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September 2025 – The Croatian Government has introduced the Draft Act on the Screening of Foreign Investments, which is currently undergoing public consultations. The Draft Act seeks to establish a foreign direct investment (FDI) screening mechanism in line with Regulation (EU) 2019/452 and OECD investment standards. Its aim is to create a national framework for reviewing FDIs that may pose risks to national security or public order.
The Draft Act is open to public comments (via https://esavjetovanja.gov.hr/) until 3 October 2025.
Scope of application
The screening mechanism will apply to:
- Foreign investors – natural or legal persons from third countries, and
- EU entities that are under direct or indirect control of third-country investors or governments.
The obligation to file an application for approval will rest on either the foreign investor or the domestic entity receiving the investment.
Only one application will be required, so it is irrelevant which party files it, as long as the submission is complete and compliant.
Transactions in scope
Mandatory screening will cover acquisitions of 10% or more of shares, voting rights, or ownership interests (qualified holdings), as well as increases or decreases of qualified holdings. It will also apply to concessions, PPP contracts, and free zones, where foreign investors act as concessionaires or operators.
Critical sectors
The screening process will apply to investments involving critical entities in strategic sectors, including:
- Energy, transport, healthcare, environment, water;
- Digital infrastructure, ICT, electronic communications;
- Defence, dual-use goods, media;
- Agriculture, food production, science and research;
- Banking and financial market infrastructure;
- Elections and related infrastructure.
Thresholds
An intended acquisition of 10% or more of shares, voting rights, or equity in a Croatian entity will trigger the screening requirement.
Notably, the Draft Act does not set monetary value thresholds. This means that even small-scale transactions may fall under the mandatory screening regime if they meet the 10% ownership test.
This diverges from practices in several other EU countries, where financial thresholds are used alongside ownership thresholds to filter out low-value transactions.
Implication of Croatia's approach is twofold:
- It creates a broader review net, capturing minority investments of modest value that would otherwise remain outside FDI scrutiny in other jurisdictions.
- While this strengthens oversight of sensitive sectors, it also increases compliance burdens on investors, who must carefully assess filing obligations even for smaller deals.
Procedure and timeframe
The review process will follow these steps:
1. Initial verification – Ministry of Finance
- Verifying completeness of the application within 30 days.
- In complex cases, this may be extended to 60 days.
2. Substantive review – Screening Commission
- Issue its opinion within 90 days from receipt of the application.
- May extend to 120 days if additional documentation or assessments are required.
3. Final decision – Ministry of Finance
- Must issue a final decision within 120 days of receiving a complete application.
- Where extensions apply, the maximum timeframe is 150 days.
4. Monitoring of unreported investments
- Control bodies must notify the Ministry within eight days of discovering an unreported foreign investment.
Total envisaged review period between 120–150 days is longer than in some other EU jurisdictions, such as Bulgaria and Hungary, where deadlines are significantly shorter. Such long timeline and two-stages review (initial verification and substantive review) may warrant legislative reconsideration to ensure both effective screening and procedural efficiency.
Sanctions and enforcement
Investments made without prior approval will be unlawful. Sanctions will include annulment of approvals (if the approval was obtained on the basis of false or incomplete information or the circumstances material to the decision have changed), divestment obligations within nine months, and suspension of voting and economic rights until compliance is achieved. Judicial review will be available before the High Administrative Court. The state will not be liable for damages except in cases of intent or gross negligence.
Other key points
- The Draft Act includes robust confidentiality and data protection measures.
- The general explanatory section explicitly references Croatia's OECD accession process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
