakings in Ireland are subject to the antitrust provisions of the Treaty on the Functioning of the European Union (principally Articles 101 to 109) to the extent that their activities are likely to have an effect on trade between EU Member States.
10 Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings.
11 This refers to takeovers of Irish-registered public limited companies that are listed on a regulated market in the European Union, the ESM market of Euronext Dublin (formerly the Irish Stock Exchange), the AIM market of the London Stock Exchange, the New York Stock Exchange or NASDAQ.
12 The Central Bank Acts, as well as a number of domestic regulations transposing EU Directives (the most notable being Capital Requirements Directive IV) apply to the provision of banking services in Ireland.
13 The Markets in Financial Instruments Directive 2014/65/EU regulates investment services and the Payment Services Directive 2015/2366 regulates payment services.
15 The granting of a manufacturing authorisation in Ireland is principally governed by the Medicinal Products (Control of Manufacture) Regulations 2007, as amended, which transpose into Irish law elements of a number of EU Directives.
16 Also known as a Societas Europaea.
17 From time to time, a public takeover may involve the investor consulting with the Irish Takeover Panel to get dispensations from certain rules in the context of a particular deal.
18 SI No. 388 of 2018 Competition Act 2002 (Section 27) Order 2018.
19 Section 20(1)(c) of the Competition Acts 2002–2017.
20 Section 18(1A)(b)(ii) of the Competition Acts 2002–2017.
21 This contrasts with the position under the EU Merger Regulation, where the obligation to notify is generally on the purchaser or the party acquiring control.
22 Case M/04/032 IBM Ireland Limited/Schlumberger Business Continuity Services (Ireland) Limited. The Competition Authority's determination can be found by searching at https://www.ccpc.ie/business/mergers/mergers-archive/.
23 Case M/06/039 Kingspan/Xtratherm. The Competition Authority's determination can be found by searching at https://www.ccpc.ie/business/mergers/mergers-archive/.
24 Case M/08/009 Kerry/Breeo. The Competition Authority's determination can be found by searching at https://www.ccpc.ie/business/mergers/mergers-archive/.
25 In certain circumstances, the right to judicial review may vary; for example, in the financial services sector.
26 See footnote 8.
27 IMD World Competitiveness Yearbook 2020.
Winners. fDi Intelligence is a division of the Financial Times.
29 Companies (Miscellaneous Provisions) (Covid-19) Act 2020.
32 Commission Guidance to Member States on Investment Screening (May 2020).
33 Central Register of Beneficial Ownership of Companies.
34 Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.
35 'Competing in a Changing World – A Road Map for Ireland's Tax Competitiveness', Department of Finance, October 2014.