Navigating the international foreign direct investment (FDI) landscape is becoming ever more complex. In 2022 we saw a proliferation of new FDI regimes, a stream of revisions to existing rules and unprecedented levels of enforcement.
Of the jurisdictions surveyed, 23 of 26 have an FDI regime in place. Across the globe, over 100 jurisdictions now have some form of investment screening rules.
Last year we saw governments continuing to use FDI rules to intervene in transactions, in particular targeting semiconductor and critical infrastructure deals.
Rules and enforcement practices are evolving rapidly. The scope and focus of regimes varies widely and there is often a lack of transparency over jurisdictional tests, processes and substantive concerns. Considering FDI early in the transaction process is therefore vital. A clear global FDI analysis and filing strategy will help to assess risk and ensure consistency of notifications.
UK national security screening regime makes an impact
The UK’s National Security and Investment Act is now one year old and having a significant impact on deal making.
Five deals were prohibited under the regime in 2022.
One of the most high-profile was the acquisition of the UK’s largest semiconductor plant by Chinese-owned technology company Nexperia BV. This marked the first time that the UK government blocked a transaction using its powers to retrospectively review deals that completed before the rules took effect. It has since done the same in a second deal.
Nine other transactions were cleared subject to conditions.
More broadly, there remains uncertainty over many aspects of the regime. The scope and application of the 17 sensitive sectors (which trigger mandatory notification) are often hard to determine. There is a particular lack of transparency and dialogue in the review process.
What is clear, however, is that parties to any deal with a UK nexus – even one that does not obviously raise national security concerns – should consider very carefully the possible application of the regime.
Elsewhere governments intervene in M&A
In addition to UK enforcement activity, we saw a stream of government intervention under FDI rules throughout 2022.
In Germany, for example, the government blocked two Chinese investments in the semiconductor sector, as well as a completed deal in the medical sector. In a port acquisition case, the Ministry restricted the Chinese investor to a 24.9% stake. GlobalWafers was forced to abandon its purchase of Siltronic after failing to get German FDI clearance within the deal deadline.
Read more..https://www.jdsupra.com/legalnews/evolving-foreign-direct-investment-1606375/