The GCR Foreign Direct Investment Regulation Roundtable

This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight

Global Competition Review hosted a debate in July 2023 to mull over recent developments in the arena of foreign direct investment regulation since the publication of the GGR Foreign Direct Investment Regulation Guide, in November 2022. The discussion covered core aspects of the current landscape in the United Kingdom, Germany, Italy, Canada and the United States in this rapidly evolving area, and analysed some of the current hot topics and key issues for businesses and practitioners arising from the ways that the FDI landscape continues to transform.

The discussion was chaired by Veronica Roberts of Herbert Smith Freehills. Also taking part were Peter Camesasca in Brussels, Andrea Carreri of LCA in Italy, Jason Gudofsky of McCarthy Tétrault in Canada and Jeremy Zucker of Dechert in the United States. We also thank Covington & Burling LLP for its support of this roundtable.

The following is an edited transcript.

Part one

Veronica Roberts: We’ve seen a real shift in foreign direct investment regulation in recent years. We’re seeing a lot more protectionism and stricter enforcement in the regimes; that’s been accelerated by the pandemic and also now the heightened geopolitical tensions. We’ve seen many of these FDI regimes being expanded and new regimes being adopted, especially in the European Union. It’s now a critical part of the regulatory jigsaw, at the same level as merger control, when looking at a deal and considering where you need to make filings.

Across the regimes we’re seeing increased use of mandatory notification requirements and lowering of notification thresholds. It’s not all about Chinese investment; we’re actually seeing conditions being imposed on investment from a wide range of countries. Another theme is that across these regimes, we’re really seeing the concept of national security being stretched. It’s no longer just about military defence, and that’s a topic that we’ll look at today.

I think more than ever, it’s really important to make sure that you’ve got a global and coordinated approach to FDI in your deal planning from the outset.

FDI regimes are a lot less transparent than merger control regimes. Decisions aren’t usually published, for example, and we’re also seeing a lot more informal liaison behind the scenes between FDI agencies than we see in the context of merger control. So I think there’s enormous value in doing what we’re doing today, discussing what’s actually happening in practice behind the scenes and drawing on our first-hand experience of dealing with the regulators in different jurisdictions.

So I think it would be good to start by highlighting the key features of each regime and current hot topics, really focusing on what’s critical for the different regimes. For example, we see in the UK there’s a real focus in cases so far on dual-use tech and critical infrastructure. But when we look at Canada, for example, there’s been more of a focus on critical minerals. It’d be great if each participant could give a high-level overview of the key features of the FDI regimes in your respective countries with that focus. Let’s start with you, Jeremy, on CFIUS.

Jeremy Zucker: Thanks very much, Veronica. As many of us are aware, the US foreign direct investment regime has long been overseen by a multi-agency committee – the Committee on Foreign Investment in the United States, known as CFIUS, chaired by our Treasury Department and including a number of other agencies with a wide range of responsibilities like the Departments of Justice, Homeland Security and Defence. This committee has broad power to review non-US investments in – and acquisitions of – US businesses to determine the potential impact on US national security. CFIUS has the power to impose mitigation measures as a condition of clearing the deal; it can suspend a transaction and recommend that the president block or unwind a transaction.

CFIUS has been around for many years – quite a few decades now – and was arguably the first of its kind and its authority and reach have continued to expand, particularly in recent years. The historical test for CFIUS’s jurisdiction over foreign investments in US companies has always hinged on the concept of control and this concept has been defined very broadly in practice.

About five years ago, in 2018, the US Congress passed the Foreign Investment Risk Review Modernization Act, referred to as FIRRMA, which, among many other things, expanded CFIUS’s jurisdiction to include certain non-controlling investments if they involve critical technologies, critical infrastructure or so-called ‘sensitive personal data’. Last year in September of 2022, the Biden administration issued an executive order that directed CFIUS’s attention to certain sectors of the economy considered fundamental to US technological leadership and national security. These include areas like artificial intelligence, biotechnology and quantum computing, as well as other areas that might not be so intuitive like clean energy and climate adaptation technologies, as well as food security.

The executive order from the Biden administration also directed CFIUS to consider the impact that foreign investments might have on US supply-chain resilience and security, thinking about certain critical relationships, providing things to the US government, as well as the concentration of ownership or control by a foreign investor in a particular supply chain.

Turning to what we’ve seen in our recent practice before CFIUS, as is also the case in Europe, CFIUS has shown, in recent years, a very strong interest in protecting sensitive personal data. We’ve also seen tremendous focus on investments in so-called ‘critical technologies’. The test for critical tech has changed over time. Today, it’s defined primarily by reference to export licence requirements that might apply with respect to the country of the foreign investor.

We’re also seeing CFIUS make changes on the fly, with amendments to the regulations that govern its practice. One recent amendment that caused a bit of a flurry in the United States has to do with when the clock starts on the timing for mandatory filings, and we’ll talk a little later on about the circumstances under which mandatory filings might occur.

There’s also been a renewed focus on enforcement. Last year in October 2022, CFIUS released a memorandum to the public outlining the committee’s penalty process and describing the aggravating and mitigating factors that CFIUS will consider when determining the size of a potential penalty.

Historically, CFIUS has told us very little about its enforcement activities, but CFIUS officials in recent months have been talking quite a bit more about it. They clearly intend to improve enforcement and compliance practices simultaneously. I think they view that transparency will incentivise compliance and increase reporting.

The law I mentioned from 2018, FIRRMA, also authorised CFIUS to create an office of so-called ‘non-notified transactions’ that gives CFIUS the ability to look out into the market and identify a non-US investment into a US company that appears to be within the committee’s jurisdiction but was never submitted for review. CFIUS has the authority to reach out and grab those transactions, and we know that this office has been quite busy. For the two most recent years, for which there’s publicly available data issued by CFIUS, we know that they have requested information regarding many hundreds of such transactions and, in a few dozen cases, have requested that the parties come into CFIUS for review. Needless to say, these are all on a post-close basis when risk to the parties is quite a bit higher.

Finally, there’s much talk these days of a so-called ‘outbound investment review’ mechanism. Some have referred to it as ‘reverse CFIUS’, although that’s not entirely accurate. There were many who expected this to have been announced already this year; it hasn’t happened, so I think many of us, myself included, expect that it will be released by the end of the year. The idea is to make sure there is greater oversight and, if necessary, control of flows of funds out of the United States into so-called ‘countries of concern’, on the basis that when money flows, expertise and/or technology typically accompanies it and that raises national security concerns analogous to those raised by inbound investments.

I think the US government takes the view – and I’ll be eager for the views of our colleagues here today – that a mechanism of this sort will only be effective if it’s multilateral, and, so, one of the reasons for the delay may well be a desire to have similar programmes ready to go from allied countries. If and when an outbound review mechanism is put into place, it will be the first of its kind in a major Western economy, as far as I’m aware. I know certain Asian countries do have various forms of outbound review, but I think this will be significantly more impactful if and when it’s imposed.

That’s quite a lot from me, and I’ll turn it over now to Jason to speak from the Canadian perspective.

Jason Gudofsky: Thank you, Jeremy, for passing the baton over and I do want to thank LBR for inviting me to participate on this roundtable and Veronica for chairing today’s session.

Canada’s foreign investment law, the Investment Canada Act, which I’ll also refer to as just the ICA, has two regimes: the socioeconomic industrial policy regime, which dates back to 1985, and the national security regime, which was introduced only in 2009. Let me explain both regimes, starting with the socioeconomic regime. The socioeconomic regime applies to every acquisition of control of a Canadian business by a non-Canadian, and the establishment of a new Canadian business by a non-Canadian. For the most part, almost all investments are subject to just a simple administrative notice to the director of investments, which can be made at any time before closing or within 30 days thereafter. There’s no substantive review that is accompanied by this filing. It will become clear later when we describe national security, why this filing has now taken on some new importance.

But the real activity and interest on the socioeconomic side is on investments, which require an approval from the responsible minister under the ‘net benefit to Canada’ standard. These investments relate to direct acquisitions of control (ie, acquiring the voting interests of a Canadian entity or all – or substantially all – of the assets of a Canadian entity that exceeds a monetary threshold). The one exception is that indirect acquisitions of control involving cultural businesses can also be subject to review.

Now the monetary thresholds are very high. When Veronica said we’re seeing a lowering of thresholds, on the socioeconomic side of things, we are actually seeing an increase in those thresholds, and they increase every year. I won’t go through the specific thresholds, but it’s an enterprise value test that goes well over a billion – now almost 2 billion – for trade agreement investors, so it’s quite high. There’s a lower asset-based threshold for state-owned enterprise investors and for cultural businesses. Where the threshold is exceeded, you cannot close your transaction until the minister has determined that the transaction is likely to be of net benefit to Canada. The waiting period is 45 days, which can be unilaterally extended for 30 days (calendar days) and thereafter extended only with the permission of both the minister and investor. In most cases, though, investments are cleared on the net-benefit approval standard within the 75-day period. Even on the more complex transactions, in most cases you can get through it in 90 days. In reality, given these high thresholds, we’ve seen only around 10 reviews in each of the past five years, so not that substantial.

Let’s talk quickly about the national security regime, which is the regime that’s causing a lot of excitement across the globe. The national security regime applies to all transactions and investments that are subject to the socioeconomic regime, but also applies more broadly to every acquisition in whole or in part of an entity or the establishment of an entity. So when you use the word ‘part’, that means less than control, for example. When we say ‘entity’, that means something that could be less than a Canadian business provided that it meets one of the conditions of:

  • having all or part of its operations in Canada;
  • individuals in Canada employed in connection with the entity’s operations; or
  • assets in Canada used and carrying on the entity’s operations.

It only needs one of those three factors.

The national security regime is based on a test of whether the transaction is injurious to national security; the regime applies from when the minister becomes aware of an investment and expires 45 days from when a filing is made. A filing only has to be made mandatorily where the socioeconomic regime applies, but as of August 2022 investors can voluntarily put a filing in where a filing is not required. That filing, whether it’s a voluntary or mandatory one, starts a 45-day waiting period. So the strategic question is always: where a transaction doesn’t require the filing to be made pre-closing (ie, where it’s not a net-benefit review filing), do you file beforehand and wait for the 45-day clock to expire, or do you decide to close and file afterwards?

Reviews themselves can take over 200 days and, if the transaction has not been completed, they are suspensory. But if you don’t make a filing, and the minister calls it in before closing, that could happen at the 11th hour, then it would have a suspensory effect; so you need to be strategic.

I’ll just say one or two other quick points. When thinking of national security and when it’s likely to apply, you need to look at both the Canadian business and the investor and we’ll get more into some Chinese and state-owned enterprise (SOE) factors later on – eg, there’s a bill before Parliament right now that would make a filing mandatory where the investor was convicted of bribery or corruption. Then also looking at the target itself and, for example, under the national security guidelines of 2021 you look at whether there’s critical minerals, critical infrastructure, critical supplies, personal identifiable information that the Canadian businesses would have access to; whether it’s a recipient of major government subsidies through the strategic innovation fund; and so forth. You need to look at both the investor and the target.

And so with that, I will pass the baton to Andrea.

Andrea Carreri: Thank you so much, Jason and Jeremy. The concepts you have expressed are equally applicable to the Italian regime. The Italian FDI authority stands within the prime minister’s office. This is the first important point: it is not a different agency, but it’s the government itself running all of the investigations and issuing the approval.

Notifications are mandatory in Italy, to the extent that a deal falls within the FDI regime’s golden power rules. Normally we use three tests. One test is the type of transaction – normally an acquisition of certain stakes. The second is the nationality of the buyer and the third is the kind of strategic sector. Notifications suspend the effect of the deal for the period of investigation, which is 45 business days. If this period elapses without a government-issued decision, it is provided by law to be silent consent. This is why the Italian government always responds within 45 business days, as it might be extended in cases of opening an investigation. The period is extended for 20 days, or, as Peter may teach us, to the extent that it has been circulated around the FDI authorities in the European Union and EU Commission. I will leave the calculations to Peter; the calculation should be 35 calendar days, but you know better than me, Peter, that there are some debates there.

One important issue is that we have two different kinds of strategic sector. One is defence, national security plus 5G and cybersecurity – I’m calling that the super-security sector – where we have a threshold of 3%, in case of acquisition by EU or non-EU entities. Then we have the other strategic sectors: energy, transportation, telecommunications plus all of the strategic sector provided for by the EU regulation, amounting to 27 or 28 different strategic sectors, all of which, in Italy, have specific rules containing two different decrees extending or specifying the strategic sector areas. For example, one important strategic sector now, which is the subject of an Italian government investigation, is critical raw materials, together with an analysis of potential Russian investors in that specific bill.

An interesting point is that, in Italy, establishment or incorporation of new strategic sectors is subject to mandatory filing to the extent that they involve national security – while for other sectors, in the event that at the level of the ultimate shareholder, we have non-EU entities in excess of 10%. It is quite common that the Italian government quickly clears the incorporation of Newcos, which are not intended to be of strategic sensitivity. However, they are subject to mandatory filing.

Another interesting aspect is that we have seen a number of notifications, irrespective of the presence of assets, subsidiaries or other kinds of business of the target in Italy, but to the extent that goods are sold in Italy by way of a distribution contractor and/or, as has happened twice, at least in our experience, satellite signals. You don’t have any assets in Italy, no subsidiaries, but you have the signals of the satellite used for activities that are normally considered strategic.

Let me add two points, which are quite interesting: transparency and information. The only public source of information is the report of the Italian government, issued every year to Parliament, which includes a short description of the position of the government in respect of FDI matters, plus a complete list with few details, but containing the outcomes for each of the notifications.

In 2020, we had about 400 notifications. In 2021, 500. For 2022, we are expecting the new report in the next two or three weeks. It is believed that there will be at least 600 notifications.

It is an important tool, not because the decision of the Italian government may constitute a case precedent, but it’s interesting to check out which kind of deal has been considered within the perimeter and whether this includes the application of the special powers, recommendations or undertakings, or other cases where the Italian government has expressly indicated that those deals and the sector involved in those deals are out of the perimeter of the Italian Golden Power law. It is the kind of information that we normally use, at least to put in the preliminary analysis, just to understand whether we are in the dark grey areas or white-grey areas.

Right to activity is one of the important points that the Mario Draghi government introduced into the system. It was used in a 2018 case where an Italian company producing drones was sold to Chinese investors. In 2021, Mario Draghi intervened and declared basically that the notification had to be done – it wasn’t. They were in violation of the Golden Power Law and, given the strategic sector involved, the government basically issued a sort of a retroactive veto, meaning that the deal was declared null and void, which is a civil law sanction. We are not aware of whether a criminal sanction was imposed, but it is unlikely.

This is the last point. Peter, please go ahead.

Peter Camesasca: Thank you, Andrea. So, I really wanted to pick up on a point you made earlier about the role of Europe. FDI, as we’ve heard from Andrea, is really a national power within the EU, which means, contrary to merger control where there’s a one-stop shop for deals of a certain size and turnover thresholds, we’re looking at a selection, I’d nearly call it a Chinese menu, of different national laws.

The EU does have residual powers and as Andrea has alluded, it’s really best described as a distributor of information regarding FDI filings, which is then picked up – or not – by the various national regulators. So rather than limiting myself to that very short and concise description of what the EU does, or rather doesn’t do, let me say a few words on Germany, which is one of the bigger and more active regimes we have in Europe.

Like in Italy, it’s government-driven and it’s the economics ministry that’s in charge. It’s based on a law that has mutated a couple of times over the last 15 years, but it’s been around for a while and has tightened significantly. Like in most other jurisdictions, notification requirements are mandatory if you’re in defence and if you are in a defined-by-law ‘sensitive sector’. At this stage, we’ve got 27 of those.

We do have shareholding thresholds, so it starts at about 10% for the most sensitive sectors – so you’d be looking at defence or critical infrastructure – and 20% for the other regular sensitive sectors if I can call them that. Above that, there is a general catch-all 25% threshold where the government, if it so elects, can use a call-in power, which it has been granted by law as well.

The legislator has made really big strides in the last couple of years to define what is and what isn’t sensitive. It tries to do so with that typical attempt at precision that we Germans like to bring to the table to really catch only the national security issues. To illustrate that, let me give you two examples.

AI is covered but only, according to the law, if the goods developed or manufactured are capable to carry out a cyber-attack, or imitate people to disseminate disinformation, or identify people.  This is really an attempt by the legislator to not just say ‘AI’ blanket cover, but rather narrow it down to something rather tangible.

The second example is the development of robots. That will only be covered if they’re specifically designed for handling highly explosive materials, or if they’re radio-hardened to withstand certain radio doses or they’re specifically designed to be used at heights of more than 30,000 metres or depths of more than 200 metres. All other robots are, so to speak, free to go.

In the same logic, while sensitive data will be subject to substantive assessments after notification, data alone are not a trigger for mandatory filings. As in Italy, internal restructurings are generally caught. The regulator is fairly practical there, though, and will only require notification if a new non-EU or non-EFTA entity is introduced in the chain of control above the German entity. So that is where we are today.

As I mentioned, our German FDI law gets reviewed regularly. It’s up for overhaul in 2024 and that’ll be an important one because the catalogue of sensitive areas will be revisited.

The final point I’d like to pick up on is Jeremy’s point on the outbound investment – we’re looking at that in Germany as well. Our Economy Minister Habeck is in favour of introducing that; our chancellor, in true style, is on the fence for the time being, so watch this space.

And with that, over to our favourite jurisdiction in wider Europe: Veronica and the UK.

Roberts: Thank you, Peter, for that reference to the wider Europe, because yes, the UK doesn’t form part of this information-sharing mechanism that’s operated by the European Commission, but we did introduce our own regime back in January 2022.

It’s really fascinating, listening to the differences between each of the FDI regimes that you’ve all run through. Our regime has a mandatory filing obligation for any investor that passes through 25%, 50% or 75% in a company active in the UK in one of 17 sensitive sectors. So Germany has 27, we have 17 and I think they’re probably all defined quite differently. Peter, I was listening to your definition of ‘robotic technology’, for example. It’s defined differently in the UK and it is one of the mandatory filing sectors. So it really underlines this point that you have to look very closely at each of these regimes.

There is a broader call-in power in the UK; the government is able to call in any transaction where an investor has acquired what we call ‘material influence’ over a company active in the UK, which could give rise to a risk to national security. Material influence can be as low as 15% – we’ve even seen it at 12% in one case – so again, you need to look very carefully at any minority investments as well.

Just to call out a few interesting points about the UK regime. It’s more than a foreign investment regime, it actually applies equally to UK investors, as well as non-UK investors. It also applies to intragroup transactions, which has been covered for Italy and Germany. It does also have an extraterritorial angle, much like the one that, Andrea, you described for Italy. So you wouldn’t have to do a mandatory filing, but if, for example, there was a change of control over a company in France and they were supplying goods into the UK, and the UK government thought that that change of control could give rise to a risk to national security, they could call that transaction in, and, therefore, you could do a voluntary filing. We are seeing more voluntary filings being made.

So far we’ve seen three prohibitions, two divestments and 11 decisions clearing transactions but subject to remedies. Actually, this is a really good time to hold this webinar because the UK government has very recently produced a report commenting on the first full year of the regime.

Andrea, interesting too that you’re getting up to about 600 notifications in Italy. The UK government says it received just over 860 in the first full year of the regime – that’s from April last year to the end of March this year. One point that is interesting is that although that number of notifications is actually lower than the government had anticipated, the number of deals in which they’ve intervened and imposed remedies is higher, at 15 cases, as opposed to the 10 cases where they thought they’d end up imposing commitments. So I think it is interesting to see the way that the different FDI regimes approach what’s essentially the same issue.

In the last couple of months we’ve also seen the ISU – the Investment Security Unit – becoming a lot more active in terms of asking questions about non-notified transactions, so it was really interesting to hear Jeremy describing that same trend under CFIUS; I think we’re definitely seeing that more in the UK now. The ISU has a new transactions intelligence team and we have seen more questions being asked about non-notified transactions, given their monitoring of press reports and intelligence generally. Of course, asking questions about a non-notified transaction doesn’t necessarily mean they’re going to go straight into an investigation, but in the transaction documentation you might want to start catering for these circumstances where an agency starts asking questions about a transaction prior to completion. If this trend continues, and I expect we’re going to see it continuing across the countries, then you may well see more voluntary filings being put in as a result.

Like many FDI regimes, we don’t have transparent decisions. In the UK, there is a very short, very high-level summary of any decision where the ISU imposes commitments, on the government’s website. There have been indications recently that the ISU is going to try to be a bit more transparent and certainly engage in discussions with parties about what should and shouldn’t fall within the mandatory filing regime. There, I think we will see a bit of change and a bit more guidance being given to parties at the outset.

Part two

Roberts: What I’d like to do now is move the discussion on to our next topic. As I said at the start, many regimes do claim to be country-agnostic in the sense that they apply equally, in principle, to all foreign investors – or indeed in the case of the UK, to all investors, including those from the UK. But how does this actually play out in practice when you drill down into the decision making? In particular, how does the nationality of the investor affect outcomes? The bottom line is, is Chinese investment being targeted more than investment from other jurisdictions when it comes to conditional clearances and prohibition decisions?

I’m also interested in how this ties in with so-called ‘passive investments’ so, for example, via fund structures and the extent to which the FDI authorities are asking questions to find out who’s ultimately behind a passive investment. Peter, can we start with you first please, to cover Germany and the EU?

Camesasca: I’ll start with our blackletter law, which will tell you that indeed it is totally agnostic and that other than differentiating between EU and EFTA investors on the one hand, which wouldn’t be subject to filing obligations except in the defence area, there’s no further blackletter differentiation of how to deal with investors from the various deemed foreign countries.

Having said that, the nationality of the investor does come in, however, when it comes to the substantive assessment and evaluation of whether or not there is a threat. There, it’s clear that investments from certain states, particularly from China, Russia and Belarus are scrutinised more intensely compared to investments from, say, the US or Canada. This is also what would explain why we’ve had that Costco saga play out over the better part of the last year, which, in the end, was just a minority stake in one of the four port operators in the port of Hamburg – so not the single operator or the majority stake in a single one of the four operators, just a minority stake. It led to one of the very rare public scrutinies and debates we’ve had on FDI in Germany.

I would like to stress, now that I’ve made this ‘welcome to the US or Canada’ statement I just made, that this does not mean that investors from the US or Canada could not face scrutiny in a particular case. I think one of the better quotes here is from our former minister of economics, Peter Altmaier, who said at the start of Covid in 2020: “especially innovative companies from the tech and biotech industry need protection, as internet giants from the US, like Amazon, have been strengthened during the corona crisis”. That’s a really rare and very, I’d say, un-German quote that does stress to me how agnostic FDI is and how, even if we’re looking at a friendly investor – we’ve all picked up that Danish example for a Japanese investor – that could equally happen in Germany as well.

Now, I just want to say a very quick word on the EU more broadly. As I mentioned, there’s no direct FDI powers, but of course the EU can steer and influence directionally where things are heading. A good example would be outbound investments, where the EU is quite actively promoting and putting that on track, and I think quite rightly as you were saying, Jeremy, in lockstep, ideally with what is happening in the US. Another example would be the guidelines that have been issued regarding risks associated with investments from Russia and Belarus in the wake of conflict in Ukraine.

With that, Andrea, over to Italy.

Carreri: Thank you, Peter. The question on the nationality of the investor is already important under Italian law and that is because we have one specific provision, a sort of potential alert in case the buyer is controlled by a non-EU government, which includes, by definition, not only the Chinese players but also sovereign funds in the Gulf area or Singapore. This is a further point of attention, because of the law and the Italian language.

The example we have on the veto against a very small deal, included in arguably the cybersecurity area, because the Russian lenders (not Russian shareholders) of the ultimate owner of the buyer is actually the result of the European Commission direction in the context of a Russian investment in Italy.

The nationality as I said before, stands not only in a strictly geopolitical sense – meaning China or Russia – but also on the sovereign front. It is because a number of these sovereign wealth funds operate through general partners with a number of limited partners, are allegedly constituting a passive investor. The topic of the passive investor is one of the topics on the table here in Italy, but not only in Italy – I also know that CFIUS intervened on the matter of the passive investment, following the rule “I want to know who is behind this”.

Passive or non-passive, we normally don’t have a distinction to the extent that a threshold is exceeded. If you have a limited partner investing more than 3% and a general partner making an acquisition of 30% or 50% in the super-strategic sector, we normally strongly recommend notification to the Italian government because the question is not whether the ultimate investor is passive or not, but at the end of the story, whether directly or indirectly, it becomes the owner of a certain percentage of shares. Of course, an alternative point is whether or not this passive investor acquires certain corporate rights in the chain.

That is the situation for Italy, and I’m passing to Jason now.

Gudofsky: Thank you very much, Andrea. So our law is agnostic in the sense that it applies to investments by all non-Canadians, but the reality is that the focus has been on investments from ‘non-allied’ countries. On the socioeconomic regime of our act, the focus or concern has been around managed economies and one can see China as being one of the more active investors into Canada. Historically, going back to prior to 2012, we were seeing a lot of investments by Chinese state-owned enterprises in our oil sands, for example. Then in 2012, our then-prime minister, Prime Minister Harper, in reviewing an acquisition of a very large Canadian company called Nexen by CNOOC, said that he would approve CNOOC’s acquisition but would only allow acquisitions of control of Canadian oil sands companies by Chinese SOEs in exceptional circumstances. This was the first time we’ve seen that there was a real target under the Investment Canada Act for a certain nationality.

The national security regime is also agnostic. In fact, if you can believe this, the first national security case was actually an investment by a US investor, Alliant Techsystems, in January 2008, when it announced that it was acquiring the information systems and geospatial information services division of MacDonald, Dettwiler and Associates. That transaction raised concerns because the information that the target business gains was also important for defence reasons, for protection of our Arctic, for the Canadian government, and, at the time the Investment Canada Act did not have a national security regime – so Canada introduced one after that transaction.

So the history actually doesn’t necessarily start with China, but certainly today, China is the focus; over 50% of national security reviews over the last few years have involved investments from China – and that comes from Canadian government statistics – six out of 12 reviews in years 2021 to 2022, and seven of 11 in the year prior. Just this past year in 2022, the government identified three non-reportable transactions after they had closed – minority investments, so therefore not subject to the socioeconomic filing regime – and forced three separate Chinese investors to divest their minority interests in lithium businesses.

So the focus certainly has been on China, but that’s partly because that’s the non-allied country that makes the most investments in Canada. We are seeing relatively little from North Korea, Iran and Russia in Canada.

To Veronica’s point on managed funds – the Canadian government considers ties between an investor and China in a number of different ways. Most straightforwardly, the government will consider any direct or indirect ownership interest in the investor by the Chinese state; the filing that has to be submitted in the socioeconomic regime requires the disclosure of any direct or indirect interest in the investor held by a foreign state, which is the most common way a Chinese link comes to light. This includes an assessment of the whole chain of ownership up to the ultimate controlling person or entity. The Canadian government will also consider China’s ability to exercise statutory authority over an investor. Past national security enforcement actions suggest that the Canadian government will take an extremely broad view of this. In particular, it appears that the Canadian government may perceive China’s laws of general application, such as its 2015 National Security Law and 2017 National Intelligence Law, providing the Chinese government with the ability to either coerce or otherwise exercise influence over effectively any Chinese-based company.

Strong links to China on either the target or buyer side may give rise to national security concerns. In fact, we have seen recently a concern based on the activities of the target in China, because those activities had impacts back in Canada and they used the Investment Canada Act as an opportunity to address concerns by the target, even though the transaction itself was not the cause of those national security concerns.

Finally, I’ll say that if you fail to properly identify information relating to links to non-allied countries like China in the filing, an investor risks not only significant fines that are going to be introduced by a bill that’s before Parliament, but also you’re filing could be deemed non-complete, and, if it’s not complete, you never started a waiting period and therefore that would give the government a forever right to come after your investments. So yes, we do need to think about investments from non-allied countries and certainly China is a focus these days.

So with that, over to Jeremy to tell us what’s happening in the US.

Zucker: Thanks, Jason. Needless to say, it’s important to recall that CFIUS, like FDI regulators in other countries, assesses the threat posed by a foreign investor together with the risk presented by the data, technologies, products and services that are provided and produced by a target company. So we do need to bear in mind that both categories of variables impact whether and to what extent, in this instance, CFIUS will feel the need to impose mitigation or, in the worst case, ask the president to block or unwind a deal.

Picking up on some earlier comments about passive investments, there is a specific carve-out to CFIUS’s jurisdiction provisions pertaining to investments by private equity funds. Analysis there turns on the nationalities of a fund’s general and limited partners and, in particular, on the rights that the LPs may enjoy with respect to the decision making of the GP and also with respect to access to target company data and technologies. So you shouldn’t assume that any investment made as a limited partner in a fund is going to be exempt, but there may well be coverage for you there.

With respect to the question about investments from China, it’s no secret that the US government is working with allied countries to address national security concerns raised by US adversaries, and the list of such adversaries certainly includes China. I remember back to a time seven or eight years ago now when China’s so-called ‘Made in China 2025’ programme was announced and I remember telling quite a few people at the time that the reaction from the US government – this is quite a few administrations ago – was as if this had been a declaration of war. We’ve seen, across both Democratic and Republican presidential administrations, a continued and continuing focus on what Chinese investment might mean as a larger part of China’s approach to its place in the world.

CFIUS officials have made clear that while there is no mention of China in their regulations, they always consider the regulatory regimes and the perceived national security goals of foreign countries when determining whether an investor from one of those countries might pose a threat.

Without a doubt, Chinese investment in the United States has diminished in recent years from very high highs. But in fiscal year 2021 – the most recent for which CFIUS has released public data –Chinese investors continued to submit a lot of CFIUS notices, more than any other country, save Canada and Japan.

It is also worth pausing to think about outbound investment review. We do not have such a mechanism in place yet – we are expecting to have one relatively soon. But we do have something that may well be considered a pilot programme, and the focus on the potential threat of China is clearly present there.

Within the last year, here in the United States, the so-called CHIPS and Science Act, known as the CHIPS Act, became law and it incentivises companies to produce semiconductors and develop related R&D activities on US soil by way of both tax breaks and subsidies. And with respect to these subsidies, an interesting angle is that if you’re a company that receives such subsidies and spends the money to develop production or R&D capabilities on US soil, any subsequent investment made in semiconductor-related activities in another country will become subject to US government review. While – in a sense – this is narrow because it only applies to the part of the economy that relates to semiconductors, I certainly see it as a pilot programme, where the US government is beginning to explore how it might meaningfully monitor and, if necessary, restrict flows of funds heading out to countries of concern – which are certainly defined to include China.

As discussed earlier, the view is that when money flows, technology and/or expertise go with it. So, from a US perspective, we certainly expect a continued focus on China but not to the exclusion of other countries.

Roberts: Thanks, Jeremy. The UK regime doesn’t differentiate on the basis of nationality and in fact, as I mentioned before, it applies equally to UK and non-UK investors. One of the remedies decisions that we have already seen in Epiris/Sepura was focused on a UK investor, and actually the recently published annual report revealed that 32% of deals that are called in for further assessment under the UK regime involved UK investors.

However, when it comes to the form, of course this asks for details of the ownership structure of the investor, including parent company and other individuals, entities or limited partners who may have material influence over the UK company or have voting rights of 5% or more, and asks there for nationality details.

And we do see a focus on China in the UK regime. The annual report said that 42% of deals called in for further assessment in the first full year of the regime did involve investors associated with China. Then when it comes to remedies imposed in practice, the UK is very much in line with what you have all highlighted. There does remain a particular focus on Chinese investment. Four out of the five prohibition divestment decisions to date have involved Chinese or Hong Kong investors, and the fifth was an investor ultimately backed by Russian oligarchs.

Having said that, there are also examples of Chinese investment that have been conditionally cleared; four of the 11 conditional clearance decisions to date have involved Chinese investment. So, it is under scrutiny, but clearance – even unconditional in some cases – is possible.

Finally, just picking up on the issue of passive investments, this is really a live issue under the NSI regime, and the ISU has been looking in detail at the governance rights of limited partners. Jeremy, you flagged that it’s very much a case-by-case analysis. It just depends in any particular case what influence a limited partner might have and what information they might be able to obtain about the UK target. So, this is definitely an area we see a lot of interest in, in the UK.

Part three

Roberts: Let’s move the discussion on to focus on the types of remedies that we see being imposed under foreign direct investment regimes and the extent to which remedies can be negotiated with FDI agencies.

I think this is a particularly useful discussion with the participants here today because, as we’ve said before, FDI regimes rarely publish their decisions. It is very unusual to see the detail of remedies agreed upon in practice in any particular decision. But of course, we’ve all got direct experience dealing with the authorities and agreeing remedies with the authorities and know what actually happens behind the scenes. In terms of the types of remedies that are agreed upon in practice, we see some similarities across different jurisdictions, with a focus on information and access restrictions, as well as governance and onshoring remedies. But as ever, I’m sure we will pick up on some differences. So, I’m going to invite you all to comment on the sorts of remedies you see in practice as well as the negotiation process and, of course, include any practical tips for our listeners. Can we start with you, please, Jason, for Canada?

Gudofsky: Sure. Thank you, Veronica.

So, as I explained at the beginning of our discussion today, the ICA has a socioeconomic regime and a national security regime, and the remedies – which we often refer to here as ‘undertakings’ – are very different under each, so I will quickly go to each.

Under the socioeconomic regime, the ICA does not require an investor to provide remedies or undertakings in support of net benefit review. But the reality – or the practical reality – is that the minister effectively requires undertakings in each reviewable transaction. Those undertakings, as they relate to the factors for assessing net benefit under Section 20 of the ICA, relate to such things as ensuring that there will continue to be minimum levels of Canadians employed with the Canadian business; minimum levels of Canadian participation in senior management positions and on the board of the Canadian business; guaranteed minimum levels of capital expenditure in Canada; continuing to conduct R&D in Canada; maintaining a Canadian head office; support for ESG and local charities; and so forth.

Now the specific undertakings will relate directly to the activities of the Canadian business that’s being acquired; they are typically benchmarked against the Canadian business’s past three years of historical performance along with any of its future plans. These are all socioeconomic – because the test is based on net benefit to Canada – but hold onto that because we’re going to get back to it in a moment when we talk about national security.

So with national security, to begin just so that you understand the national security provisions of our act, when cabinet issues a national security order it will include a statement of concern. That will be where – in a page or less – the government will explain what the nature of its concerns are. Those statements of concern are really what would direct the national security remedies or undertakings that an investor may provide.

Now, a few things to note here. As I mentioned, except when you have a net benefit approval, you can file after closing and, therefore, have national security reviews after closing – unless the minister calls in the investment before closing on his or her own initiative. During that review, if the closing has happened, there are no interim measures; you have full enjoyment over the use of your investment. There is currently a bill before Parliament that would allow interim measures to be ordered, but for now, you have full use and enjoyment of the business. There are no hold-separates, no monitors or any kind of checks.

In terms of addressing the concerns themselves, up until recently it’s been pretty binary. Either the government has decided that the transaction is not injurious to national security and the investment has been allowed to proceed, or it has been injurious and either prohibited from closing or, if closed, a divestiture order has been required. Now, there is a bill before Parliament to allow the minister to take undertakings, to allow for a more flexible process. While the minister doesn’t formally have that authority in practice, over the past year, the minister has been taking undertakings in the context of determining whether to recommend that a full review be ordered or, if a review is ongoing, whether to refer it to cabinet for a final decision.

The undertakings themselves are private – they’re not made public. What we are seeing though is that the Canadian government is working very closely with CFIUS to look at national security agreements that are agreed to in the CFIUS process and we’re seeing the Canadian government saying: “Yes, we would like those too.” We’re seeing undertakings that I’m sure are very similar to those that Jeremy will review when we go through CFIUS. And we are seeing the Canadian government, in one recent case, bleed into the socioeconomic and asking, in the context of national security, for the types of remedies or undertakings that one sees more on socioeconomic side, relating to CapEx expenditures, ESG policies and so forth. So we are seeing a little bit of the raising of thresholds and saying: “Oops, now that we are actually looking at this, we would like to protect Canadian jobs, participation, management” and so forth.

It remains to be seen whether we start seeing the minister, who typically only looks at socioeconomic undertakings, starting to now bleed socioeconomic considerations into national security together with the types of things we see in NSAs in the US. I will now pass it over to Andrea.

Carreri: Thank you so much, Jason. I think the concept of remedies should also be a matter of definition. In Italy, we have undertakings and recommendations, but please note that any decision by the government can be challenged at the administrative court – which, as far as I know, is unusual compared to other jurisdictions. We have also had some cases appealed to the administrative court. The good point of this is that these decisions are publicly available and so we gain a great deal of interesting information.

So far, the administrative courts have decided that the Italian government can do whatever it wants. This is because this is a geopolitical and highly strategic law, and the government is the constitutional body entrusted to take decisions in those areas.

Undertakings and recommendations are provided by the law and may include restricted access – as we know from the press on the Pirelli case, which showed us that certain information should stand with a specific committee made by an Italian or EU person only, not a Chinese representative, and that undertakings may also include restricted access to certain assets by a qualified person (just like in defence or national security). A recommendation is a very soft form of undertaking that normally results in an obligation to inform. For example, we have advised a multinational company operating in the submarine cable industry, and one of the recommendations was to update the Italian government on the scope of its security programme yearly.

I return to the Pirelli tyres case because it is very interesting for two reasons. One is because, apparently, directly or indirectly the Italian government intervened in a shareholders’ agreement between Italian and Chinese shareholders, which included some modification as to the right to appoint the CEO. Second, is the one I explained before, setting up an international security committee at Pirelli in Italy; which is where all the information coming from the tyre sensors is locked in, because the sensors are not only collecting personal data – who is driving and where they’re driving – but also data about the state of the infrastructure.

In short, this is the state of so-called remedies in Italy. We could spend two days debating what is a ‘recommendation’ and what is an ‘undertaking’, so I will now pass over to Peter.

Camesasca: Thank you, Andrea. I’ll try to be brief as well. In Germany, as in many other European countries, it is true that there is no systematic recording, there is no public or official gazette that publishes decisions or remedies. So it is not a transparent process at all.

I think the long and short of the German approach to remedies is in terms of their substance; it is very similar to what my colleagues have said before. The one comment I would like to make is more a process-driven comment. In the earlier days of German FDI, it was really an agreement between the parties and the government on what remedies should be imposed and how they should be enforced. That is still, formally, so. However, we discern a real shift when dealing with the regulator, where it’s much more now the ordering of remedies.

Of course they’re pre-discussed and you can argue if you’d like something different, you can try to input on the remedies but ultimately the language is the regulator’s. I think there really is a process ahead of potential remedies where it makes sense if you think you are under threat of a governmental intervention, to think long and hard about how you’re going to deal with that and make sure it ends up on your track and not a superimposed one.

Zucker: Thanks very much, Peter. In the United States, as in other jurisdictions, there is no public gazette or other such record of the measures that have been imposed. It’s certainly the case that CFIUS doesn’t hesitate to impose mitigation measures on a transaction in which national security risks have been identified during the review. It’s on the parties to decide whether to accept the mitigation being imposed as a condition of receiving clearance or to walk away from the deal.

Mitigation can be imposed by CFIUS in various forms. One common form is for the transaction parties to enter into an NSA with the government; and all parties, including the government, are party to what is essentially a contract. In the past few years, we have seen a massive uptick in the use of NSAs. Each is monitored and enforced by designated CFIUS monitoring agencies, the identities of which will depend on the profile of the US business in which the investment is being made. So you might see, for example, that Treasury and Defence are monitoring agencies for one agreement, while perhaps the Justice Department or Energy Department might be the monitoring agency in a different instance – depending, of course, on what the target business does. There are now so many NSAs that CFIUS has an office specifically dedicated to monitoring and enforcement as there are now dozens and dozens of them.

NSAs are used these days to capture commitments that historically – at least, when we were giving advice ­– parties may have already built into the transaction agreements, memorialising, between and among buyer and seller or investor and target, various mitigation measures we would have recommended as a way of pre-empting CIFUS feeling the need to impose an NSA. We find that our ability to pre-empt NSAs and avoid them has diminished in recent years as CFIUS has increasingly felt the need to impose them and be a party to an agreement and thus, in its view, have a much better ability to monitor compliance and bring enforcement measures should it think compliance is flagging.

The kinds of mitigation measures found in NSAs can vary widely depending on the kind of business we’re talking about. Just to talk about a few in general terms:

  • prohibitions on the transfer or sharing of the target business’s IP or trade secrets with the foreign investor;
  • prohibitions on the transfer of certain data or technology in the possession of the US business to the foreign investor;
  • establishing guidelines for how any existing or future US government contracts might be handled and any information that the US government would be providing to the company in the context of those contracts;
  • ensuring that certain jobs are held only by US citizens or that, for example, servers on which US data are stored are located only in the United States;
  • in some instances, requiring that certain sensitive assets be divested or otherwise excluded from the proposed transaction; and
  • increasingly – and this is an interesting and often very thorny issue – ensuring that when the US business engages a third-party vendor that that vendor itself has been vetted and approved in advance by the US government if it will have access to certain data of the US business.

Once an NSA is effective, it can only be terminated by the CFIUS monitoring agencies in their sole discretion; it doesn’t automatically happen when a foreign investor exits, although it’s pretty reasonable to expect that that will eventually occur.

Lastly, a final point on negotiations with the US government. Obviously, there’s an imbalance in bargaining power. We come to them with the deal we’d like to get approved; they have things they’d like to see addressed and, in the end, they decide whether and when they are satisfied. We’ve found in some instances tremendous willingness to negotiate with us to understand our position – and in other instances, distressingly little interest in any such negotiation – it’s been much more of a ‘take it or leave it’. We have found, at least in some instances, that explaining to the US government that we’re not just objecting as a matter of principle but that, as a matter of practice, what they’re asking for will meaningfully interfere with the operations of the US target company, can often provoke a willingness to have a discussion and to at least modify, if not remove, certain mitigation measures on which they’re otherwise going to insist.

With that, I’ll turn it over to Veronica.

Roberts: Thanks, Jeremy. So just some final words from me on the UK regime.

We’re seeing remedies of the type that all the participants have been describing. One thing we’ve seen quite frequently is agreeing with the government a blacklist-whitelist approach to information that the investor can and can’t see. We’re also seeing quite strict controls being imposed on access to infrastructure and staff security measures at infrastructure. So, I think it all sounds quite similar.

One thing that is different is that so far in the remedies that we’ve seen under the UK regime – which, of course, is much newer than other regimes we’ve been talking about – is that compliance seems to be limited to the company reporting that they have complied with the remedies on a once-a-year basis. This is of course very different from the monitoring agency you were talking about, Jeremy, so I do wonder whether we might see moves in that direction – perhaps to tighten up compliance and monitoring a little bit more but it is still relatively early days in the UK regime. Again, in common with other participants, our experience of negotiating remedies with the ISU in practice has really been quite mixed. In some cases, you do get told what the remedies are; in others, it has been possible to negotiate a little, although, the government’s concerns have always been quite clear in general terms.

I agree with the comment you made, Jeremy. If you do have issues with how a remedy might work in practice for a company based in the UK, you can make some suggestions for tweaking that remedy so it still deals with the government’s concern but makes it much more workable in practice to UK companies. That’s where we’ve seen a real shift in terms of negotiating remedies with the ISU.

Part four

Roberts: Let’s wrap things up for this FDI webinar. We’ve seen across a range of jurisdictions that FDI regulation is clearly a critical piece of the regulatory jigsaw that needs to be carefully considered from the outset in conjunction with merger control, any other regulatory clearances required and also thinking about FDI clearances across the world.

I’d like to ask each participant just to offer a few final words, building on the really interesting debate that we’ve been having so far and to offer your thoughts on likely future developments and areas of focus in each of your jurisdictions.

Peter, can I ask you to start first, please?

Camesasca: Thank you, Veronica. The German FDI regime has been around for a good while. It has increased, I think, significantly in maturity over the past four to five years. Still, my sense is dealing with the minister of economy takes a practical, pragmatic approach; it’s certainly a regulator that is open to further developments and streamlining of the regime.

Having said that, I think the upcoming evaluation in 2024 is an important one. I expect further amendments to German FDI and, certainly, a tightening of what is or isn’t a sensitive area.

Carreri: It is the same in Italy. The FDI regime has become more mature and sophisticated. We have a number of strategic assets that cross several industries. We may have a sector that is not included formally on the list, but it falls in because, for example, of personal data management, or constitutional or highly strategic sectors involved.

I expect strengthening of the regime in the area of the so called ‘made in Italy’ businesses, which is not just a fashion but includes the supply chain in a number of industries. We have a draft law which considers strategic sectors – the textile sector for example, and the food sector – so that’s an area where I’m expecting increased attention.

On the other side, on the basis of our experience and on the basis of what is published by the Italian government, I expect that allied nations like the United States or Japan will be more facilitated in the context of the acquisitions here in Italy. That is because other areas, other nationalities, will be obstacles, primarily China.

We have an interesting example of a couple of deals in respect of Indian investors. India is coming to Europe and, notably, Italy, and it seems that this is a friendly nation for our government. So, we haven’t encountered any geopolitical problems there.

Anyway, very last thing: Italian law has very strict timing procedure – that is the 45 business days, which is something that is really important for cross-border deals as normally Italy is the first to come up with an issue of clearance or conditional clearance by the Italian government.

Zucker: From the US perspective, again there’s always a bit of a lag in the publicly available data, but we know that for fiscal year 2021, CFIUS had a record year with more than 400 filings. We’re certainly expecting more of the same with respect to 2022. From the perspective of our practice, it has remained very robust. We know that CFIUS has, in the most recent year or two, meaningfully increased its staffing levels, which is yet another indication that the US government is expecting – and certainly hoping – to see many more transactions so that they can keep their finger on the pulse of foreign investments and engage with even more counterparties as they try to keep control of this particular slice of the US national security landscape.

As I mentioned earlier, we think that investing parties should keep their eyes open for increased enforcement in the coming years with respect to national security agreements that have already been agreed. We’re all eagerly anticipating the rollout of an outbound investment review mechanism.

So, for transaction parties who are contemplating participating in an investment involving a non-US investor and a US target business, of course we’re going to recommend that you consider CFIUS considerations early in the transaction process. Because we know that CFIUS officials are increasingly coordinating – whether formally or informally – with FDI regulators in other jurisdictions in Europe and elsewhere, a sophisticated strategy concerning CFIUS and FDI review matters across multiple jurisdictions can make a difference. We always recommend that our clients start a conversation with us early in the process of building towards a cross-border investment.

Gudofsky: Thank you very much, Jeremy. I’m going to conclude with six themes or points.

The first is, we’re going to see a lot more focus on filing strategies. In particular, as I noted early on, only under the socioeconomic regime – where there is a net benefit review – must you go to the government before you close. For all other investments, the choice is whether to file pre- or post-closing, or even if a filing isn’t required, whether to file voluntarily. We’re going to see investors who are very nervous about leaving this until after closing and even target vendors who are very concerned that if a filing is not made it can still be called in at the 11th hour before closing, resulting in a delayed deal. So the first thing will be over filing strategy, including timing of filing.

The second point concerns risk sharing in transaction agreements. We are seeing an incredible amount of attention paid to how to deal with risk sharing. On the merger control side of things, hell-or-high-water provisions can often make sense; they make much less sense on the national security side of things because they effectively provide a blank cheque to a foreign government (in this case, Canada) by a non-Canadian. That is typically not well appreciated or liked. And so we’re seeing more interest in reverse termination fees for allocating risk.

Third, we need to remember the inherently political nature of the foreign investment regime and the ICA. The decisionmakers are elected officials; therefore, you need not just a legal strategy but a government relations strategy. Both go hand-in-hand.

Fourth, we need to recognise that these reviews are becoming multi-jurisdictional. In fact, under a bill before parliament, the minister wants the specific, explicit right to be able to disclose information to foreign regimes.

Fifth, we need to recognise the interplay between the ICA and the Competition Act. The Investment Review Division will often speak to the Competition Bureau and, therefore, even non-notifiable mergers can become known to the bureau through the ICA process and can be reviewed by the Competition Bureau, even if below thresholds, at any time within one year of closing.

And the final point is about developments. There is a bill before Parliament expected and likely to come into effect towards the end of this year that, among other things, will turn some of these non-suspensory or non-pre-closing filings into mandatory filings – including for non-control acquisitions. The bill will allow interim measures to be imposed while review is going on; it will allow the minister to take undertakings, which will, we think, lead to more remedied investments and not less; and there’ll be increased penalties for failing to file and for contraventions of the act.

Roberts: Thank you, Jason. Back to the UK’s regime, which is the most recent FDI regime we’ve been talking about today. I have, perhaps, a few slightly different points.

First of all, I think we are going to see a real commitment from the agency to be more transparent with parties about what is and isn’t caught by the mandatory filing obligations. We’ve seen that starting in practice and I hope that we will see that continue.

Second, the concept of ‘national security’ is, of course, not defined in our regime – it’s not defined in any regime because it moves with the times – and I think that we’ll very much see that in the UK as well. We will see more mandatory sectors being introduced. Perhaps we’ll see a couple of the existing mandatory filing sectors being scoped back because the ISU will decide it’s receiving too many filings in a particular sector and they’re not giving rise to issues.

Third, given the questions that we’re now seeing from our agency about non-notified transactions, I think we will see parties submitting more voluntary filings. Jason raised a really interesting point about the risk that you structure for in the transaction documents. We’ve also seen sellers of assets in the UK wanting to try to structure in any risk that the investor might give rise to if they change their ownership during the course of an NSI review. So there are all sorts of risks that parties now are trying to cater for more in the documentation to try to smooth the NSI process.

Fourth, again picking up on a point you made, Jeremy, about CFIUS outreach that we’re seeing in a number of jurisdictions in Europe right now, which are much newer regimes than the CFIUS regime and the Canadian regime, I think that that means that in the UK we will see more of a commitment to checking on compliance with remedies going forward. We discussed that earlier and I think we’ll see a stricter UK monitoring regime in place over time.

Finally, I just wanted to pick up on a theme that most of us have mentioned: there aren’t any current proposals in the UK for an outbound FDI screening mechanism. But we’ve heard about that from a number of the jurisdictions here today, and I think that’s going to be a continuing theme going forward.

About the panel

Veronica Roberts

Veronica Roberts is a partner and UK regional head of Herbert Smith Freehills' competition, regulation and trade practice. A solicitor advocate, Ms Roberts specialises in UK and EU competition law, and has over 25 years' experience working in London (and previously Brussels) on high-profile matters. She leads HSF's global FDI group, which has a busy FDI filing practice. She has been involved in several of the conditional clearances issued to date under the UK's new FDI (NSI) regime and in March 2023 gave oral evidence before a Parliamentary Select Committee on the first year of operation of the NSI regime in practice.

Peter Camesasca

Peter D Camesasca has 27 years’ experience in all major aspects of EU competition law. He is a former co-chair of Covington’s FDI Regulation initiative and has a particular focus on in- and outbound aspects of the Asia/Europe interface. Mr Camesasca’s experience includes cases under Articles 101, 102 and 106 TFEU, national and multi-jurisdictional merger and joint venture notifications, investigations by multiple enforcement authorities and global antitrust litigation and monopolisation issues. He advises and litigates on horizontal and vertical cooperation issues, prepares and executes compliance and dawn raid programmes and participates in the installation of in-house training programmes.

Andrea Carreri

Andrea Carrerri contributed to the founding of LCA. He specialises in M&A, extraordinary transactions, and industrial and commercial joint ventures, and also deals with domestic and international company and commercial law, FDI/golden power and trade sanctions matters with particular reference to the M&A field and within different industries. Mr Carreri is the head of LCA International and coordinates different teams in cross-border transactions. He advises national and international clients active in several industries (including the iron and steel, life science and pharma, telecommunication, publishing, mechanical and chemical markets).

Jason Gudofsky

As head of McCarthy Tétrault’s antitrust/competition and foreign investment group, Jason Gudofsky provides legal advice, devises strategies, and offers creative solutions to achieve clients’ business goals involving complex business transactions. He assists both foreign investors and Canadian businesses navigating the Investment Canada Act regime, including net benefit and national security reviews. Mr Gudofsky provides clients with competition law advice in the context of their mergers, strategic alliances, joint ventures, and other commercial transactions. He is regularly called upon to provide risk assessments, to advise management and boards on their proposed arrangements and to navigate clients through government investigations. He has been awarded the highest rankings by all relevant lawyer ranking services.

Jeremy Zucker

Jeremy B Zucker, chair of Dechert’s national security practice, has extensive experience advising on national security reviews of foreign direct investment by the Committee on Foreign Investment in the United States (CFIUS). He has represented many dozens of foreign investors and acquirers (including sovereigns) as well as domestic sellers and targets in connection with investment transactions. Mr Zucker also advises clients on international trade regulatory compliance matters, including in relation to economic sanctions, export controls, anti-bribery and anti-money laundering.

Unlock unlimited access to all Global Competition Review content