On 1 January 2019, the Flemish Decree of 7 December 2018 concerning good governance (Bestuursdecreet) entered into force (the "Decree"). The Decree introduced a safeguard mechanism to control foreign investments into specific Flemish public authorities and institutions in order to protect public security (the "Safeguard Mechanism").
The Safeguard Mechanism is introduced amid growing concern regarding foreign investments in strategic infrastructure and technology in Europe. In November 2018, the European Parliament, the European Council and the European Commission reached a political agreement on a European framework for foreign direct investment screening, which seeks to introduce rules governing national screening mechanisms and enhanced cooperation between the Member States (See, Van Bael & Bellis on Belgian Business Law, Volume 2018, No. 11, p. 8, available at www.vbb.com). More recently, in its resolution of 14 February 2019, the European Parliament adopted the Commission's proposal at first reading.
Pursuant to the Safeguard Mechanism, any legal act by an institution pursuant to which a foreign private individual or foreign legal entity would gain control of or the decision-making power over such institution, is liable to be annulled or declared inapplicable by the Flemish Government. This will be the case if such an act is capable of endangering the strategic interests of the Flemish Region (Vlaams Gewest) or the Flemish Community (Vlaamse Gemeenschap), by compromising their strategic independence or the continuity of vital processes or by losing specific strategic or sensitive knowledge to foreign interests.
The scope of the Safeguard Mechanism includes Flemish public authorities (such as the Flemish Government or the Flemish administration) and other local authorities (such as the municipalities (gemeenten / communes) or provinces (provincies / provinces)). The Decree also contains a catch-all clause, pursuant to which other institutions may fall under the scope of the Safeguard Mechanism if they satisfy the following criteria: (i) they have been founded for the specific purpose of fulfilling goals in the general interest; (ii) they have legal personality; and (iii) they are funded for more than half or controlled (through the majority of the votes in the board of directors or otherwise through the control on their governance) by institutions falling within the scope of the Safeguard Mechanism.
The Decree specifies that the Flemish government is only entitled to use the Safeguard Mechanism if it has first tried to protect the strategic interests through the consent of the relevant institution.
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