On 24 October 2025, at a session of the Croatian Parliament held under urgent procedure, the new Foreign Investment Screening Act (hereinafter: the “Act”) was adopted. The Act was enacted with the aim of implementing Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union within Croatian legislation, as well as establishing a national mechanism for screening foreign direct investments that may, in any way, affect the protection of national security and public order of the Republic of Croatia, the EU, or its Member States.
The new Act introduces an entirely new regulatory framework relevant to foreign investments in the Republic of Croatia. Primarily, it introduces an obligation to report certain investments to the competent authorities prior to their implementation, although the Act also provides for so-called ex post screening and even its own retroactive application. Its implementation undoubtedly represents a significant step in strengthening institutional oversight of investments originating from third countries that may impact strategic sectors of the economy.
Scope / Applicability of the Act
Foreign investment, for the purposes of the Act, means any direct or indirect foreign investment of any kind into an obligated entity, whereby the foreign investor, by investing its capital, acquires or increases a qualifying stake (at least 10% of shares and/or voting rights and/or proprietary rights / total interests / share interests) or holds a controlling position (actual control over the obligated entity or a holder of interests in the obligated entity / a shareholder of the obligated entity through a majority stake, majority of voting rights, the right to appoint or dismiss management or supervisory board members, veto rights, exerting significant influence and imposing relevant decisions, or formal/informal agreements with the obligated entity or its shareholders), for the purpose of carrying out economic activity or economically utilising public or other goods in the Republic of Croatia.
The Act explicitly states that it applies to investments enabling effective participation in the management of an obligated entity carrying out an economic activity or in control over such an entity, with the aim of establishing or maintaining temporary or permanent ties with an existing or future obligated entity and effectively participating in its ownership structure, management, and/or control.
The Act defines an obligated entity as a trader or commercial company, regardless of legal form, with its registered office or business establishment in the Republic of Croatia, operating or to be established in connection with a foreign investment, with respect to which the foreign investment affects or may affect security or public order.
Finally, a foreign investor encompasses a broad range of entities included in the legal definition. In this regard, a foreign investor is any natural person who does not hold citizenship of the Republic of Croatia, any EU Member State, or any signatory state of the European Economic Area Agreement (hereinafter: “EEA”), as well as any legal entity established or otherwise organized under the laws of a third country—that is, any country that is not an EU or EEA Member State. If the legal entity has its registered office in the Republic of Croatia, or within the EU or EEA (including subsidiaries and branches), but is directly or indirectly subject to decisive influence by an entity from a third country that is not part of the EU or EEA, that legal entity, i. e. entity with its registered office within the EU or EEA, is also considered a foreign investor. Additionally, the Act includes intermediaries in investment migration within the definition.
It is therefore evident that the Act, on the one hand, provides for a wide range of legal acts, transactions, deals, and undertakings considered foreign investments (such as acquisition of an existing company, the transfer of share interests, the incorporation of a new company, the conclusion of concession agreements, and public-private partnership agreements), while on the other hand, it covers a wide range of subjects included in the definition of a foreign investor. However, the application of the Act, in the context of these definitions, is limited to obligated entities managing critical infrastructure or resources in the fields of energy, transport, health, finance, and communication and information technology. Accordingly, the foreign investment screening obligation prescribed by the Act does not apply to all foreign investments, but only to those concerning strategically important economic sectors.
It is particularly emphasised that the Act requires the identification of ultimate beneficial owners in accordance with the standards and regulations governing anti-money laundering and counter-terrorist financing, thereby aiming to prevent and prohibit the concealment of actual control within non-transparent and complex ownership structures.
Institutional Framework
The Ministry of Finance is the authority responsible for conducting the entire foreign investment screening procedure. Its responsibilities include issuing decisions on applications for approval of foreign investments, as well as decisions on the annulment of previously approved foreign investments. Furthermore, the Ministry of Finance also has the authority to initiate foreign investment screening procedure ex officio.
Several other competent institutions are also designated as having decisive influence in implementing the Act and supervising the application of its provisions.
The Foreign Investment Screening Commission, composed of representatives from the Ministry of Finance and the relevant sector-specific ministries, and other public authorities, competent for identifying obligated entities subject to the Act, coordinates interinstitutional cooperation, issues opinions that form the basis for decisions on foreign investment approvals, and aligns related policies and guidelines.
The National Contact Point, established within the ministry responsible for economic affairs, primarily manages communication with the European Commission and EU and EEA Member States regarding all issues related to the foreign investment screening procedure, ensuring transparency and cooperation at the European level.
Certain public authorities are designated as sector-specific competent bodies for identifying obligated entities in strategically important sectors of the economy, such as relevant ministries (economy, transport, health, defence, etc.), the Croatian National Bank (HNB) for the banking sector, the Croatian Financial Services Supervisory Agency (HANFA) for the financial market infrastructure sector, and others. These bodies identify obligated entities within their competence, maintain and update relevant records, and notify subjects of their obligations.
As control authorities, the Act designates competent commercial courts, the Central Depository & Clearing Company (SKDD), concession grantors, and the public authority responsible for market competition protection, which within their authorities implement control mechanisms through registers and databases, thereby preventing the completion of foreign investments without prior foreign investment screening and without obtaining approval from the Ministry of Finance.
Foreign Investment Screening Procedure upon Applicant’s Request
The foreign investment screening procedure is initiated upon an application for approval of a foreign investment submitted by the applicant (the obligated entity or the foreign investor), prior to the acquisition, increase, or decrease of a qualifying stake or a controlling position, and no later than before filing an application for registration of the obligated entity in the court register or before any entry into the SKDD depository, as well as prior to the adoption of a decision on granting a concession, and no later than before concluding a concession or public-private partnership agreement. In other words, the application must be submitted prior to the execution of the transaction or legal act.
The application is submitted to the Ministry of Finance, which first conducts an administrative review to verify the completeness of the application and then forwards it for further processing to the Foreign Investment Screening Commission and the National Contact Point. The Commission assesses whether the foreign investment poses a risk of negative effects on the security or public order of the Republic of Croatia, the EU, or the EEA or their other Member States, and issues an opinion based on which the Ministry of Finance decides on the approval of the foreign investment.
The Act prescribes deadlines for each authority involved in the foreign investment screening procedure must act. Considering their authorities and the prescribed deadlines, the decision on the foreign investment must be adopted no later than 120 days, or exceptionally no later than 150 days from the date of submission of a complete application for approval of the foreign investment.
No appeal is permitted against the decision of the Ministry of Finance on a foreign investment, but an administrative dispute may be initiated before the High Administrative Court of the Republic of Croatia.
Foreign Investment Screening Procedure Ex Officio
Subsequent (ex post) control
The Ministry of Finance may, upon the proposal of any member of the Foreign Investment Screening Commission, ex officio, initiate a foreign investment screening procedure after an approval has already been issued, as well as in cases of unreported foreign investments. A subsequent review may be conducted whenever there is suspicion of a negative impact of a foreign investment or suspicion that the obligated entity or the investor is acting contrary to the objectives of the Act.
Consequences of Violations
If a subsequent review establishes a violation or a threat to security and/or public order, or if necessary for the protection of the public interest of the Republic of Croatia or the EU and the EEA, the Ministry of Finance, by decision, revokes the approval of the foreign investment and orders the sale of all shares, stock and/or proprietary rights within a period not exceeding 9 months, with a possible extension of up to 6 months. From the moment the decision becomes final, the foreign investor is prohibited from disposing of shares, share interests, voting rights or proprietary rights, except for the purpose of fulfilling the sale obligation, and the obligated entity must regularly report on the progress of the sale.
Entry into Force and Retroactive Application
The Act entered into force on 13 November 2025, and an implementing regulation of the Ministry of Finance is expected to be adopted within the next 90 days. In addition, within the next 30 days, the Government of the Republic of Croatia must adopt a decision establishing the Foreign Investment Screening Commission, while public authorities (sector ministries, CNB, HANFA, etc.) responsible for identifying obligated entities must identify all such entities within their competence within 6 months of the entry into force of the Government’s regulation defining detailed criteria for determining entities subject to the Act.
It is particularly emphasised that the Act also applies, mutatis mutandis, to existing foreign investments made prior to its entry into force, and such screenings must be conducted within 3 years of its entry into force.
Conclusion
The introduction of the new regulatory framework for foreign investments is expected to substantially influence the development of investment activities on the Croatian market, as well as business operations and corporate transactions in the sectors covered by the Act. Besides creating a degree of legal uncertainty for future investments, its retroactive application extends this uncertainty to existing investments. By introducing additional administrative obligations and establishing a detailed regulatory foreign investments screening procedure, foreign investors are required to carefully assess their existing and planned projects in Croatia, with a certain risk that their investments may not be confirmed or approved by the regulator. For this reason, and in order to preserve market confidence and prevent further discouragement of entrepreneurial activity and legal uncertainty, it is particularly important that the actions of the competent authorities be aligned and timely, within the deadlines prescribed by the Act.
Luka Zubčić, Valentina Plantić
