Foreign Investment Regulation: Widening the Focus on Both Sides of the Atlantic

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Over the past several years, governments across the globe have introduced, enhanced or sought greater enforcement of their regimes for the screening of foreign direct investment (FDI) on the grounds of national security and public order concerns. FDI regulations historically focused on inbound investments that confer influence over traditionally sensitive sectors to foreign investors. More recently, governments on both sides of the Atlantic have shown a desire to regulate foreign investment more broadly, with expanded notions of sensitive sectors and technologies and a greater focus on investors with links to certain countries. In line with that, the range of regulations targeting foreign investment has evolved since the last edition of this book. Our update of this chapter not only reflects on recent trends in FDI screening, but also provides an outlook to the European Union’s recently enacted Foreign Subsidies Regulation (FSR) and on current proposals on both sides of the Atlantic to introduce powers for screening of outbound investments.

Geopolitical tensions involving China are often cited as an important factor to support the introduction or broadening of FDI regulations applicable to particular jurisdictions. Chinese investment further remains a frequent point of interest on both sides of the Atlantic and has given rise to a number of notable enforcement decisions in FDI screening. But the continuous development and expansion of FDI regulations reflects an increased sensitivity around foreign investments as a whole and their impact on the security of domestic industry, technology, data, resources and wealth, well beyond a ‘China focus’. Today, foreign investment regulation seeks to pursue much broader objectives, including the core contribution of foreign investment to economic growth and prosperity. At the same time, governments seek to understand better ‘who invests and for what purpose’.[2] Instruments to investigate foreign subsidies and for the screening of outbound investments complement those objectives with the aim of maintaining a level playing field for companies active in domestic markets and preventing a floating abroad of critical technology and know-how (e.g., through joint ventures with foreign investors).

This chapter examines the evolution and current scope of FDI regimes on both sides of the Atlantic and considers recent enforcement activity. What we observe, as a general trend is that across Europe and in the United States, FDI enforcement continues to widen its focus and subject a greater number of transactions to increased scrutiny. While concerns often still centre around investors from certain jurisdictions, FDI regulators conduct their substantive assessment on a case-by-case basis and take into account a broad set of considerations. FDI screening also remains subject to political influence and is strongly driven by geopolitical developments. While the number of prohibitions that are based on national security or public order concerns remains fairly low, the real impact of the mounting FDI laws on investors lies in navigating the exponential growth and diversity of filing requirements, the additional time required to obtain FDI clearance and for certain investors and transactions, even deciding to modify or abandon certain investments, or implement the conditions imposed in connection with FDI approvals.

FDI enforcement historically focused on Chinese investments

The evolution of FDI enforcement and legislative activity in recent years focused on, and tended to be motivated by, concerns around Chinese investment. This holds true for both sides of the Atlantic. For instance, most presidential orders to block or unwind transactions following review by the Committee on Foreign Investment in the United States (CFIUS) concerned Chinese investors or investors with significant ties to China.[3] In Germany, public debate erupted over the acquisition of industrial robot developer and manufacturer Kuka by the Chinese Midea Group in 2016, to which the German regulator issued a certificate of non-objection.[4] This case formed a turning point in Germany, serving as a precedent in public debate of why powers available to scrutinise and control FDI review should be increased.[5] The German FDI regime was tightened in the following years and, since then, interventions by the German regulator have predominantly concerned Chinese investors.

To a degree, a similar trend was emerging in the United Kingdom. Aside from a number of high-profile enforcement decisions involving UK defence assets and relating to US investors (mentioned below), a number of decisions under the ‘public interest intervention’ regime in the period from 2017-2020 concerned Chinese investors. For example, the UK government intervened in the acquisition of Sepura by China’s Hytera Communications, a provider of communications network services to the UK emergency services. The transaction was ultimately cleared, subject to undertakings to ensure that sensitive information and technology would be protected and that there would be continuity of supply and maintenance of services.[6] Hytera and Sepura also agreed to have at least one UK national as a board member. At least two other Chinese investments in the space and technology sector were abandoned following public interest interventions in the UK.[7] In the transition to the UK National Security and Investment Act (NSIA), Chinese investment has remained high on the agenda: bringing significant political attention to Chinese investment in the UK semiconductor industry, and the first two blocking decisions under NSIA have involved Chinese investors.[8] Since then, two further deals involving Chinese investors have been unwound and blocked.[9]

Stricter FDI scrutiny for all foreign investors – regardless of their origin

While Chinese investment was a prominent driver for the emergence and enhancement of FDI regimes and accounting for the fact that FDI interventions mostly centred on Chinese investment, there is now stricter FDI scrutiny for all investors, regardless of their origin. Most of today’s FDI regimes focus in the first instance and in formal terms on the protection of technologies and other national capabilities and not on the particular origin of an investor.[10] As such, FDI filing requirements are considered to be ‘investor-blind’ in that they commonly apply to all ‘foreign’ investors alike. In some regimes, nuances can arise and, for example, the determination of whether an investor is considered foreign may depend on the sector affected by the investment. Investments in particularly sensitive sectors, such as defence, often trigger a screening for all non-national investors. The EU FDI Regulation refers to ‘third countries’ and applies to investments in critical infrastructures, critical technologies, and sectors and technologies listed in Article 4(1) by investors from outside the European Union and European Economic Area.[11] The same approach is taken by many FDI regimes within the European Union that consider investors from non-Member States of the European Union, European Economic Area or the European Free Trade Association as foreign for sectors outside defence and other particularly sensitive activities.[12]

Some countries have elected to screen investments from state-owned or state-controlled entities at lower thresholds. In Spain, for example, investments made by a company that is considered to be controlled by a government, whether directly or indirectly, is subject to a mandatory screening procedure regardless of the sector concerned.[13] Australia applies specific screening thresholds (often A$0) to ‘foreign government investors’. Taking another track, the United Kingdom requires any investor (including those from the United Kingdom) in 17 core sectors to submit to screening upon acquiring more than a 25 per cent interest. The Netherlands encompassed a similar approach and included domestic investors within mandatory filing requirements in their recently enacted FDI regime.[14] Nevertheless, beyond the question of whether an investment requires mandatory filing, and in all FDI regimes, an investor’s nationality and the fact of whether an investor is considered state-owned, state-backed or state-controlled is an important factor for the substantive assessment of likely effects on national security.

The applicability of FDI regimes to a broad group of investors is reflected in the reports on FDI screening published both across Europe and within the United States. The number of transactions falling within the scope of FDI review has significantly increased during the past few years and review has been tightened. Thereby, the widened scope of FDI filing requirements has an impact on all investors, including from closely allied countries. In the European Commission report for the year 2022, most of its screening procedures included US investors (32 per cent), followed by investors from the UK (7.6 per cent), China (5.4 per cent), Japan (5 per cent), the Cayman Islands (4.8 per cent) and Canada (4.6 per cent). Around 40 per cent of notified cases originated from countries other than the top six, compared to 29 per cent in 2021.[15] In the United States, the ranking depends on the type of filing. Investors may elect to file a long-form ‘notice’ or a short-form ‘declaration’. The latest CFIUS annual report shows that investors from allied countries relied most often on the simplified requirements of a declaration, with investors from Canada on top, followed by Japan, Germany, South Korea and Singapore.[16] Most long-form notices were filed by Singaporean investors, followed by China and the United Kingdom. Overall, the rate of notices subjected to a second ‘investigation’ phase increased to about 57 per cent (from roughly 48 per cent in 2021) and took on average 15 days longer to be completed, resulting in prolonged scrutiny all investors have to face.

Despite the widened scope of FDI review, the vast majority of transactions still receive FDI approval. For example, the European Commission 2022 report notes that 96 per cent of the cases formally reviewed by the Commission were cleared (approximately 86 per cent unconditionally and approximately 9 per cent with conditions). The number of prohibition decisions remained low and amounted to only around 1 per cent of all screened transactions, while approximately 4 per cent of the transactions were withdrawn by the parties. Importantly, these decisions are made by EU Member States, as the European Commission only performs a coordinating and influencing role in FDI screening, which involves providing non-binding comments to Member States in respect of FDI that has an EU dimension. What is clear in practice is that, while public debate focuses on investors of potential concern or certain high-profile cases, for most investors, compliance with FDI regimes is a matter of timing, diligence and acceptance of transparency towards FDI regulators. Consequently, FDI review has the potential to increase the direct cost involved in deal-making, but for most parties it does not ultimately hinder their transaction plans.

Regulatory amendments broadened the sectoral scope for FDI screening

FDI regimes have traditionally focused on the most sensitive sectors, such as defence and critical infrastructure. Regulatory amendments significantly broadened the sectoral scope though for FDI screening and a broad range of investments can become subject to screening. CFIUS and, in its footsteps, the European regimes have obliged or incentivised investors to notify their transactions (backed by strong penalties) and submit to a degree of transparency about their investment plans. The areas of sensitivity and greatest interest, while carrying national differences, now clearly go beyond defence and critical infrastructure to encompass critical technology, essential inputs and supplies or data related businesses. Driven by consultations with CFIUS, during 2017, Germany, France and Italy campaigned for such changes at the European level and for an EU legal framework to provide for the screening of FDI by non-EU countries.[17] The United Kingdom began to address similar considerations in the same period with a white paper proposal for greater investment screening powers and, in the meantime, in 2018, making legislative amendments to lower the barriers to FDI intervention for acquisitions relating to critical technologies. Gathering evidence in a 2019 study,[18] the European Commission found that foreign ownership was remarkably high in sectors that the Commission considers at the heart of the economy.[19] The Commission noted that the rate of acquisitions involving state-owned investors from Russia, China and the United Arab Emirates appeared to be increasing rapidly. The Commission emphasised its concerns that state influence may result in the acquisition of EU companies for strategic rather than purely commercial reasons, and that foreign investors may benefit from state support.

In 2018, the United States Congress adopted the Foreign Investment Risk Review Modernization Act (FIRRMA), significantly expanding the jurisdiction of CFIUS to review a wider range of transactions. FIRRMA reflected broadened notions of national security and geopolitical risks, to include newly defined categories of critical technologies, critical infrastructure and sensitive personal data (TID US businesses) and expanded CFIUS’s authority beyond its traditional jurisdictional purview of ‘controlling’ investments to non-controlling but non-passive investments in those businesses. FIRRMA also required, for the first time, that certain investments involving TID US businesses be subject to mandatory filing requirements, in contrast to CFIUS’s traditional voluntary review framework. Further, FIRRMA newly established CFIUS’s authority to review certain greenfield investments in real estate. Under FIRRMA, CFIUS and its member agencies were granted additional resources, which have been used, in part, to identify and review completed transactions that previously were not notified to CFIUS. While FIRRMA did not specifically identify China or any other country, the underlying policy debate over the development of FIRRMA signalled that China was a principal focus of concern.

In 2019, the European Union adopted its EU FDI Regulation, which entered into full effect on 11 October 2020.[20] The Regulation provides for procedural standards for FDI screening in the EU Member States, contains a non-exhaustive list of factors that may be taken into account for the review of FDI and establishes a cooperation mechanism between the European Commission and the Member States. As a result of the covid-19 crisis, the attention given to FDI screening accelerated markedly. In Europe, the European Commission published guidance for Member States on how to use FDI screening in times of public health crisis and economic vulnerability in March 2020.[21] The Commission called on Member States to make full use of existing FDI regimes, or to introduce new regimes where none were yet in place. Globally, a number of countries (e.g., Australia, New Zealand, China and India) expanded their powers to scrutinise investment and act, where necessary, to protect assets that could become vulnerable during the pandemic. Some measures were temporary and others have remained.

Following Russia’s invasion of Ukraine in February 2022, the Commission reiterated its call on Member States to use FDI powers in relation to potential threat actors[22] and provided guidance on the circumstances under which Member States may be permitted to derogate, for FDI screening and enforcement purposes, from principles of free movement of capital and freedom of establishment that are central to the EU treaties. Around a similar time, the German FDI regulator used, for the first time, its powers to appoint a fiduciary. It did so in relation to the Russian gas infrastructure provider Gazprom Germania, after it learned about an unnotified change in ownership in the company. According to Federal Minister Robert Habeck, the order of fiduciary management served to protect public security and order and to maintain the security of supply. In due course, the company was put under long-term administration and received a loan of around €10 billion to support its operations.[23] Later, the German government acquired all of the shares in the company and became its sole owner.[24]

Other undercurrents to FDI policy have nonetheless endured and also shifted in recent years, recalling that Member State rhetoric envelops broader objectives for FDI screening. For instance, prominent calls from Germany and France have concerned fostering industrial capability within Europe, potentially even to the exclusion of allied investors. In June 2020, speaking at a joint French-German conference, Bruno Le Maire, the French Minister for the Economy, expressed support for stronger government engagement to develop European industrial champions for the protection of European economic interests against all other parts of the world (including the United States and China). The (then) German Minister for the Economy, Peter Altmaier, noted this policy was long-standing and encompassed a range of sectors but particularly technology and biotech industries.[25]

Substantive assessment requires a case-by-case analysis

Recent enforcement practice indicates that FDI screening serves broader objectives than the screening of investments only from certain jurisdictions. In a context of growing tensions globally, FDI regulators assess transactions on a case-by-case basis. Despite the heightened focus of FDI regimes on Chinese investors, they are by no means the only targets of FDI proceedings. Stricter scrutiny is applied also to investors from other countries depending on sensitivities within the target business and policy imperatives of national governments. Moreover, most regimes leave broad discretionary powers to screening authorities, which have some degree of flexibility to reflect trade policy (reciprocity) and other political considerations. The following cases provide illustrative examples.

Defence

Traditionally, strict scrutiny applies to FDI into the defence sector. This also extended to investors from allied countries in the past. In the UK, for instance, investors often volunteered commitments for their defence investments to address security concerns and to secure clearance. This trend started with the acquisition of GKN by Melrose in 2018 and at a time when the UK government often lacked the powers to impose remedies on the parties. While a continuing series of high-profile transactions demonstrates that foreign investments in the defence sector appear capable of proceeding, parties should be prepared to engage with government concerns.

By comparison, France has taken a stricter line on defence sector transactions, with the Minister of Economy exercising a veto in relation to the planned acquisition of Photonis International by US investor Teledyne during 2020. To secure the purchase of Photonis, a company conducting activities in the design of night vision devices, Teledyne was asked to provide undertakings and offer a minority stake in Photonis to the French sovereign investment fund, but ultimately decided not to pursue the transaction.[26] In August 2023, the attempt of a Czech majority owned private equity fund to acquire Tech Foundations, the cybersecurity business of French Atos SE, was in large part abandoned and limited to a minority investment following security concerns.[27]

For Rolls-Royce, which undertook a series of divestments and restructuring across its group in 2020 to 2021 in Spain, FDI considerations were raised by the relevant Spanish authorities in relation to the sale of its subsidiary ITP Aero, a Spanish turbine blade manufacturer that provides engines for the Spanish armed forces. For Bain Capital, the Spanish Council of Ministers ultimately authorised its investment in ITP subject to mitigation negotiated in an agreement. Among other things, Bain offered guarantees of national and European interest programmes with regard to the location, maintenance of employment and headquarters, exemption from non-EU export controls, contract compliance and the proper handling of sensitive information.[28]

Critical infrastructure

Where critical infrastructure is concerned, an expansive range of activities can become susceptible to FDI review, regardless of an investor’s identity. In the United Kingdom, the Investment Security Unit (ISU) reportedly opened a security review into the proposed acquisition of a 60 per cent stake in UK gas transmission operator National Grid plc by a consortium including Macquarie Group (an Australian firm) and British Columbia Investment Management Corporation (a Canadian pension fund).[29] Ultimately, the deal proceeded without conditions and the parties subsequently acquired a further 20 per cent stake in 2023.[30] The ISU has shown willingness to assert its interest or exercise its call-in powers in other transactions relating to critical infrastructure, even in cases involving European buyers and where mandatory filing thresholds do not appear to be met, though ultimately it did not take any further action.[31]

Similarly, EU governments have requested commitments for investments into critical infrastructure also from allied countries. The Spanish FDI authority approved an acquisition of a 22.7 per cent stake in the company Naturgy Energy Group by Australian Fund IFM, with mitigation.[32] The conditions safeguard planned investments in energy expansion and infrastructure by Naturgy until 2025 and ensure that IFM does not sell assets in excess of levels already approved by the board. It was also agreed that Naturgy will not be delisted and taken into full private ownership for at least three years. In Italy, the government recently approved the sale of a Lukoil-owned refinery to Cypriot private equity firm GOI Energy. Under its golden power regulation, the government reportedly requested that jobs be protected and environmental standards maintained after the sale of the plant, which employs about 1,000 people in Italy’s southernmost region.[33]

Critical technology

In 2019, the UK government reviewed the acquisition of satellite communications provider Inmarsat by the Connect Bidco consortium of private equity investors, which mostly originated from the United States and, shortly afterwards, lowered the applicable jurisdictional thresholds for transactions involving critical technology.[34] The review resulted in a comparatively extensive set of undertakings requiring, among other things, that the acquirers commit to behave as passive financial investors only and that other governance-related restrictions would apply, including having UK nationals appointed to a number of board and other senior positions.[35] Subsequently, a follow-on sale of Inmarsat to Viasat underwent review under the NSIA and was cleared, subject to Viasat imposing information security controls and maintaining supply of certain ‘strategic capabilities’ to the UK government.[36]

At the beginning of 2022, the UK government began a public interest intervention on national security grounds in relation to the acquisition of the semiconductor company Arm Ltd by the US company Nvidia Corporation. The deal was ultimately abandoned following concerns of several FDI and competition regulators, including the European Commission.[37] Similarly, in the planned acquisition of hyper-pure silicon wafer manufacturer Siltronic by Taiwan’s GlobalWafers, no FDI clearance could be obtained from the German regulator before expiry of the long-stop date, so the deal ultimately did not proceed.[38] Recently, the UK government imposed conditions to address national security concerns in EDF’s acquisition of the steam turbine business of General Electric. According to the published decision, concerns related to critical capabilities in naval propulsion systems.[39]

Other essential supplies and access to data

Tensions that arose in regard to global supply chains with essential medical products have also provided noteworthy FDI interventions. In Germany, as a means of maintaining independent strategic capabilities in healthcare, the federal government acquired a minority stake of 23 per cent in CureVac in 2020 through the German state-owned bank KfW.[40] It did so outside the German FDI regime but with the aim of retaining future covid-19 vaccines for the national healthcare system and to prevent the potential acquisition of CureVac by US investors.

In 2021, France rejected the takeover of the convenience store Carrefour by the Canadian supermarket group Couche-Tard. Even negotiations between the French Minister of Economy, Bruno Le Maire, and Couche-Tard regarding jobs and suppliers could not dispel concerns that the transaction would endanger national food safety. Mr Le Maire said that ‘what’s at stake is the food security of our country . . . food security is strategic for our country so that’s why we don’t sell a big French retailer’.[41] No formal FDI proceeding was commenced, but the French government commented openly that it would veto the transaction using FDI laws shortly after the proposed transaction was announced.

The Italian government is reported to have halted the move of 530 Bnl employees to the consulting company Accenture under its golden power regime. Bnl, formerly state-owned and now part of BNP Paribas, was asked by the Italian government for more details on Accenture. The questions raised by the Italian government were reported to relate to concerns that with the transfer of employees, the French consulting company was responsible for the management of personal data of the bank’s Italian clients. The transfer of employees is understood to have been cleared and subsequently completed, but it shows the authorities’ willingness to take a closer look into certain transactions regardless of the investor’s origin.

Outlook

Governments around the world emphasise their interest in maintaining high levels of foreign investment and keeping their economies as favourable places to do business. Despite that, FDI control has become significantly more intense over the past several years and at times even at the price of reduced investment flows. Whereas the focus of FDI enforcement traditionally has been on defence and critical infrastructure, and the investor’s nationality has appeared to be a significant factor, the scope of FDI enforcement has broadened over a number of years alongside an evolved and wider concept of national security risk. The readiness of many countries to protect their industries, and national manufacturing capabilities for a range of critical technologies and products, appears to be rather neutral with respect to investor nationality. Yet, most of the FDI interventions on both sides of the Atlantic involve investors with links to China or Russia.

As a result of the expansion in FDI enforcement, all investors now face closer FDI scrutiny and accordingly must learn to live with increasingly complex and longer FDI proceedings, even if, for most cases, no direct or long-term consequences will flow from a substantive FDI review. For all investors – rather than only those from certain jurisdictions or those that are found to be state-owned, state-controlled or state-backed – the pattern of more significant FDI decisions must be reasonably taken into account and suggests the need for care in planning investment choices, particularly in sectors that concern critical technologies. The risks concerning FDI require appropriate stewarding throughout the transaction process and even beyond the completion of each transaction.

This is only underscored by surrounding developments. In July 2023, the EU FSR entered into force. Under this new regulation, the Commission will have the power to investigate and counteract foreign subsidies. In a transaction context, this means that investors that have received financial contributions from foreign governments will have an additional obligation to obtain clearance from the European Commission upon acquiring certain EU targets.[42] Foreign investors will therefore face another approval procedure alongside merger control and FDI filings. While the objective of these instruments is to keep a level playing field in the EU that is undistorted by foreign subsidies, the FSR also seeks to subject the acquisition of strategic assets by state-owned or state-controlled companies to the European Commission’s prior review and approval.[43]

Another remarkable trend follows concerns about the floating abroad of technology into countries of concern through outbound investments without sufficient government screening. At the forefront of that, in the United States, an executive order from the Biden Administration proposed prohibitions on certain outbound investments in the semiconductors and microelectronics, quantum information technologies, and artificial intelligence sectors, and mandatory notification requirements for a broader set of transactions in those same sectors. In each case, these requirements focus on China. The executive order followed the US Senate’s vote to add an investment screening regulation to the financial year 2024 budget. While the Senate proposal differs and proposes a less onerous regime without any prohibitions – and the contours of the executive order will continue to develop – these developments reflect broader claims for the introduction of new instruments in national security reviews. In line with this trend, the European Union announced that it would present an initiative for the screening of outbound investments by the end of 2023.


Notes

1 Horst Henschen is of counsel and Martin Juhasz, LLM is an associate at Covington & Burling. The authors thank Heather Finstuen, partner with Covington & Burling in Washington, DC, and Christian Ahlborn, partner with Covington & Burling in Brussels and London, for their valuable comments on the update of this chapter.

2 Phil Hogan, former EU Trade Commissioner on 25 March 2020.

3 For example, Beijing Shiji Information Technology – StayNTouch (2020); Broadcom — Qualcomm (2018); Canyon Bridge – Lattice Semiconductor (2017); Grand Chip – Aixtron (2016).

4 Roland M Stein and Leonard von Rummel, ‘Germany’ in Lexology Getting the Deal Through: Foreign Investment Review 2021 www.lexology.com/gtdt/tool/workareas/report/foreign-investment-review/chapter/germany (last accessed 31 August 2023).

5 ‘Germany’s turnabout on Chinese takeovers’, European Council on Foreign Relations (21 March 2017), https://ecfr.eu/article/commentary_germanys_turnabout_on_chinese_takeovers_7251/. Elisabeth Braw, ‘Cutting-edge tech takeovers are a strategic threat to the west’, Financial Times (7 October 2019), www.ft.com/content/763cae4e-e5ed-11e9-b8e0-026e07cbe5b4.

6 On 3 December 2021, it was announced that these undertakings were renewed (on what appears to be a similar basis in substance) in connection with a restructuring of the Airwave emergency communications service, www.gov.uk/government/publications/acquisition-of-sepura-plc-by-hytera-communications-corporation-limited-acceptance-of-revised-national-security-undertakings.

7 For example, Aerostar/Mettis merger inquiry, see www.gov.uk/cma-cases/aerostar-mettis-merger-inquiry; Gardner Aerospace/Impeross merger inquiry, see www.gov.uk/cma-cases/gardner-aerospace-holdings-limited-impcross-limited-merger-inquiry.

8 During the summer of 2022, the Secretary of State for Business blocked the transfer of technology with potential defence applications by Manchester University (www.gov.uk/government/publications/acquisition-of-know-how-related-to-scamp-5-and-scamp-7-vision-sensing-technology-notice-of-final-order), while a later variation order allowed the University of Manchester to share the technology in certain circumstances subject to the agreement of the Secretary of State (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1130244/aquisition-scamp5-scamp7-know-how-notice-of-variation-of-final-order-notice-09-01-23__1_.pdf). The sale of integrated circuit designer, Pulsic, was also blocked (www.gov.uk/government/publications/acquisition-of-pulsic-ltd-by-super-orange-hk-holding-ltd-notice-of-final-order).

9 The investment by Nexperia in Newport Wafer Fab has been subject to retroactive and apparently prolonged NSIA review and ultimately was ordered to be unwound retroactively in November 2022 (Newport Wafer Fab decision: notice of final order (publishing.service. gov. uk). In December 2022, the UK government blocked the acquisition of UK-based designer of integrated circuits HiLight Research by Chinese acquirer SiLight (Acquisition of HiLight Research Limited by SiLight (Shanghai) Semiconductors Limited: notice of final order – GOV.UK (www.gov.uk)).

10 However, certain regimes target investors from specific countries. India, for example, introduced stricter rules for all investors from border nations. See Press Note No. 3 (2020 Series) dated 17 April 2020, https://dpiit.gov.in/sites/default/files/pn3_2020.pdf.

11 The application of the EU Screening Regulation only to investments from non-EU investors was recently confirmed by the European Court of Justice in its judgement of 13 July 2023, Case C-106/22, Xella Magyarország, paragraphs 29 et seq.

12 For example, Austria, Germany, Hungary and Spain.

13 Callol, Coca & Asociados, 2 February 2021: FDI Advisory Compilation.

14 The new Dutch FDI screening regime entered into force on 1 June 2023 and applies retroactively to investments completed after 8 September 2020.

15 Report from the Commission, Third Annual Report on the screening of foreign direct investments into the Union (SWD(2023) 329 final), page 19, https://circabc.europa.eu/ui/#.

16 Committee on Foreign Investment in the United States, Annual Report to Congress, CY 2022, CFIUS – Annual Report to Congress CY 2022_0.pdf (treasury. gov).

17 See ‘France, Germany, Italy urge rethink of foreign investment in EU’, Reuters (14 February 2017), www.reuters.com/article/uk-eu-trade-france-idUKKBN15T1ND.

18 European Commission, Study and Commission Staff Working Document (SWD(2019) 108 final) on Foreign Direct Investment in the EU (13 March 2019), https://ec.europa.eu/transparency/documents-register/detail?ref=SWD(2019)108&lang=en.

19 After the financial crisis in 2009, Chinese investment was a welcome source of capital for many European countries. For example, the Greek government sold its majority stake in the Piraeus Port Authority to a Chinese state-owned investor. In addition, jurisdictions such as Portugal have maintained an open policy towards all FDI.

20 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, https://eur-lex.europa.eu/eli/reg/2019/452/oj.

21 Communication from the Commission (2020/C 99 I/01), 26 March 2020, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A52020XC0326%2803%29.

23 ‘Germany boosts energy security with $10 bin Gazprom Germania plan’, Reuters (14 June 2022), www.reuters.com/business/energy/germany-shelters-gazprom-germania-with-10-bln-euro-loan-govt-source-2022-06-14/.

24 See press release of the company, which was renamed to ‘Securing Energy for Europe’, 14 November 2022, www.sefe-group.com/en/newsroom/press-releases/the-german-government-becomes-the-sole-owner-of-the-sefe-group.

25 Bruno Le Maire on 22 June 2020 at the French-German bilateral meeting in Berlin.

26 Teledyne Technologies Inc.: Other Events (Form 8-k), 18 December 2020, www.sec.gov/Archives/edgar/data/1094285/000109428520000168/0001094285-20-000168-index.html-000168/.

27 ‘Billionaire Kretinsky Says He Won’t Boost Eviden Stake After French Concerns’, Bloomberg (4 August 2023), www.bloomberg.com/news/articles/2023-08-04/kretinsky-says-he-won-t-boost-eviden-stake-after-french-concerns#xj4y7vzkg.

28 ITP Aero, press release, ‘The Council of Ministers authorises the Bain Capital acquisition of ITP Aero from Rolls-Royce’ (8 March 2022), www.itpaero.com/en/communication/itp-aero-news/the-council-of-ministers-authorises-the-bain-capital-acquisition-of-itp-aero-from-rolls-royce.html.

29 ‘UK to hold national security review of £4.2bn deal for key gas network’, Financial Times (7 August 2022), www.ft.com/content/8ea34a47-519a-457a-9a3e-dc1e19259454.

30 ‘Macquarie takes further control of Britain’s gas network’, Financial Times (19 July 2023), Macquarie takes further control of Britain’s gas network (ft. com).

31 Department for Business, Energy and Industrial Strategy press release, ‘Government to take no further action under National Security and Investment Act on BT share acquisition’ (23 August 2022), at www.gov.uk/government/news/government-to-take-no-further-action-under-national-security-and-investment-act-on-bt-share-acquisition.

32 ‘Spain approves IFM’s Naturgy bid with conditions’, Reuters (3 August 2021), www.reuters.com/business/energy/spain-approves-ifms-naturgy-bid-with-conditions-2021-08-03/.

33 ‘Italy conditionally approves Lukoil refinery sale, sources say’, Reuters (11 April 2023), Italy conditionally approves Lukoil refinery sale, sources say.

34 Department for Business, Energy and Industrial Strategy, June 2020: Enterprise Act 2002: guidance on changes to the turnover and share of supply tests for mergers (Orders 2020), at www.gov.uk/government/publications/enterprise-act-2002-guidance-on-changes-to-the-turnover-and-share-of-supply-tests-for-mergers-orders-2020.

35 Connect Bidco/Inmarsat Merger Inquiry, www.gov.uk/cma-cases/connect-bidco-inmarsat-merger-inquiry.

36 Inmarsat, press release, ‘Viasat, Inmarsat reach agreement with UK Government on plan to increase highly-skilled jobs and R&D investment in UK space sector’ (21 March 2022), www.inmarsat.com/en/news/latest-news/corporate/2022/viasat-inmarsat-agreement-uk-government.html.

37 UK Competition and Markets Authority, press release, ‘NVIDIA abandons takeover of Arm during CMA investigation’ (8 February 2022), www.gov.uk/government/news/nvidia-abandons-takeover-of-arm-during-cma-investigation.

38 ‘GlobalWafers’ Siltronic deal fails as Germany misses deadline’, Reuters (1 February 2022), www.reuters.com/business/globalwafers-siltronic-deal-fails-german-govt-approval-misses-deadline-2022-01-31/.

39 See Notice of Final Order, published 7 August 2023, Acquisition of GE Oil & Gas Marine & Industrial UK Ltd and GE Steam Power Ltd by EDF Energy Holdings Ltd via its wholly owned subsidiary, GEAST UK Ltd: notice of Final Order (www.gov.uk).

40 Federal Ministry for Economic Affairs and Energy (BMWi), press release, ‘Federal Government to contribute 300 million euros to CureVac’ (15 June 2020), www.bmwi.de/Redalction/EN/Pressemitteilungen/2020/20200615-federal-government-to-contribute-300-million-euros-to-curevac.html.

41 ‘French “no” to Canada’s Couche-Tard regarding Carrefour is ‘final’ -minister’, Reuters, (15 January 2021), www.reuters.com/world/americas/french-no-canadas-couche-tard-regarding-carrefour-is-final-minister-2021-01-15/.

42 A mandatory and suspensory filing is required, where (i) the EU turnover of the target company, at least one of the merging parties, or the joint venture is of at least €500 million and (ii) all parties combined have been granted a financial contribution of at least €50 million by a non-EU state in the three years prior to signing the transaction agreement or the announcement of the public bid.

43 See Recital 2 of Regulation (EU) 2022/2560.

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