Foreign Direct Investment (FDI) Regulation in Norway: Key Legal Considerations for Foreign Investors
Norway has long been recognised as a stable and attractive destination for foreign investors. With its relatively shielded economy, transparent legal framework, and strategic location in Northern Europe, the country offers significant opportunities for international investors. Further, Norway is open to foreign investors and investments, with limited Foreign Direct Investment regulation compared to other European states. However, the government has initiated a process to review this regulation, to potentially bring it more in line with other European regulation.
This overview outlines the Foreign Direct Investment regime in Norway, highlighting key legal considerations for foreign investors.
Norway’s Foreign Direct Investment (FDI) Framework
Norway is not a member of the European Union (EU) but is part of the European Economic Area (EEA). This membership grants Norway access to the EU single market and its fundamental principles of free movement of goods, services, persons, and capital. Since the EEA free trade rules came into effect in 1995, Norwegian regulation has been adjusted to align with these principles.
For investors outside the EEA, Norway’s FDI framework is governed by bilateral and international trade agreements, as well as principles of reciprocity. While Norway does not have any general restrictions on FDI and generally welcomes foreign investment, certain sectors are subject to specific restrictions or concession requirements. In addition, there are restrictions due to national security interests and competition law rules.
Note, however, that the Norwegian government is considering a general screening mechanism for foreign investment in Norwegian companies and has received an official Norwegian report which considers the matter. A summary in English is available here: NOU 2023: 28 – regjeringen.no No actual proposal has yet been presented, and we will continue to monitor the development.
Key Sectors in Norway with Foreign Direct Investment (FDI) Regulations
Norway has implemented a specific national FDI screening mechanism under the National Security Act (NSA). The screening mechanism relates to companies who are subject to supervision and further regulation under the Norwegian act relating to national security. This is a limited number of companies. It applies to all companies who are suppliers of goods or services in connection with classified procurements as set out in the Act. Other companies are only subject to the screening mechanism if the government has resolved that the specific company is subject to the security act. Currently, this only includes a very limited number of companies. These are mainly in sectors such as defense, telecommunications, energy, and transport, but may also be within real estate. Investments involving a qualified majority stake in these sectors are subject to mandatory notification requirements.
Norway’s hydropower resources are considered a public asset. Major hydropower plants (above 10 megawatts) must have at least two-thirds of public ownership. Smaller plants are subject to licensing requirements.
The oil and gas sector, a cornerstone of Norway’s economy, requires governmental approval for the acquisition of participating interests in petroleum licenses. However, these requirements are not specifically targeted at foreign investors.
The purchase of farmland exceeding 3.5 hectares requires a concession if the buyer is not a family member of the current owner. Local municipalities often impose residency requirements for buyers.
Board Requirements in Norway
In addition to the regulation noted above, it is worth noting that Norway has specific requirements for board compositions. One of these are gender based, which limits the number of board members of the same gender. These do not apply to all companies, but currently only to companies with income of more than MNOK 100 or more than 50 employees.
The other requirement applies to all companies and regards the residence of the board members. At least half of the board members must be residents of an EEA state, the United Kingdom or Switzerland. This also applies to the CEO. The ministry of Trade, Industry and Fisheries may grant exemptions from this rule. The application process is simple and may be made via email. However, the processing time may vary.
Legal Considerations for Foreign Investors in Nor
In addition to the FDI Framework, there are some key aspects for foreign investors to be aware of when considering investing in Norway.
Norwegian governmental bodies are often very digital compared to other countries, and is somewhat simplified compared to other jurisdictions (i.e. no stamp duties and no notary requirements). The system is trust based to a high degree. This trust is also visible in other ways. As the other Scandinavian countries, Norway has a high level of publicly available information, such as ownership, accounting and tax.
Depending on your country of origin, Norwegian level of employee protection and mandatory employee benefits may require specific attention.
Regarding ESG, Norwegian compliance regulation includes several aspects from EEA law, such as privacy regulations, consumer protection regulation, and ESG reporting (CSRD). In addition, companies are required to follow OECD guidelines for responsible business conduct, promote equality in the workplace and remove discrimination. They must report on their fulfilment.
The Norwegian tax system and regulation also provides for participation exemptions within the EU/EEA area.
Additionally, investors should conduct thorough due diligence, particularly in sectors subject to national security or concession requirements. Engaging local legal counsel is advisable to navigate the complexities of Norwegian law.
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For more information or assistance with investing in Norway, please contact our team of experienced legal advisors.
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