Mondial | Publication | 2021
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements. More and more jurisdictions have adopted FDI screening regimes or tightened those already in place. Many jurisdictions are defining the sectors considered relevant to national security more broadly, with a strong focus on the healthcare sector in response to the COVID-19 outbreak. Indeed, many jurisdictions took specific measures in response to the pandemic, such as lowering (or eliminating) notification thresholds and otherwise tightening their regimes. Some of these measures will expire or be relaxed as the world emerges from the pandemic, but many will likely remain.
Accordingly, navigating FDI screening requirements is critical for parties contemplating cross-border investments or acquisitions. Proposed transactions are now far more likely to trigger screening requirements, even in sectors previously not considered relevant from an FDI perspective. The same transaction may trigger multiple FDI screening regimes, some involving complex cross-border consultation, as under the new EU FDI screening framework. As with global merger review requirements, identifying applicable regimes and potential substantive concerns early is an essential part of transaction planning. Indeed, FDI screening and merger review often proceed in parallel and must be closely coordinated.
Norton Rose Fulbright, from 50+ offices on four continents, together with its co-counsel, has a uniquely global perspective on the evolving landscape of FDI screening regimes. We are proud to offer this summary of FDI screening regimes in key jurisdictions around the world. Please use the below links to access brief summaries of the current FDI rules and contact information for national experts.
Naturally, these summaries are intended to provide general information only. They are not intended to be complete or to constitute legal advice by any Norton Rose Fulbright entity or other contributor. For specific advice, please do not hesitate to contact the undersigned, the authors of the relevant national summaries or your usual contact at Norton Rose Fulbright.
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On January 1, 2021, major reforms were effected to the Australian foreign investment framework, which apply to any foreign investments subject to the Foreign Acquisitions and Takeovers Act 1975 (the Act) occurring on or after January 1, 2021.
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Foreign direct investment review in Canada is regulated by the federal government under the Investment Canada Act (ICA). For the most part, the ICA provides that foreign investments fall under the jurisdiction of the Minister of Innovation, Science and Economic Development (Minister of Innovation, Science and Industry). The Minister of Canadian Heritage is charged with reviewing investments that involve a Canadian cultural business.
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The last decade has seen a progressive relaxation of the regulatory regime governing foreign investments into China.
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In October 2020, EU Regulation 2019/452 (the FDI Regulation) entered into effect, creating a new framework for screening foreign direct investments (FDI) into the European Union (EU).
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France, which has had an FDI screening mechanism since 1966, has in the last two years further strengthened and clarified it through successive reforms.
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Foreign direct investment (FDI) screening in Germany is governed by the Foreign Trade and Payments Act (Aussenwirtschaftsgesetz) and the Foreign Trade and Payments Regulation (Aussenwirtschaftsverordnung or AWV).
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Foreign investment in India is governed by the Foreign Exchange Management Act, 1999 and the rules and regulations thereunder (FEMA), including the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (as amended from time to time) (NDI Rules).
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In Indonesia, foreign direct investments (FDI) are not subject to screening or prior approval.
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Under the Italian foreign investment regime (set forth in Law Decree No. 21 of 15 March 2012, as amended, and in several implementing measures), the Italian government has the power to impose conditions on, or even veto, investments by foreign persons in Italian companies and assets in strategic sectors when such investment may jeopardize the national security or other public interests (often referred to as “golden power”).
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Foreign direct investments (FDI) in Japan are regulated by the Foreign Exchange and Foreign Trade Act (the FEFTA).
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In Mexico, foreign direct investments (FDI) are regulated by the Foreign Investment Law (FIL).
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Russia’s Federal Law № 57-FZ “On the Procedure of Making Foreign Investments in Companies of Strategic Importance for National Defence and State Security” (the FSIL) is a consolidated legal framework governing foreign investment in entities carrying on activities of strategic importance (so-called “strategic” entities).
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Over the past two years, Spain has significantly strengthened its foreign investment screening mechanism, and all acquisitions by foreign investors (as defined below) of a Spanish entity active in a strategic sector are subject to prior authorisation by the Ministry of Industry, Commerce and Tourism (“MoICT”).
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In Turkey, companies with foreign ownership (FDI Companies) must notify foreign direct investments (FDI) to the Ministry of Industry and Technology (the Ministry), but approval is only required to establish a liaison office.
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The foreign investment review landscape in the United States has, over the course of the past year, grown more complicated as new regulations under the Foreign Investment Risk Review Modernization Act (FIRRMA) have been implemented and new enforcement tools and resources have been allocated.
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