Spanish FDI and Government-Controlled Entities

Background

One of the particularities of the Spanish FDI regime is that most Sovereign Wealth Funds (“SWFs”) and other entities which are ultimately controlled by a foreign government, including public bodies or armed forces, are considered sensitive for the purposes of the Spanish FDI regime.  Thus, they are required to notify the Spanish authority of each and every acquisition (i) that exceeds the 10% threshold in a Spanish corporation for the first time, or (ii) that results in a change of control, for the purposes of EU merger control, over Spanish corporations or assets, independent of the activities of the target.  In practice, government control is the main ground of sensitivity actually leading to filings due to the investor.  Approximately 22 of 181 authorisation requests in 2025 were submitted on this basis. This article sets out the legal framework (Section 2 below), the practice of the authority (Section 3 below), and the levels of intervention as regards government-controlled entities (Section 4 below).

Legal basis

Article 7bis (3)(a) Act 19/2003, of 4 July, on the legal regime governing capital movements and economic transactions with foreign countries and on certain measures to prevent money laundering (the “Spanish FDI Act”) subjects a transaction to the Spanish FDI regime “if the foreign investor is directly or indirectly controlled by the government, including public bodies or the armed forces, of a third country, with the criteria set out in Article 7(2) of the Competition Act being applied for the purposes of determining the existence of such control” (emphasis added).

The Spanish Competition Act interprets the notion of control in line with the EU Merger Control Regulation and the Consolidated Jurisdictional Notice.

Article 16(1)(a) Royal Decree 571/2023, of 4 July, on foreign investments (the “Implementing Regulation”) expressly refers to control “through significant financing, including subsidies, from the government of a third country.”  However, in light of the Spanish FDI Act cross-referring to the competition rules as regards the notion of control, control through financing should only occur in the limited circumstances considered under merger control rules, e.g., where economic dependence coupled with structural links confers decisive influence.

In addition, Article 16(1)(b) Implementing Regulation establishes an exemption from the notification obligation for government-controlled entities: “if it is apparent from the nature of the fund manager, the legal or statutory provisions governing the appointment of its directors, or other statutory provisions relating to its management or nature, that [i] its investment policy is independent and [ii] focused exclusively on the return on its portfolios, [iii] with no room for political influence from a third State.”

Practice of the authority

According to the authority, government-controlled entities from any jurisdiction can benefit from the exemption.  This position has evolved since the introduction of the Implementing Regulation.  Initially, the agency indicated that SWFs from non-Western jurisdictions were not eligible for the exemption.  Lately, the regulator considers that the exemption will apply when the conditions set out in the Implementing Regulation apply on their merits without origin playing a role, e.g., certain funds from Singapore and South Korea now benefit from the exemption.

The entities that fall under the exemption do not have to notify their acquisitions in Spain provided that the target is not considered sensitive under the Spanish FDI Act.

As for government-controlled entities that do not benefit from the exemption, the authority, paradoxically, issues some no jurisdiction decisions if the target is not sensitive.  However, the agency has indicated that it should not be inferred from these decisions that the government-controlled entity is exempt from notifying the authority in future cases.  From a legal perspective, the regulator can change its opinion in subsequent transactions but a prior no jurisdiction decision should protect the investor from receiving fines.  Conversely, if the authority applies the exemption to a specific government-controlled entity, this is expressly stated in the decision.

In addition, there is at least one SWF that has agreed with the agency to inform it of each and every transaction.  The authority then advises whether this transaction should be formally notified and go through the approval procedure.

Finally, decisions on the applicability of the exemption can only be adopted in a specific case.  It is not possible to request the regulator’s view on the applicability of the exemption in the abstract, i.e., outside the context of a specific transaction.  The authority insists on the parties not assessing the applicability of the exemption but query as to whether they can require the notification of a transaction clearly meeting the exemption without legal bases. 

Levels of intervention

According to the statistics published by the authority (see here), in 2025, 12%, i.e., approximately 22 of all authorisation requests were made under the government control category. This is in contrast to the other two categories of sensitive investors, which accounted for 0% and 1% of all authorisation requests (i.e., zero and approximately two transactions), respectively.  These include investors (i) affecting security, public order, and public health in another EU Member State, and (ii) those involving a risk of criminal activity.

The statutory review period is three months, subject to requests for information stopping the clock.  In our experience, the review period takes between two and two and a half months for non-problematic transactions.  This also holds true for reviews with the majority of government-controlled entities.

In general, conditions under the Spanish FDI regime are possible, and their imposition has increased slightly over the last year. According to data from 2025, out of the 181 authorisation requests, the Spanish authority imposed conditions in 14 cases. Spanish FDI decisions are not publicly available, so it is not possible to ascertain the grounds on which the conditions were imposed. However, in our experience, with the exception of a handful of countries, government-controlled entities are no more likely to receive conditions than other entities, as the imposition of conditions appears to be mainly driven by the sensitivity of the target.  That said, we have seen, for example, conditions imposed on government-controlled investors aimed at limiting their access to the target’s sensitive information.