In the second episode of the ‘Ganado Meets Corporate’ podcast, Mario Galea, chairperson of the National Foreign Direct Investment Screening Office, talks about the role of foreign director investment, the EU and its role today in Malta.

After having served as chief executive officer at Malta Enterprise, Mario Galea took on the role of chairperson of the National Foreign Direct Investment Screening Office (NFDIS) in April 2020.

Galea has been in the sector of foreign direct investment for over 30 years, and has influenced the development of industries such as pharma and life sciences. He says that this industry has become part of his life.

Background to FDI

Galea outlines how foreign direct investment is an interesting and complex subject which is prevalent in a number of industries, including manufacturing, tourism, hotel management, financial services, aviation, maritime, etc.

Along the years, the European Union has had a lot of intra-foreign direct investment, however, the chairperson notes that in the last 10 to 15 years, there has been (i) an inflow of investment coming from outside the EU and (ii) a change in the type of investor.

Therefore, the dynamics of foreign direct investment have evolved and, to this effect, the way in which foreign direct investment is looked at and regulated has had to adapt.

In terms of its development, Galea explains that the European Commission recommended the implementation of a regulation five years ago in order to ensure that there is one regulation that oversees security of the Union.

Although the introduction of the FDI Regulation was perceived with some trepidation, Galea believes that overall, such a regulation has had a positive effect as it gives comfort to a prospective investor knowing that the EU is open to investment, but that potential risks are also assessed carefully.

In the same vein, the regulation introduced a screening mechanism, which also had the knock-on effect of fostering positive collaborations between member states, something which goes beyond what was foreseen by the European Commission.

Galea points out that the Malta FDI office has collaborated with at least five countries on different transactions, and that this is a useful learning mechanism where different practices are exchanged. He says that even the national approach in Malta has been well received by other member states.

FDI in practice in Malta

Galea then elaborates on his experience with local services providers and professionals in the industry. He said that they have responded to this regulation positively and that the NFDIS has established a good working relationship with various professionals in the industry.

Today’s biggest challenge is IT and artificial intelligence activities

In terms of numbers, Galea indicates that around 98 per cent of all the transactions that the office viewed were responded pragmatically within established time frames, and that while most transactions have proceeded without being conditioned, there have been some which have been refused or were subjected to certain conditions.

In this regard, conditioning of an investment has focused on protecting Malta’s security and also, on occasion, the security of individual data.

Potential future developments

In the final part of the podcast, Galea identifies certain aspects which, based on his experience in the industry, may need to be addressed. He notes that the EU regulation may need some tweaking, especially in relation to the approach on ultimate beneficial owners (UBO), where apart from considering whether the activity of the UBO is within the EU or outside of the EU, one should also look at the history of the UBO.

A second point to consider adjusting is related to synchronising timings for screenings among member states. In his view, this would ensure greater uniformity across the EU as there had been circumstances where different timelines created uncertainty.

Lastly, Galea emphasises that today’s biggest challenge is IT and artificial intelligence activities. He says that with such activities, it is difficult to know if they may impose a security risk in Malta or how such risks may spread to other member states.

Galea concludes by noting that, up to now, every aspect of the new regulation has been a learning process which has been received positively by the industry and jurisdiction.

Simay Cilingir is a trainee advocate at Ganado Advocates.