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1、National security reviews 2020:AglobalperspectiveA guide to navigating the rules for investing in countries that require national security approvalNational security reviews 2019:AglobalperspectiveA guide to navigating the rules for investing in countries that require national security approvalForeig

2、n direct investment reviews 2020:A global perspectiveA guide to navigating the rules for investing in countries that require foreign direct investment approvalIIForeign direct investment reviews 2020:A global perspectiveFarhad JalinousWhite&Case Global Head ofForeign Direct Investment Reviews and US

3、 National Security/CFIUS Washington,DCNow in its fifth year of annual publication,White&Cases Foreign Direct Investment Reviews provides a comprehensive look into the evolving foreign direct investment(FDI)laws and regulations in a number of key jurisdictions around the world.In this edition,we have

4、 added four new jurisdictionsIndia,Mexico,Spain and Swedento the ones covered in prior editions.We have also expanded the section dedicated to the European Union,with essential information related to European FDI developments at the macro level and in various jurisdictions.Once the exclusive domain

5、of sectors traditionally associated with national security,FDI reviews worldwide are extending their reach into transactions in healthcare,high-tech,real estate and a growing list of other sectors.FDI considerations now reside among the top-five major issues in any cross-border M&A transaction.Withi

6、n Europe,Germany,Italy,Spain,France and others have increased their FDI control measures this year,while still more are set to do likewise.Even as its Member States expand their individual FDI regimes,the EU has continuously refined its FDI direction throughout 2020,with a March guidance paper and a

7、 June white paper building atop the Screening Regulation that came into full effect on October 11.The EU aims to enact a“strong EU-wide approach to foreign investments screening in a time of public health crisis and related economic vulnerability.”Meanwhile in the US,the Committee on Foreign Investm

8、ent in the United States(CFIUS)has expanded its jurisdiction to reach certain pure real estate transactions,as well as certain non-controlling but non-passive investments in sensitive companies referred to as“TID US businesses.”Some investments in TID US businesses are even subject to mandatory fili

9、ng requirements.Then there is COVID-19.The pandemic has brought FDI restrictions into sharper focus,and accelerated regulatory movement across the US,Europe and elsewhere.For the duration of the pandemic,and surely for years afterward,parties to cross-border transactions will need to redouble their

10、due diligence in assessing whether their transactions will require(and pass)an FDI review,either voluntary or mandatory.Investors need to understand FDI restrictions as they are today,and how these laws are evolving over time in order to avoid disruption to realizing synergies,achieving technologica

11、l development and integration,and ultimately securing liquidity.Navigating foreign direct investment reviews worldwideContentsAmericasUnited States Page 3Canada Page 9Mexico Page 13EMEAEuropean Union Page 15Finland Page 23France Page 25Germany Page 29Italy Page 33Russian Federation Page 37Spain Page

12、 41Sweden Page 44United Kingdom Page 47Asia-PacificAustralia Page 53China Page 57India Page 61Japan Page 633Foreign direct investment reviews 2020:A global perspectiveCFIUSFIRRMAthe most significant CFIUS overhaul in more than a decadehas now been fully implemented.This has resulted in a number of k

13、ey changes to the CFIUS process,such as mandatory filings for certain transactions,an expansion of CFIUSs jurisdiction,and the introduction of a new expedited filing option.Investors need to assess early in a transaction process whether the US business subject to the transaction qualifies as a“TID U

14、S business”one involved with critical technologies,certain critical infrastructure or sensitive personal data of US citizensas foreign investments in TID US businesses are subject to CFIUSs expanded jurisdictional reach and may trigger mandatory filing requirements.Penalties for not complying with m

15、andatory filing obligations can be up to the value of the transaction.Most transactions continue to get cleared by CFIUS without mitigation,but when CFIUS does have concerns,the consequences can be substantial,including unexpected costs and measures that can frustrate deal objectives.Investors must

16、assess potential CFIUS risks and plan transactions carefully to protect themselves.Such assessments should also include determining the advisability of filing via a declaration or notice.The declaration filing option is proving to be a useful tool for many transactions,but parties should account for

17、 potential delays if CFIUS requests a notice.CFIUS has also started pursuing non-notified transactions of interest more aggressively,while also ramping up compliance and enforcement efforts related to mitigation agreements.If CFIUS officials reach out with questions regarding a non-notified transact

18、ion or about mitigation compliance matters,it is advisable to engage CFIUS counsel right away.The Committee on Foreign Investment in the United States(CFIUS),which is led by the US Department of the Treasury and made up of US national security and economic agenciesincluding Defense,State,Justice,Com

19、merce,Energy and Homeland Securityconducts national security reviews of foreign direct investment(FDI)into the United States.The Foreign Investment Risk Review Modernization Act of 2018(FIRRMA)significantly overhauled the CFIUS process,including by adding new types of transactions subject to CFIUS r

20、eview and,for the first time ever,mandating notification to CFIUS in certain cases.Final regulations fully implementing FIRRMAs reforms took effect on February 13,2020.Since then,CFIUS has made additional changes,including imposing filing fees for CFIUS notices and issuing a new rule that changes th

21、e mandatory filing requirements for transactions in which the target US business is involved with critical technologies,such as certain items,technology and services subject to US export controls.TYPES OF DEALS REVIEWED Historically,CFIUS has had jurisdiction to review any transaction that could res

22、ult in“control”of a US business by a foreign person.Control is definedand interpreted by CFIUSbroadly as the power,whether exercised or not,to determine,direct or decide important matters affecting an entity.Control can be present even in minority investments.A“US business”is similarly defined and i

23、nterpreted broadly.Covered transactions(those subject to CFIUSs jurisdiction)include deals structured as stock or asset purchases,debt-to-equity conversions,foreign-foreign transactions where the target has US assets,private equity investments(in some cases even where the general partner is US-owned

24、)and joint ventures into which a US business is being contributed.Despite CFIUSs broad historical jurisdiction,in recent years the shifting national security landscape in the US,particularly regarding Chinese investment,exposed gaps between the transactions that CFIUS was able to review and those be

25、yond its reach that nonetheless presented potential national security concerns.FIRRMA sought to close these gaps by expanding CFIUSs jurisdiction and mandating filing in certain cases.Most deals are approved,but new rules covering more types of transactions and requiring mandatory filings in certain

26、 cases have changed the landscapeUnited StatesBy Farhad Jalinous,Karalyn Mildorf and Keith Schomig4White&CaseThe critical technology mandatory filing requirement focusing on the export-control treatment of the targets critical technology with respect to the foreign investor and its substantial owner

27、s took effect on October 15,2020,and replaced the prior standard that considered whether a TID US businesss critical technologies were utilized in connection with identified industries.Transactions for which certain actions occurred prior to October 15,2020(such as execution of a binding transaction

28、 agreement)would be subject to the prior industry standard.If a mandatory filing applies,notification by a declaration or notice must be submitted to CFIUS at least 30 days prior to the transactions completion date.The new regulations also introduce a concept of“excepted investors,”which are not sub

29、ject to CFIUSs expanded jurisdiction for covered investments or real estate transactions and are exempt from mandatory filing requirements.Excepted investors and their parents must meet relatively strict nationality-related criteria related to“excepted foreign states,”which are currently Australia,C

30、anada,and the US(though this list can change).Excepted investors are not exempt from CFIUSs general jurisdiction,only from CFIUSs expanded authorities under FIRRMA.SCOPE OF THE REVIEW CFIUS reviews focus solely on national security concerns.CFIUS conducts a risk-based analysis based on the threat po

31、sed by the foreign investor,the vulnerabilities exposed by the target US business and the consequences to US national security of combining that threat and vulnerability.Based on its risk assessment,CFIUS determines whether the transaction presents any national security concerns.If CFIUS identifies

32、such concerns,it first determines whether other provisions of US law can sufficiently address them.If no other provisions of US law adequately address the concerns,CFIUS next determines whether With respect to investments,in addition to its traditional authorities-of-control transactions,CFIUS now h

33、as expanded jurisdiction to review certain“covered investments”in sensitive US businesses referred to as“TID US businesses”under the regulations.(TID stands for Technologies,critical Infrastructure and personal Data.)TID US businesses are those that:Produce,design,test,manufacture,fabricate or devel

34、op one or more critical technologies Perform certain actions in relation to identified critical infrastructure assets,referred to as“covered investment-critical infrastructure”Maintain or collect sensitive personal data of US citizens Certain transactions involving TID US businesses are also subject

35、 to mandatory filing requirements.A covered investment is a non-controlling transaction that affords the foreign investor any of the following with respect to a TID US business:Access to any material nonpublic technical information in its possession Board membership or observer rights Any involvemen

36、t,other than through voting of shares,in substantive decision-making regarding sensitive personal data of US citizens,critical technologies or covered investment critical infrastructureBeyond its traditional investment focus,CFIUS now also has jurisdiction to review the purchase or lease by,or a con

37、cession to,a foreign person of real estate in the US that is located within,or will function as part of,certain air or maritime ports;or is located in or within certain proximity ranges of identified military installations and areas.Real estate transactions under CFIUSs jurisdiction are not subject

38、to mandatory filing requirements.CFIUS also has jurisdiction to review changes in rights that would provide control or,for a TID US business,covered investment rights as well as transactions designed to evade CFIUS review.WHO FILES CFIUS notices are typically submitted jointly by the parties,typical

39、ly the investing entity and the target,to the notified transaction Though the new regulations mandate filings for certain transactions,CFIUS review remains predominantly a voluntary process,as most transactions subject to CFIUSs jurisdiction do not meet the mandatory filing criteria.Even for transac

40、tions under CFIUSs voluntary authorities,CFIUS may request parties notify a transaction of interest and has the authority to initiate reviews directly.Notably,under FIRRMA,CFIUS is pursuing non-notified transactions more aggressively,so the risk of CFIUS reaching out on a non-notified transaction ha

41、s generally increased compared with past years.Mandatory filing requirements apply only with respect to controlling investments or covered investments(i.e.,“covered transactions”)in TID US businesses.Specifically,subject to certain exemptions,mandatory filings are required in the following two circu

42、mstances:The acquisition of 25 percent or more of the voting interests in a TID US business by a person in which a single foreign government holds,directly or indirectly,a 49 percent or greater voting interest.All parents in the investors ownership chain are deemed 100 percent owners,so dilution of

43、ownership interests is not recognized for purposes of this test A foreign investment in a TID US business involved with critical technologies,where one or more“US regulatory authorizations”(for example,export licenses)would be required to export,re-export or retransfer any of the US businesss critic

44、al technologies to the investor or any person holding a 25 percent or greater,direct or indirect,voting interest in the investor.With a few exceptions,mandatory filing is required even where such critical technologies would be eligible for export to the relevant foreign person under a license except

45、ion5Foreign direct investment reviews 2020:A global perspectivemore sensitive from a national security standpoint,or in cases where parties want to be assured the certainty of CFIUS clearance,it may be advisable for the parties to start with a notice.Once accepted by CFIUS,a declaration is assessed

46、in 30 calendar days.At the end of the 30 days,CFIUS may take one of four actions:clear the transaction;inform the parties that CFIUS cannot clear the transaction on the basis of the declaration,but not request a notice(commonly referred to as the“shrug”);request that the parties file a notice for th

47、e transaction;or initiate a unilateral review.Though the shrug outcome does not confer“safe harbor”as a clearance doesafter a shrug,CFIUS could potentially request a notice for the transaction in the futurein our experience clients have often found the shrug outcome to be sufficient for closing.For

48、a notice,the parties initially submit a draft“prefiling”on which CFIUS will provide comments and follow-up questions.After addressing those comments,parties will formally file the notice with CFIUS.CFIUS then has to accept the filing,after which a 45-calendar-day initial review begins.At the end of

49、the review,CFIUS will either clear the transaction or proceed to a 45-calendar-day investigation.About half of cases now proceed to investigation,which is an improvement from recent years.An investigation may be extended for one 15-calendar-day period in“extraordinary circumstances.”If a transaction

50、 is referred to the president,the president has 15 calendar days to decide whether to prohibit the transaction.In some cases,CFIUS will need additional time to complete its process,as when negotiating mitigation measures with the parties.In such circumstances,CFIUS may encourage the parties to withd

51、raw and resubmit the filing,any mitigation measures could resolve the concerns.If mitigation is warranted,CFIUS will typically negotiate terms with the parties,which will be a prerequisite to CFIUS clearing the transaction.If CFIUS determines that mitigation cannot adequately resolve its concerns,CF

52、IUS will typically request that the parties abandon their transaction(or the foreign buyer divest its interest in the US business if the review happens following closing).If the parties will not agree to abandonment or divestment,CFIUS can recommend that the President of the United States block the

53、transaction,as only the President has the authority to prohibit a transaction.Presidential blocks are relatively rare,though they have happened more frequently in recent years.It is still more typical for parties to agree to terms for abandonment or divestment directly with CFIUS.Although the CFIUS

54、process is confidential,presidential blocking orders are public.REVIEW PROCESS AND TIMELINE There are now two options for how parties can notify a transaction to CFIUS:a declaration,which is a short-form filing reviewed on an expedited basis;or a joint voluntary notice,which is the traditional CFIUS

55、 notification mechanism.Both declarations and notices include required information about the investor and its owners,the US business that is the subject of the transaction,and the transaction itself.For both declarations and notices,CFIUS will also typically request additional information via Q&A du

56、ring the review.Following the initial submission,the declaration process typically takes approximately five to six weeks and the notice process typically takes up to three to five months.Following its assessment of a declaration,CFIUS may request the parties file a notice,so in those cases the total

57、 process for a transaction notified by declaration will take longer.For complex transactions,deals expected to be which restarts the initial 45-day review period.Most transactions are cleared in one CFIUS cycle.Filing fees apply to notices submitted to CFIUS,but not declarations,though they apply fo

58、r notices submitted following CFIUSs assessment of a declaration.Fees are assessed based on a tiered approach,providing for a proportional cost equal to or less than 0.15 percent of the transaction value.The lowest fee is US$750 for transactions valued between US$500,000 and US$5 million(transaction

59、s under US$500,000 are not subject to fees),and the highest-tier fee is US$300,000 for transactions valued at US$750 million or more.TRENDS IN THE CFIUS PROCESS Many of CFIUSs concernsincluding those addressed in FIRRMArelate to Chinese and Chinese-connected investments in the US.Despite the substan

60、tial decline in Chinese investment in the US,China continues to be a substantial focus of CFIUS.Beyond new Chinese investments,this includes potential Chinese ties to FDI from other countries,as well as non-notified transactions that were previously closed,sometimes several years prior.Based on our

61、experience,including experience under the CFIUS Pilot Program and more since the new FIRRMA regulations took effect in February 2020,we also note the following other key trends related to CFIUS.Increased CFIUS authorities change the equationNow that there are mandatory CFIUS filing requirementswith

62、potential penalties for non-compliance up to the value of the transactionparties need to consider CFIUS issues much more carefully in connection with potential cross-border transactions.The jurisdictional analysis under FIRRMA has also grown increasingly complex,particularly for non-controlling tran

63、sactions.Parties are considering these issues and often incorporating CFIUS-related provisions into 6White&Casetransaction agreements even where no CFIUS filing is being made to provide themselves with additional protection regarding potential CFIUS compliance obligations.Declarations are proving to

64、 be a valuable toolIn 2019,declarations were available only for transactions subject to the CFIUS Pilot Program,which mandated filings for transactions meeting-specified criteria of heightened CFIUS sensitivity.The CFIUS Annual Report for 2019 revealed that under the Pilot Program,just over 70 perce

65、nt of cases notified by declaration were either cleared on the basis of the declaration(approximately 37 percent)or received the“shrug”(approximately 34 percent).CFIUS requesting a notice was actually the least common CFIUS outcome,happening only 28 percent of the time.Now that declarations are a no

66、tification option for all covered transactions,in our experience clients have been availing themselves of this option and have often found it to be effective for transactions that do not seem likely to present substantial national security concerns.Threats and vulnerabilities are evolvingCFIUSs risk

67、-based analysis has also evolved to include new types of potential“threats”and“vulnerabilities.”CFIUS now routinely reviews all transactions for“third-country threats”channels through which China and other deemed strategic competitors might cause harm through the foreign investor(even if the foreign

68、 investor itself is not from such a country).On the vulnerability side,FIRRMA identified key areas of potential substantive sensitivity with its expanded authorities over investments in TID US businesses and its new real estate jurisdiction.This does not,however,mean that critical technologies,criti

69、cal infrastructure,sensitive personal data,and close proximity are the only areas of concern to CFIUS.The concept of national security remains broad,and CFIUS has shown interest in transactions covering a range of industries.External events can also affect national security sensitivities,such as an

70、increased focus on health and supply chain security issues in light of the COVID-19 pandemic.CFIUS steps up pursuit of non-notified transactions FIRRMA provided additional resources for CFIUS to identify and review non-notified transactions of interest.CFIUS officials have emphasized their focus on

71、this area,and we have seen a substantial increase in CFIUS outreach to parties regarding non-notified transactions,including for transactions that closed years ago.So far,as would be expected,the outreach on past transactions has largely seemed aimed at deals involving Chinese and Russian investors.

72、CFIUS remains largely a voluntary process,but given expanded resources and CFIUS personnel dedicated to finding non-notified transactions,it appears that the risk of not filing a transaction with a nexus to national security has generally increased.Emphasis on compliance and enforcement is risingFIR

73、RMA also provided additional resources for compliance and enforcement,and CFIUS officials have indicated that they will be looking closely at compliance with existing mitigation agreements.CFIUS issued its first penalty in 2018,which was for US$1 million for repeated violations of a mitigation agree

74、ment.CFIUS also issued another penalty in 2019 for US$750,000 for violations of an interim CFIUS order.CFIUS officials are currently working on promulgating enforcement guidelines.Parties under existing mitigation agreements,or parties entering into new ones,should focus on compliance to avoid poten

75、tial CFIUS enforcement action.HOW FOREIGN INVESTORS CAN PROTECT THEMSELVES It is critical for foreign investors to consider CFIUS issuesincluding assessing jurisdictional matters,whether mandatory CFIUS filing will apply,and potential substantive risksas early as possible in cross-border transaction

76、s involving foreign investment(direct or indirect)in a US business.Given potentially severe penalties for noncompliance,parties need to know early whether filing will be requiredand where it is not,may want to include relevant representations in the purchase agreement to provide additional protectio

77、n.In cases where filing is mandatory or the parties voluntarily notify CFIUS,allocation of CFIUS mitigation risk will be a key issue.Most transactions are cleared without mitigation,but when it is required,mitigation can have a substantial impact on transaction goals and present unexpected costs.The

78、 range of mitigation measures that can be imposed by CFIUS is quite broad(based on the risk profile of the deal),and it is important for investors in particular to have as clear an understanding as possible with respect to what mitigation measures would be acceptable to them.7Foreign direct investme

79、nt reviews 2020:A global perspectiveOUTCOMES CFIUS continues to approve most notified transactions without mitigation measures Notwithstanding mandatory filing requirements,CFIUS remains predominantly a voluntary process Declarationsshort-form CFIUS filings that are reviewed on an expedited basisare

80、 proving a valuable tool for parties in transactions that do not present national security concerns Where CFIUS has national security concerns,it can impose mitigation conditions that can have significant implications on the foreign investors involvement with the US business.It remains critical for

81、investors to consider mitigation risks at the outset and negotiate protections into the transaction agreement The decrease in Chinese investment in the US has correlated with a decline in transactions being stopped by CFIUS,though China remains a key CFIUS focus even in non-Chinese transactions CFIU

82、S has substantially increased its pursuit of non-notified transactions of interest,including for transactions that closed several years ago.CFIUS is also ramping up its compliance and enforcement efforts with respect to mitigation requirements The same legislation that contained FIRRMA also included

83、 the Export Control Reform Act of 2018,which requires the Department of Commerce to establish export controls on“emerging and foundational technologies,such as sensitive technologies not currently captured under the export control regime.”A few controls of“emerging technologies”have been released,an

84、d more are expected to be issued on a regular basis in the near future.These are important developments to monitor as they are directly relevant to CFIUSs mandatory filing requirements and expanded authorities for investments in businesses involved with critical technologies2020 UPDATE HIGHLIGHTS Th

85、e number of CFIUS reviews continues to remain high,and more parties seem to be notifying CFIUS via declarations.So far,declarations have often proved an attractive and useful option for parties,particularly for transactions that are not expected to present substantial national security concerns It i

86、s important to analyze potential CFIUS issues early in the deal processincluding assessing whether mandatory filing requirements applyand,where relevant,incorporate CFIUS-related terms into transaction agreements FIRRMA has been fully implemented as of February 2020(though CFIUS is continuing to mak

87、e changes),significantly expanding CFIUSs jurisdiction,mandating filings for certain transactions,adding the expedited declaration filing option,and making other changes to the CFIUS process The recent substantial decline in Chinese investment in the US correlated with a notable decrease in transact

88、ions being stopped by CFIUS.China,however,remains a key focus of CFIUSincluding assessment of Chinese-related risks for transactions involving non-Chinese investors9Foreign direct investment reviews 2020:A global perspectiveThe Investment Review Division(IRD),which is part of the Ministry of Innovat

89、ion,Science and Economic Development Canada(ISED),is the government department responsible for the administration of the Investment Canada Act(ICA),the statute that regulates investments in Canadian businesses by non-Canadians.The IRD interfaces with investors and other parties as part of a prelimin

90、ary(informal)review of an investment to determine whether there are potential national security concerns.Where concerns arise,the IRD will work with the Minister of ISED,in consultation with the Minister of Public Safety and Emergency Preparedness,who will refer investments to the Cabinet(the Canadi

91、an Prime Minister and his appointed ministers,formally known as the Governor in Council),who may order a formal review if the investment could be injurious to Canadas national security.The national security review process is supported by Public Safety Canada,Canadas security and intelligence agencie

92、s and other investigative bodies described in the National Security Review of Investments Regulations.Since the pandemic,the Canadian government announced a new policy that would subject certain investments by non-Canadians to enhanced national security review.This policy applies to investments“rela

93、ted to public health or involved in the supply of critical goods and services to Canadians or to the government.”The policy does not define what businesses are subject to this policy,as it is intentionally meant to apply broadly.The policy also sets out enhanced measures applicable to investments ma

94、de by state-owned enterprises or investors working under the influence or direction of a foreign(non-Canadian)government.WHO FILES The ICA is a statute of general application that applies to any acquisition of control of a Canadian business by a foreign investor.If the relevant financial threshold u

95、nder the ICA is exceeded,the statute provides for a process of pre-merger review and approval of foreign investments to determine if they are of“net benefit”to Canada.If the financial threshold is exceeded,the investor must file an application for review and the transaction must be approved by the r

96、elevant minister.A key element in the application for review is the requirement to set out the investors plans for the Canadian business,including plans related to employment,participation of Canadians in the business and capital investment.An application for review is a much more detailed document

97、than a notification.If the financial threshold is not exceeded,the investor has an obligation only to file a simple administrative notification form,which can be filed up to 30 days after closing.In either case(filing of an application for review or just a notification),the Canadian government has t

98、he jurisdiction Since COVID-19,deals involving foreign state-owned enterprises or enterprises related to public health or the supply of critical goods and services are increasingly subject to reviewCanadaBy Oliver Borgers1for 45 days after receipt of such a filing to order a national security review

99、 if there are concerns.The entry point for national security review screening will usually be the obligatory filing under the ICA(either an application for review if the financial threshold is exceeded,or a simple administrative notification form if the threshold is not exceeded).The government also

100、 has the power to subject non-controlling minority investments to a national security review,although we are not aware of any instances of such a review to date.TYPES OF DEALS REVIEWED It is important to keep in mind that the Canadian government has the power to review any transaction(including mino

101、rity investments)in which there are“reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security.”Unlike the“net benefit”review process under the ICA,there is no financial threshold for investments under the ICAs national security review regime.Further w

102、idening the potential scope of the national security review regime is the fact that there is no statutory definition of“injurious to national security.”This lack of definition creates wide discretion for the minister and some uncertainty for foreign investors.The types of transactions that have been

103、 the subject of formal review under the national security lens include those relating to satellite technology,telecommunications,fiber-1 Oliver Borgers is a partner in the Toronto office of McCarthy Ttrault LLP(T+1 416 601 7654,E OBORGERSMCCARTHY.CA).White&Case LLP has no affiliation with McCarthy T

104、trault LLP.2 Generally,an acquisition of greater than 50 percent of the equity or voting interests of an entity,though in certain cases an acquisition of greater than one-third of the equity or voting interests of a corporation,will be considered an acquisition of control.Investments by foreign stat

105、e-owned enterprises or by private investors assessed as being closely tied to or subject to direction from foreign governments will be subject toenhanced scrutiny.10White&Caselaser technology and critical infrastructure,as well as where a non-Canadian investor proposed to build a factory located in

106、close proximity to Canadian Space Agency facilities.Investors subject to Canadian national security reviews have included American companies,as well as investors from emerging markets,but particular scrutiny can be expected for state-owned investors,especially since the announcement of the COVID-19

107、policy.SCOPE OF THE REVIEW A national security review will generally focus on the nature of the business to be acquired and the parties involved in the transaction(including the potential for third-party influence).In assessing whether an investment poses a national security risk,the Canadian govern

108、ment has indicated that it will consider factors that focus on the potential effects of the investment on defense,technology and critical infrastructure and supply.The Canadian government will also focus on transactions related to public health or involved in the supply of critical goods and service

109、s to Canadians or to the Government of Canada.Review can occur before or after closing.Transactions that run the risk of raising national security concerns can seek clearance by making any ICA filings well before the proposed time of closing(at least 45 days,although because of the pandemic,governme

110、nt review times are taking longer and 90 days would be more prudent).The Canadian government may deny the investment,ask for undertakings and/or provide terms or conditions for the investment(similar to mitigation requirements in the US),or,where the investment has already been made,require divestme

111、nt.TRENDS IN THE REVIEW PROCESS The Canadian government has steadily increased its focus on national security,including rejecting mergers due to national security concerns.Since COVID-19,the government is being particularly careful to scrutinize the transactions it becomes aware of.In light of the d

112、ecline in value of many Canadian businesses since March 2020,fewer transactions will be subject to mandatory approval.Given this decline in value,along with the newly recognized importance of certain businesses to Canadas ability to combat the pandemic and to ensure a continued supply of products an

113、d services essential to Canadians and the government,the enhanced review measures described above were announced to guard against potentially harmful or opportunistic foreign investments.In additions,under the enhanced policy,investments by foreign state-owned enterprises(SOEs)or by private investor

114、s“assessed as being closely tied to or subject to direction from foreign governments”will be subject to enhanced scrutiny to determine whether they may be motivated by“non-commercial imperatives”that could harm Canadas economic or national security interests.HOW FOREIGN INVESTORS CAN PROTECT THEMSEL

115、VES Where a transaction gives rise to national security risks,non-Canadian investors should consider filing notice of the transaction with the minister at least 45 days prior to closing to obtain pre-clearance(assuming the minister does not seek further time under the national security review regula

116、tions).For an investment that does not require notification(i.e.,a minority investment),the Canadian government encourages non-Canadian investors to contact the Investment Review Division at the earliest stage of the development of their investment projects to discuss their investment.As in other ju

117、risdictions,it is therefore critical for foreign investors to consider Canadian national security review issues in planning and negotiating transactions.In particular,an investor should ensure that it secures a closing condition predicated on obtaining national security clearance in Canada,where app

118、ropriate.It may also be appropriate for merging parties to allocate the national security risk.11Foreign direct investment reviews 2020:A global perspectiveOUTCOMESIn its Investment Canada Act Annual Report(March 1,2019),the Canadian government reported that 15 national security reviews were ordered

119、 from April 2012 to March 2018 and,in all cases,the proposed investment was either blocked,abandoned or subject to conditions.These 15 investments involved the following industries:pharmaceutical and medical manufacturing;civil engineering construction;telecommunications,including telecom equipment

120、manufacturing;ship and boat building;electrical equipment and manufacturing;rail transportation;computer and related services;and crude oil and natural gas.The majority of the 15 national security reviews involved investors from China and Russia.Also for these transactions,examples of mitigation mea

121、sures that were considered or imposed on investments were disclosed by the government for the first time.Formal national security reviews have been ordered by the Cabinet 15 times since the national security review process was introduced from March 2009 to March 2018(the date on which IRD has releas

122、ed statistics)Many more transactions have been the subject of informal national security review by the IRD,most often resulting in successful pre-clearance.Only a small fraction of the thousands of notifications and applications for review filed with the IRD have attracted national security scrutiny

123、 The outcomes of the 15 instances where formal national security reviews were ordered include:the investment was authorized with conditions that mitigated the identified national security risks(four cases);the investor was ordered to divest control of the Canadian business(five cases);the investor w

124、as directed to not implement the proposed investment(four cases);and the investor withdrew its application prior to a final order being made(two cases)REVIEW PROCESS TIMELINE The process can take up to 200 days(or longer with the consent of the investor)from the date the initial notice of the transa

125、ction is sent to the Minister of ISED.The minister has 45 days(which can be extended by up to an additional 45 days)after an application or notification under the ICA has been certified,or after the implementation of a minority investment that does not require notification,to refer an investment to

126、the Governor in Council for an order for national security review.If an order is made,it can take 110 more days(or longer with the consent of the investor)for the review to be completed.2020 UPDATE HIGHLIGHTS The 2020 Investment Canada Act Annual Report is overdue,no doubt because of the unprecedent

127、ed challenges posed by the pandemic.In 2019,for the first time,the Canadian government released details regarding transactions that were scrutinized on national security grounds reflecting the new mandatory reporting requirements on national security.Any FDI in connection with capped investments und

128、ertaken without the prior authorization from the CNIE will nullify all the legal acts executed to perform the investment.13Foreign direct investment reviews 2020:A global perspectiveThe Foreign Investment Act and its regulations(jointly,the FIA)constitute the main statutory framework governing forei

129、gn direct investment(FDI).In some specific instances,sectorial statutory frameworks(such as the Credit Institutions Act)or relevant permits,authorizations,or concessions complement or supersede the provisions of the FIA.Under the FIA,FDI is generally allowed without prior authorization from any admi

130、nistrative agency,except with regard to legal entities that are:Engaged in the activities described in Article 6 of the FIA(restricted investments)Engaged in the activities provided in Articles 8 and 7 of the FIA,or with assets valued in excess of the monetary threshold set forth in FIAs Article 9,i

131、n an amount in excess of the corresponding cap(capped foreign investments)RESTRICTED INVESTMENTSRestricted investments entail the acquisition of a stakein any amountof the equity of Mexican companies engaged in land passenger and freight transport services within the Mexican territory or development

132、 banking.Pursuant to the FIA,investments in such ventures are limited solely to Mexican nationals.Foreign investors are statutorily precluded from undertaking a restricted investment.Foreign direct investments,whether undertaken directly or indirectly,are generally allowed without restrictions or th

133、e need to obtain prior authorization from an administrative agencyMexicoBy Henri Capin-Gally Santos and Germn Ricardo Macas SalasCAPPED FOREIGN INVESTMENTSForeign investors cannot acquire more than a 10 percent capital stake in a Mexican cooperative production company,which is a special low-revenue

134、company dedicated to a certain primary activity(such as fishing,artisanal products or agricultural production)with a preferential tax regime.Foreign investors cannot acquire more than 49 percent of the capital stock of Mexican legal entities that are engaged in one of the following reserved activiti

135、es:Manufacture and marketing of explosives,firearms,cartridges,ammunition and fireworks Printing and publication of newspapers for exclusive commercialization within the Mexican territory Ownership of agricultural,livestock and forest lands Fishing in freshwater,inshore and exclusive economic zones

136、Integral port administration Piloting services in ports located within the Mexican territory Freight shipping within Mexican waters Ship,aircraft and rail equipment fuel and lubricant supply Broadcasting Air transport servicesThe National Foreign Investment Commission(CNIE)may still authorize any FD

137、I entailing an acquisition of more than 49 percent of the capital stock of a Mexican legal entity engaged in:Maneuvering services in ports located within the Mexican territory Freight shipping via coastal and ocean navigation Aerodrome management or operation Education services Legal services Constr

138、uction and/or operation of railways,as well as railroad transportation services Holding assets with a book value that exceeds MXN 19.55 billion14White&CaseAUTHORIZATION PROCESSTo obtain authorization from the CNIE,the interested foreign investors are required to file a pre-investment control notice

139、before the CNIE,attaching as exhibits a duly filled-in questionnaire issued by the CNIE;the financial and corporate documents of the interested foreign investors;a general description of its investment impact in terms of employment,technological contributions and competitiveness increase of the targ

140、et company;or any other synergy that could derive therefrom;and evidence of payment of filing fees.Once the pre-investment control notice is duly submitted,the CNIE has 45 business days to authorize the proposed investment.If the CNIE does not issue a decision within that period,the proposed investm

141、ent will be deemed authorized according to the FIA.The CNIE can deny an FDI request only for national security purposes.In such a case,the interested foreign investors may file an administrative appellate motion within 15 business days challenging the denial.If the motion is denied,they may file an

142、amparo writ before a court within the following 15 business days challenging both resolutions.Any FDI in connection with capped investments undertaken without the prior authorization from the CNIE will nullify all the legal acts executed to perform the investment.The CNIE can also fine the involved

143、foreign investors up to MXN 434,400.Foreign investors may acquire a non-limited participation in the capital stake of companies engaged in capped activities without prior authorization if the investment is“neutral”a preferred non-voting financial investment equity that is not characterized as FDI un

144、der the FIA.Although the FIA is the law generally applicable to FDI,foreign investments can be further limited or restricted by specific regulations or permits applicable to the target company.In any process involving the analysis of potential FDI,investors should review the terms and conditions pro

145、vided in the specific regulatory framework and in the permits,authorizations and/or concessions granted to the target company.Sensitive sectors are now expanding to biotechnologies,hi-tech,new critical technologies such as artificial intelligence,or 3D printings and data-driven activities.15Foreign

146、direct investment reviews 2020:A global perspectiveWhile there is still no standalone foreign direct investment(FDI)screening at the EU level,the EU continues to push for a coordinated approach toward foreign direct investments into the EU.The key instrument is the EU Screening Regulation,which has

147、entered into force on October 11,2020.Other legislative ideas have already been floated,including the introduction of new tools to control the acquisitions and activities of foreign-subsidized companies in the EU.In addition,the EU has stepped up to ensure a coordinated approach towards investments

148、into health-critical EU assets during the COVID-19 pandemic.PART 1:EU DEVELOPMENTS EU SCREENING REGULATION The EU Screening Regulation(refer to the EU chapter in Foreign Direct Investment Reviews 2019 for details)falls short of delegating any veto or enforcement rights to the EU,which means that Mem

149、ber States remain in the drivers seat for FDI controls.While the EU Screening Regulation also does not oblige EU Member States to introduce a national FDI review process,we expect additional Member States to do so,such as the Netherlands,Sweden,Denmark and Ireland,which currently contemplate the ado

150、ption of FDI regimes.Certain countries have also recently adopted FDI regimes,such as Hungary and Norway.However,the EU Screening Regulation is primarily a means of harmonizing and coordinating the widely differing review mechanisms in place at the Member State level throughout the EU.In particular,

151、the Regulation introduces a coordinating mechanism whereby the European Commission(EC)may issue non-binding opinions on FDI reviews performed in Member States.“Non-reviewing”Member States may provide comments to the“reviewing”Member States.Member States and the EC may also provide comments on a tran

152、saction that is not being reviewed because it takes place in a Member State with no FDI regime,in a Member State in which the transaction does not meet the criteria for an FDI review by the government,or the reviewing Member State decided to waive screening of a particular investment.In the latter c

153、ase,the Member State concerned by the FDI must provide a minimum level of information without undue delay to the other relevant Member States and/or the EC on a confidential basis.The cooperation mechanism may also apply to a completed investment that is subject to scrutiny under a Member State ex p

154、ost regime(most Member States,however,have adopted ex ante FDI regimes),or an investment that has not been scrutinized within 15 months after the investment has been completed.The practical impact of the cooperation mechanism,therefore,will be largely procedural.The final say in relation to any FDI

155、undergoing screening or any related measure remains the sole responsibility of the Member States conducting reviews pursuant to their national FDI screening procedures.However,it cannot be excluded that(in particular)smaller EU Member States may find themselves under considerable pressure to conform

156、 to opinions or comments issued by the EC or other Member States.In the same vein,despite the fact that the status quo of Member States being responsible for any enforcement actions post-FDI screening still stands,the implementation of the EU Screening Regulation will likely create an impetus for Me

157、mber States to align themselves better with the EU Screening Regulation.This alignment may prompt Member States to consider establishing a new national security review regime(where one does not already exist),or amend In a regime undergoing rapid change,investment screening is currently“light,”with

158、red tape increasing for European inbound investmentEuropean UnionBy Dr.Tobias Heinrich,Dr.Tilman Kuhn,Mark Powell,Orion Berg,Thilo Wienke,Camille Grimaldi and Fanny AbouzeidThe white paper is extremely far-reaching andif adopted into legislationwould be a significant change for foreign investors int

159、o the EU.16White&Casetheir current regimes to comply with the Regulation.In particular,the EU Screening Regulation sets out the following cornerstones that an FDI regime should reflect:Investment reviews should revolve only around the baseline substantive criteria of“security and public order”Invest

160、ments in the following(non-exhaustive)sector-specific assets and technologies may be problematic:critical infrastructure(whether physical or virtual,including energy,transport,water,health,communications,media,data processing or storage,aerospace,defense,electoral or financial infrastructure,as well

161、 as sensitive facilities and investments in land and real estate,crucial for the use of such infrastructure);critical technologies and dual-use items(as defined in the EU Dual Use Regulation,including artificial intelligence,robotics,semiconductors,cybersecurity,quantum technology,aerospace,defense,

162、energy storage,nuclear technologies,nanotechnologies and biotechnologies);supply of critical inputs,including energy or raw materials,as well as food security;access to sensitive information,including personal data,or the ability to control such information;and media activities as far as freedom and

163、 pluralism are concerned Investments may be particularly problematic where a foreign government(including state bodies or armed forces)directly or indirectlye.g.,through ownership structures or“significant funding”controls the acquirerThe most immediate effects of the EU Screening Regulation,however

164、,will be largely procedural.In particular,the new role of the EC and the other Member States will add an additional layer of complexity to the investment screening review process.In any event,the involvement of more players is expected to result in more“red tape”and inevitably longer review processe

165、s.While the EU Screening Regulation is by and large an instrument of“soft law,”it does add substantial complexity and uncertainty to security reviews performed at the Member State level.It will also put additional pressure on Member States to consider a broader range of security interests,which is l

166、ikely to facilitate lobbying efforts from other stakeholders taking interest in a transaction.From a practical point of view,the new EU Regulation establishes an automatic information exchange system between all Member States on every notified transaction.Investors should make sure that a comprehens

167、ive multijurisdictional FDI assessment is carried out in transactions involving potentially strategic sectors and a variety of jurisdictions where the target business operates.The EC confirmed that during the transition period(until December 31,2020),UK investments into the EU should be considered“i

168、ntra-EU investments.”As such,UK investments should not be subject to screening of foreign investments or any assessment under the EU cooperation mechanism.In addition,on the basis of the specific derogations provided in the withdrawal agreement between the UK and the EU,the EC considers the UK not a

169、 part of the cooperation mechanism on FDI Screening.WHITE PAPER ON FOREIGN-SUBSIDIZED COMPANIESWhile the EU Screening Regulation has just entered into force,the EU is already floating ideas on the introduction of new tools to control the acquisitions and activities of foreign-subsidized companies in

170、 the EU.In June 2020,the EC released its“White Paper on levelling the playing field as regards foreign subsidiaries.”With its white paper,the EC is seeking views on three tools to control the acquisitions and activities of foreign-subsidized companies in the EU.In particular,the white paper contempl

171、ates the following tools:A general ex post control mechanism to review distortions of competition through foreign subsidiaries A mandatory ex ante notification mechanism that would allow the EC to review foreign-subsidized acquisitions,including certain minority investments The possibility to exclud

172、e bidders that have received distortive foreign subsidies from public contracts tendered by the EU and Member State authoritiesThese proposed tools would sit somewhere in between merger control/antitrust,trade law and FDI control.The EC considers the tools to close a perceived enforcement gap in cas

173、e of foreign subsidies,and to be complementary to the existing instruments.The second toola mandatory ex ante notification mechanism of foreign-subsidized investments at the EU levelcould in particular result in procedural overlaps with EU or national merger control and national FDI reviews.Where FD

174、I constitutes an acquisition that is facilitated by a foreign subsidy,while also raising concerns with regard to security and public order,the new tool would result in parallel procedures.Such a foreign-backed acquisition would have to be notified to several relevant public authorities under both th

175、e 17Foreign direct investment reviews 2020:A global perspectivemedical sector have been added to the list of critical activities to undergo an FDI screening,notably in Germany,France,Italy,Spain,Austria,Hungary,Poland and Slovenia.While the COVID-19 pandemic is a very particular situation calling fo

176、r effective responses,the successful use of the Guidance Paper may serve as a blueprint for future concerted reactions to the investment climateeven without a standalone FDI review at the EU level.PART 2:FDI AT THE MEMBER STATE LEVELOnly about half of EU Member States have a screening regime.The reg

177、imes differ widely in terms of:Whether they provide for mandatory or voluntary filings,or ex officio intervention rights of the government Where filing requirements exist,whether there is a threshold related to the percent of voting rights or shares acquired,a turnover-based threshold,or another typ

178、e of trigger Which industries are viewed as“critical”and may hence trigger a filing obligation and/or government intervention Whether the government has a right to intervene below the thresholds Whether they are suspensory(i.e.,provide for a standstill obligation during the review)Whether they cover

179、 only investments by non-EU/EFTA-based investors or by any non-domestic investor The duration and structure of the proceedings,including whether clearance subject to remedies(e.g.,compliance or hold separate commitments)is possibleSome regimes are truly hybrid,and the answer to these questions depen

180、ds on the targets activities and other factors.FDI screening mechanisms and the possible new tool,considerably adding to the administrative burden.Foreign investors should anticipate the additional administrative burden of this additional mandatory notification combined with a potential merger contr

181、ol filing at the EU or Member State level.Overall,the white paper is extremely far-reaching andif adopted into legislationwould be a significant change for foreign investors into the EU.For the time being,these are just“ideas”on the horizon,and would likely be the subject of significant debate durin

182、g the legislative process between the European Parliament and the Council.However,the proposal is another manifestation of growing protectionism,whether for national security or wider economic or geo-political reasons.EU GUIDANCE ON PROTECTING STRATEGIC INTERESTSIn the meantime,the EC has resorted t

183、o“soft law”in an attempt to align investment screening throughout the EU.On March 25,2020,the EC issued a Guidance Paper focusing on the protection of health-related assets in the face of the COVID-19 pandemic.In particular,the EC warned the Member States of an“increased risk of attempts to acquire

184、healthcare capacities(for example for the productions of medical or protective equipment)or related industries such as research establishments(for instance,developing vaccines)via foreign direct investment.”The Guidance Paper called on the Member States to make full use of any existing FDI screening

185、 mechanism,or to set up a full-fledged regime,capable of addressing risks to critical health infrastructures and supply of critical inputs.While not binding for the Member States,the ECs guidance has not gone unnoticed.For example,within months of the Guidance Paper,specific activities in the OVERVI

186、EW OF REGIMES WITH/WITHOUT STANDSTILL OBLIGATIONThere is broad divergence among the regimes regarding whether they provide for mandatory filings,voluntary filings,ex officio investigations or a mixture thereof.The German regime is illustrativeas explained in the chapter“Germany,”it provides for a ma

187、ndatory filing requirement based on the targets activities,the size of the stake(voting rights)acquired and the“nationality”of the investor.If these thresholds are not met,the government may still intervene,and investors may make voluntary filings,under certain circumstances.(At a minimum,there need

188、s to be a direct or indirect acquisition of at least 25 percent of the voting rights of a German company by non-EU/EFTA-based investors.)The regime provides effectively for a standstill obligation where filings are mandatory.COVERAGE OF INVESTMENTS BY NON-EU INVESTORS ONLY?The various national regim

189、es also differ in terms of whether they only cover investments by non-EU-based investors or any non-domestic acquirer.Some regimes are,again,hybrid:For example,the German regime scrutinizes investments by any non-domestic acquirer in the defense sector(as of a 10 percent stake),while in all other se

190、ctors,investments by EU or EFTA-based acquirers are permitted by law(although the government takes a very broad view as to whether an investor is non-EU/EFTA-based).The French regime captures acquisitions of control by any non-French investors,but minority acquisitions only if the investor is non-EU

191、/EEA-based(as of 25 percent of voting rights for all kinds of entities and,until the end of 2020,as of 10 percent of voting rights with respect to listed companies).18White&CaseFDI regime in place Austria Belgium Bosnia and Herzegovina Bulgaria Croatia Czech Republic Denmark Estonia Finland France G

192、ermany Greece Hungary Italy Latvia Lithuania Montenegro North Macedonia Norway Poland Portugal Romania Russia Serbia Slovenia Spain Turkey UkraineFDI regime in placeFDI only for non EU/EEA,or all foreign investorsFDI regime mandatoryFDI regime suspensory/standstill obligationCountryDefenseHealthcare

193、EnergyTelecomAgriculture/Food productionTransportationReal estateOtherAustriaFood,IT,waterBulgariaFinanceCroatiaFinanceCzech Republic*Finance,data,critical technologiesDenmarkEstoniaFinlandFranceData,mediaGermanyMedia,cloud computing,telematics,finance,dual-use goodsGreeceHungaryItalyFinance,data,me

194、dia,critical technologiesLatviaGamblingLithuaniaFinancePolandRomaniaFinanceRussiaMedia,insuranceSloveniaFinance,insurance,data,critical technologiesSpain Finance,data,media,critical technologiesTurkeyUnited Kingdom*Financial sector,media*Activities most reviewed by the UK government(but not statutor

195、y)*On the basis of a bill currently under discussion19Foreign direct investment reviews 2020:A global perspectivetechnologies such as artificial intelligence or 3D printings,and data-driven activities.Moreover,the COVID-19 pandemic brought FDI into sharper focus and accelerated movement on a nationa

196、l level across Europe and elsewhere around the world.Governments were concerned about foreign investors taking opportunistic advantage of European companies being in distress,and of course,the crisis led the governments to add the healthcare sector to the sensitive industries.Finally,5G technology h

197、as become a source of concern for certain Member States that had issued specific rules to ensure FDI screening in relation to 5G INDUSTRIES SUBJECT TO SCRUTINYWe are seeing an increased convergence in views across the US,Europe and elsewhere that so-called“sensitive”sectors need to be protected in a

198、 more or less coherent way from what is being described in the US as“adversarial capital.”This trend is displayed through both the lowering of thresholds that trigger FDI reviews and an expansion of what qualifies as a sensitive sector for purposes of FDI reviews,export controls and international tr

199、ade compliance.Sensitive sectors are no longer limited to the traditional sectors associated with national security at a macro level(defense,energy or telecom).They are now expanding to biotechnologies,hi-tech,new critical networks/equipment.In Italy,the governments“Golden Power”pre-clearance proces

200、s is mandatory for contracts or agreements with non-EU persons relating to the supply of 5G technology infrastructure,components and services.France introduced a specific ad hoc authorization process for operating 5G technology in French territory.In Germany,the Federal Network Agency has published

201、a security catalog for telecoms and data processing,highlighting the critical nature of 5G networks,and the Federal Government is contemplating supplementing the technical security check for 5G networks with a political review process.20White&CaseFILING THRESHOLDSSome national FDI regimes determine

202、filing requirements or intervention rights based solely on the size of the stake acquired,and cover share deals and asset deals alike;others rely on different or additional factors,such as the targets revenues or other measures of its significance.For example,in the healthcare sector,the German regi

203、me provides for a filing obligation for an investment of at least 10 percent by a non-EU/EFTA-based acquirer,inter alia,into German:Hospitals handling 30,000 or more cases/year Production facilities for directly life-saving medical products as of an annual turnover of 9.068 million Production facili

204、ties and warehouses for other pharmaceuticals as well as pharmacies as of 4.65 million packages put on the market per year Diagnostic and therapeutic laboratories as of 1.5 million orders/yearPrior approval is required in Austria only if the target company has an annual revenue of 700,000 or more.IN

205、TERVENTIONS OUTSIDE THE FORMAL SCOPE Triggered by the COVID-19 pandemic,the German Federal Ministry for Economic Affairs and Energy announced in June 2020 that the state-owned Kreditanstalt fr Wiederaufbau(KfW)will acquire a 23 percent interest in CureVac,a biopharmaceutical company whose focus is o

206、n developing vaccines for infectious diseases like COVID-19 and drugs to treat cancer and rare diseases,in order to avoid its potential acquisition by any foreign investor.Similarly,in July 2018,the German Federal Government had decided to prevent the acquisition of a 20 percent stake in the power g

207、rid operator 50Hertz by a Chinese investor by arranging for an investment by KfW(because it did not have jurisdiction to block the deal under the then-pertinent FDI regime).The German Federal Government officially confirmed that the acquisition by KfW was aimed at protecting critical infrastructure

208、for energy supply in Germany.DURATION OF PROCEEDINGS(INCLUDING SCOPE FOR EXTENSIONS)The duration of proceedings differs widely between jurisdictions.Generally,the process takes several months,and many feature a two-phase process(initial review period followed by in-depth review)and provide for stop-

209、the-clock mechanisms,such as suspension based on information request,or negotiation of mitigation requirements.21Foreign direct investment reviews 2020:A global perspectivePhase II(45 business days)Suspension possible for information request Extension possible if mitigation requirements(in practice

210、3 4 months)Phase 1(30 business days)Review during 45 business daysSuspension possible(10 to 30 business days)for information requestReview by the Government within 6 monthsSuspension possible for information requestIn-depth review(4 months from receipt of full documentation)Extension by 3 months for

211、 extraordinary casesSuspension possible in case of mitigation requirementsDeadline runs anew when additional information is required“Initial review”(2 months)Review during 30 business daysExtension of 45 days possible if necessary(further extension if the parties agree)Suspension possible for inform

212、ation requestNon standalone regimeExpected regimeMerger control:Phase I(40 business days)and Phase II(24 weeks)UK government can ask the CMA to report a“public interest”case and the FDI control will run alongside merger reviewproducer and supplier of light intensifier tubes using digital technology

213、with military applications.Teledyne has finally decided to withdraw its offer.Clearance with“remedies”(mitigation agreements)is becoming customary in an increasing number of Member States.Remedies generally include maintaining sufficient local resources related to the sensitive activities,restrictio

214、ns on the use of intellectual property rights or on the governance of the target POSSIBLE OUTCOMES OF PROCEEDINGSBlocking decisions on the grounds of national security concerns remains an exception in most Member States.Issuing a formal veto to a potential foreign investor may leave the target busin

215、ess without a new investor as illustrated by the recent Photonis transaction in France.In March 2020,the French Minister of the Economy issued an informal objection to US company Teledyne Technologies Inc.s contemplated investment in Photonis,a French company,mandatory continuation of sensitive cont

216、racts to ensure continued services,appointing an authorized security officer within the target company and reporting obligations,etc.In extreme cases,national authorities may also impose mandatory disposal of sensitive activities to an approved acquirer.23Foreign direct investment reviews 2020:A glo

217、bal perspectiveThe Finnish government views foreign ownership positively as a catalyst for increasing internationalization and competitiveness.Deals are restricted only when they meet very specific criteria.The objective of the Finnish Act on Monitoring Foreign Ownership(172/2012,as amended,the“Moni

218、toring Act”)1,is to assess foreign investments for their potential impact on national interests.When doing so is deemed necessary to protect national defense and safeguard public order and security,the government may restrict the transfer of influence to foreigners,foreign organizations and foundati

219、ons.The Monitoring Act has a special focus on defense industry companies,including dual-use companies,and companies operating in the security sector.The Ministry of Economic Affairs and Employment(the“Ministry”)handles matters concerning the monitoring and confirmation of corporate acquisitions and

220、also serves as the national contact point in the cooperation between Member States and the EU.FILING OBLIGATIONS AND CONSEQUENCES IN THE EVENT OF BREACH Under the Monitoring Act,a“corporate acquisition”occurs when a foreign owner gains control of at least one-tenth,one-third or one-half of the aggre

221、gate number of votes conferred by all shares in a Finnish companyor otherwise secures a holding that confers decision-making authority.All corporate acquisitions concerning the defense and dual-use sectors require advance approval by Finnish authorities.Advance approval must also be acquired for cor

222、porate acquisitions concerning companies operating in the security sector that provide products or services to authorities that are deemed vital for the security of the society.Deals not related to defense or security may also be covered by the Monitoring Act if the company being acquired is conside

223、red critical for securing vital functions of society.In such cases,investors are however not required to submit an application prior to completing a transaction.But in practice,applications are always submitted prior to completion.The government intentionally does not define the phrase“company consi

224、dered critical for securing vital functions of society”because the definition evolves over time.The Ministry may also oblige a foreign investor,for a particular reason and after processing the matter,to submit an application concerning a measure that increases the foreign investors influence but whi

225、ch does not result in exceeding the abovementioned limits.For the defense and dual-use sectors,monitoring covers all foreign owners.For security sector companies and companies considered critical for securing vital functions of society,monitoring applies only to foreign owners residing or domiciled

226、outside the EU or the European Free Trade Association.The Ministry may also impose mandatory conditions for the confirmation of a corporate acquisition and,where necessary,enforce compliance with the application of a conditional fine.If the Monitoring Act is breached,the transaction can be declared

227、null and void.Deals are generally not blocked in Finland,and are reviewed mostly when in the defense and dual-use sectorsFinlandBy Janko Lindros1 New amendments to the Monitoring Act entered into force on October 11,2020.This review includes the planned amendments as we expect that the Finnish Parli

228、ament will not make any significant changes to the Finnish Government proposal.Deals not related to defense or security may also be covered by the Monitoring Act if the company being acquired is considered critical for securing vital functions of society.24White&CaseREVIEW PROCESS The review process

229、 starts when an investor submits an application to the Ministry.There are no formal requirements for the layout of the application,but the Ministry has published instructions for preparing one.It is critical that the application be made by the potential foreign owner,not a Finnish holding company al

230、ready set up by the potential new owner.After receipt of the application,the Ministry asks for input from other authorities and,if necessary,the Ministry may disclose confidential documents and information to these authorities.The Ministry may also decide not to review a submitted application for pr

231、ior approval if it determines that the acquisition does not fall within the scope of the Monitoring Act.Where it is apparent that the purpose of an acquisition or an equivalent measure is to circumvent the provisions of the Monitoring Act,the Ministry has the right to examine the acquisition at its

232、request.If the Ministry finds that the transaction may endanger a key national interest,it transfers the matter to the governments plenary session for resolution.The governments plenary session then makes the decision about whether to restrict or approve the deal,depending on whether it believes the

233、 deal poses a threat to the national interest.However,if the Ministry believes that a transaction does not endanger a key national interest,it approves the transaction.The vast majority of transactions submitted to date have been approved by virtue of this rule.All applications are urgently processe

234、d by the Ministry.The Monitoring Act states that a transaction is deemed to have been approved if the Ministry does not make a decision on an in-depth review within six weeks,or if the application has not been transferred to the governments plenary session within three months dating from the day whe

235、n all necessary materials were received.In practice,the process usually takes six to eight weeks.In view of the COVID-19 crisis,a decree of July 22,2020 lowered the voting rights threshold from 25 percent to 10 percent for listed companies.Foreign direct investment reviews 2020:A global perspectiveS

236、ince 2014,the scope of the French Foreign Investments Control regime has been substantially expanded.In May 2019,the so-called PACTE(Plan d Action pour la Croissance et la Transformation des Entreprises)law strengthened the powers of French authorities in case of breach of the filing requirement or

237、commitments imposed in the context of a clearance decision.Subsequently,No.2019-1590 of December 31,2019 and the Ministerial Order of December 31,2019 relating to foreign investments in France,which entered into force on April 1,2020,amended the regime to grasp new strategic sectors,refine certain c

238、oncepts and provide a clearer review framework for foreign investors.The regime has then been updated in the context of the COVID-19 health and economic crisis.The Bureau Multicom 4,which is located within the Ministry of Economys(MoE)Treasury Department,conducts the review.The process generally inv

239、olves other relevant ministries and administrations depending on the areas at stake.Since January 2016,a commissioner of strategic information and economic security(attached to the MoE)also assists the Treasury when coordinating inter-ministerial consultations.WHO FILESThe foreign investor files a m

240、andatory request for prior authorization,which must include detailed information on the investor and its shareholders,the target,the pre-and post-closing structures,financial terms of the transaction and the sensitive activities at stake.TYPES OF DEALS REVIEWEDTransactions reviewed under the French

241、Monetary and Financial Code(MFC)include:Acquisition by a foreign investor of a direct or indirect controlling interest in a French entity Acquisition by a foreign investor of all or part of a branch of activity of a French entity For non-EU/EEA investors only,the acquisition of more than 25 percent

242、of voting rights of a French entity whether made,directly or indirectly,by a sole investor or by several investors acting in concert(instead of the 33 percent threshold of the share capital or voting rights under the former regime)In view of the COVID-19 crisis,a decree of July 22,2020 lowered the v

243、oting rights threshold from 25 percent to 10 percent for listed companies.This measure is temporary and should be in place until December 31,2020 only.The review applies only to foreign investments made in the sensitive activities listed in the MFC.Previously,the scope of the review differed dependi

244、ng on the origin of the investor.The Decree of December 2019 abandoned this distinction.For both European Union/European Economic Area(EU/EEA)investors and non-EU/EEA investors,the list of strategic sectors notably includes:Activities relating to dual-use goods and technologies,and activities of und

245、ertakings holding national defense secrets or that have concluded a contract to the benefit of the French Ministry of Defense Activities relating to the interception/detection of correspondences/conversations,capture of computer data,security of information systems,space operations and electronic sy

246、stems used in public security missions Activities relating to infrastructure,goods or services essential to guarantee energy supply,water supply,transport networks,telecom networks,space operations,public security,public health and vital infrastructure R&D activities in cybersecurity,artificial inte

247、lligence,robotics,additive manufacturing,semiconductors,certain dual-use goods and technologies,sensitive data storage,energy storage and quantum technologies.A ministerial order of April 27,2020 broadened the list to include biotechnologiesThe French Foreign Investments Control regime has recently

248、been reinforced following a reform of 2019,and other measures have been adopted in view of the COVID-19 pandemicFranceBy Nathalie Ngre-Eveillard and Orion Berg26White&CaseSince the Decree of 2019,the screening obligations also cover print and digital press as well as activities relating to the produ

249、ction,transformation or distribution of agricultural products enumerated at Annex I of the Treaty on the Functioning of the European Union(TFUE)when they contribute to food security objectives,such as ensuring access to safe,healthy,diversified food,protecting and developing agricultural lands,and p

250、romoting Frances food independence.SCOPE OF THE REVIEWThe MoE assesses whether the transaction may jeopardize public order,public safety or national security based on the information the investor provided in its submission.Follow-up Q&A and meetings with the MoE and other involved ministries are cus

251、tomary.The seller and the target company may also be requested to cooperate with the review.The Decree of December 2019 specified the standard of review.The MoE is now expressly entitled to take into consideration the ties between a foreign investor and a foreign government or foreign public entity.

252、In addition,the MoE may refuse to grant authorization if there is a“serious presumption”that the investor is likely to commit or has been punished for the commitment of certain enumerated infringements(such as drug trafficking,procuring,money laundering,financing terrorism,corruption or influence pe

253、ddling).The MoE may also take into account the investors previous breach to prior authorization requirements or to injunctions and interim measures.In addition,the PACTE law of 2019 modified the sanctions mechanism in case of infringement to the prior approval obligation.As such,if a transaction has

254、 been implemented without prior authorization,the MoE may enjoin the investor to file for prior authorization(this measure is not only punitive,but may also be used by the MoE to give the foreign investor the possibility to cure the situation),unwind the transaction at his own expense or amend the t

255、ransaction.If the protection of public order,public security or national defense is compromised or likely to be compromised,the MoE also has the power to pronounce interim measures to remedy the situation quickly.Remedies include suspending the investors voting rights in the target company;prohibiti

256、ng or limiting the distribution of dividends to the foreign investor;temporarily suspending,restricting or prohibiting the free disposal of all or part of the assets related to the sensitive activities carried out by the target;and appointing a temporary representative within the company to ensure t

257、he preservation of national interests.Sanctions will also be imposed if an investor did not comply with the clearance conditions imposed by the MoE,such as the withdrawal of the clearance,compliance with the initial commitments,or compliance with new commitments set out by the MoE,including unwindin

258、g the transaction or divesting all or part of the sensitive activities carried out by the target.Non-compliance with MoE orders is subject to a daily penalty.In addition,the MoE may impose monetary sanctions amounting to twice the value of the investment at stake,10 percent of the annual turnover ac

259、hieved by the target company,1 million for natural persons or 5 million for legal entities.In addition,the PACTE law introduced some transparency into the French review system.The MoE is now required to issue yearly public general statistics(on a no-name basis)related to French national security rev

260、iews,to provide a better sense of the general approach adopted by the MoE.TRENDS IN THE REVIEW PROCESSIn 2017,following several cross-border deals involving French flagships acquired by foreign investors,the French National Assembly created a Parliamentary Enquiry Committee to investigate decisions

261、made by the French State and explore how French national security interests are protected on such occasions.This put increased pressure on the services conducting and coordinating the review process to ensure that they have completed a thorough review of both the activities at stake and the profile

262、and intentions of the foreign investors.All relevant administrations are involved in the review process,and the investor and its counsels,as well as the target company,may be convened to meetings and Q&A sessions in relation to the envisaged transactions.Delineating and retaining strategic activitie

263、s,jobs and resources in France has also become an increasing strategic concern in the review process,especially as they relate to clearance commitments that may be required of a foreign investor.HOW FOREIGN INVESTORS CAN PROTECT THEMSELVESForeign investors must anticipate foreign investment control

264、issues before planning and negotiating transactions.The responsibility for filing lies primarily on the buyer and,if the transaction falls under the MFC regulation,prior clearance by the MoE should be a condition of the deal.The parties may also seek a ruling from the MoE to confirm whether a contem

265、plated transaction falls within the scope of the MFC.The Decree of 2019 opened a new option for the target,which may now submit a request at any time to obtain comfort about whether its activity falls within the scope of the MoE review.The sellers cooperation in the preparation and review of the fil

266、ing 27Foreign direct investment reviews 2020:A global perspectiveclearance with commitments.In practice,longer periods,such as three or four months,should be anticipated if the MoE requests supplemental information and considers imposing conditions to clear the case.2020 UPDATE HIGHLIGHTSThe amended

267、 Foreign Investment Control regime entered into force on April 1,2020.The MoE indicated orally that the new regime will provide more flexibility in the follow-up and the revision of the conditions imposed on foreign investors.According to the MoE,no substantive reform will adopted in coming years.Th

268、e MoE is currently working on guidelines clarifying the rules,notably from a sectorial standpoint.The French government adopted two measures to circumvent the effects of the COVID-19 crisis on the buyout is important.If the parties expect that conditions or undertakings will be imposed,the buyer sho

269、uld anticipate discussions with the MoE and other interested ministries that may impact the timeline for clearance.In addition,the buyer should consider including a break-up fee or opt-out clause in the transaction documentation to protect its interests if the conditions imposed on the transaction a

270、re too burdensome.Preliminary informal contacts with French authorities may also be advisable.REVIEW PROCESS TIMELINEUnder the new framework,the MoE has 30 business days to indicate whether a transaction falls outside the scope of the review,is cleared unconditionally or requires a further analysis.

271、Where further analysis is required and mitigating conditions are necessary,the MoE has an additional period of 45 business days to provide the investor with its final decision,refusal of the investment or of French strategic companies.A ministerial order of April 27,2020 included the biotechnologies

272、 in the list of critical technologies likely to be subject to screening,and a decree of July 22,2020 lowering the voting rights threshold from 25 percent to 10 percent for listed companies and only for non-EU/EEA investors.This second measure is temporary and should be in place only until December 3

273、1,2020.OUTCOMESOnce the review is completed,the MoE may:Authorize the transaction without condition(a rather rare outcome)Authorize the transaction subject to mitigating conditions/undertakings aimed at ensuring that the transaction will not adversely affect public order,public safety or national se

274、curity(most of the cases when the MoE decides to review the investment)Refuse to authorize the transaction if adverse effects cannot be remedied(also a very rare outcome)Mitigating conditions/undertakings may pertain to the investors preservation of the continuity of the targets activities and the s

275、ecurity of its supply of products or services;for example,maintaining existing contracts with public entities,or maintaining R&D capabilities and production in France.They may also include corporate requirements such as ensuring that sensitive activities are carried out by a French legal entity,and/

276、or imposing information-access/governance requirements involving French authorities.The MoE review is a mandatory process.Contractual agreements in breach of the mandatory process are deemed null and void.The PACTE law amended the sanctions mechanism in case of breach of the notification requirement

277、 and granted the MoE additional powers in that regard.According to the BMWi,almost all of the cases in which security concerns were identified in 2019 and 2020 were resolved through contractual arrangements.29Foreign direct investment reviews 2020:A global perspectiveIn Germany,the investment climat

278、e remains liberal in principle.Nevertheless,since around 2016,German foreign investment control has continuously toughened and the German government has become more sensitive about protecting key technologies,industries and know-how.Several transactions involving,in broad terms,critical infrastructu

279、re,telecommunication networks or the like have been cleared only after lengthy investigations,and are subject to strict compliance remedies.The other focus is the potential use of key technologies,e.g.,in the semiconductor space or in military applications.Triggered by the EU Screening Regulation an

280、d the COVID-19 pandemic,the German regulatory framework hasonce againundergone substantial,expansive revisions throughout the past year,adding to the complexity and scope of the review process.THE REGULATORY FRAMEWORKThe German rules on foreign direct investment are set out in the German Foreign Tra

281、de and Payments Act(Auenwirtschaftsgesetz;AWG)and the German Foreign Trade and Payments Ordinance(Auenwirtschaftsverordnung;AWV).The regulatory framework is broadly structured as follows:The competent authority is the Federal Ministry for Economic Affairs and Energy(Bundesministerium fr Wirtschaft u

282、nd EnergieBMWi),which involves other ministries and government agencies depending on the target activities The German foreign direct investment regime is partly mandatory,and partly voluntary.In essence,the activities of the target and the“nationality”of the direct or indirect investor determine the

283、 process and whether there is a filing obligation For all foreign direct investments that are subject to the mandatory regime,the investment threshold is 10 percent(shares or assets),and the transaction is subject to a standstill obligation until clearance For all other foreign direct investments,th

284、e investment threshold allowing for a review is 25 percent,and there is generally no equivalent standstill obligation The review timeline includes an initial review period of two months and,to the extent the BMWi decides to initiate a full review,a subsequent in-depth review of four months from the

285、full documentation(subject to suspensions and extensions)The material review criterion to be applied by the BMWi is whether the foreign direct investment results in a probable impediment to the public order or security(ffentliche Ordnung oder Sicherheit)of the Federal Republic of GermanySCOPE OF REV

286、IEW AND TYPES OF DEALS REVIEWED In summary,the activities of the target and the nationality/origin of the investor determine the review process.Regarding certain highly sensitive industries such as arms and military equipment,encryption technologies as well as other key defense technologies such as

287、reconnaissance,sensor and protection technologies,investments of at least 10 percent(voting rights in an entity or assets constituting a business)by any foreign(i.e.,non-German)investor are subject to a mandatory review(so-called sector-specific review).Any other type of investment may only be scrut

288、inized if the investor is based outside the EEA/EFTA(so-called cross-sectoral review).The BMWi takes a broad view and looks at all entities in the entire“acquisition chain”from the direct acquirer to the ultimate parent,and also to shareholders such as limited partners in this respect.The Federal Mi

289、nistry for Economic Affairs and Energy continues to tighten FDI control further,but the investment climate remains liberal in principleGermanyBy Dr.Tobias Heinrich and Dr.Tilman Kuhn30White&CaseWhether a review is mandatory or voluntary further depends on the targets activities.In particular,the rev

290、iew is mandatory if a non-EU/EFTA investor acquires 10 percent or more of a domestic target that:Operates“critical infrastructure”(as legally defined in great detail)or develops and modifies software specifically for such“critical infrastructure”Has been authorized to carry out organizational measur

291、es pursuant to the Telecommunications Act or produces or has produced the technical equipment used for implementing statutory measures to monitor telecommunications and has knowledge about this technology Provides cloud computing services and the infrastructure for cloud Holds a license for providin

292、g telematics infrastructure components or services Is a company of the media industry that contributes to the formation of public opinion via broadcasting,telemedia or printed products and is characterized by particular topicality and breadth of impact Provides services that are needed to ensure the

293、 trouble-free operation and functioning of state communication infrastructures Develops or manufactures personal protective equipment Develops,manufactures or markets essential medicines,including their precursors and active ingredients Develops or manufactures medicinal products within the meaning

294、of medicinal product law that are intended for diagnosis,prevention,monitoring,predicting,forecasting,treating or alleviating life-threatening and highly infectious diseases Develops or manufacturers in vitro diagnostics,within the meaning of medicinal product law,that serve to supply information ab

295、out physiological or pathological processes or conditions,or to stipulate or monitor therapeutic measures relating to life-threatening and highly infectious diseasesFor any other type of target,a filing is voluntary,and the BMWi may initiate ex officio proceedings,where a non-EU/EFTA investor acquir

296、es 25 percent or more of a domestic target.The BMWi is entitled to review all types of acquisitions,including share deals and asset deals.The calculation of voting rights held in the target company will take into account certain undertakings that may be attributed to the ultimate owner,such as an ag

297、reement on the joint exercise of voting rights.In order to prevent circumvention transactions,the AWV provides more details on how to calculate and attribute acquired voting rights.Asset deals require a comparable test for the respective asset values,whereby 25 percent/10 percent of the total assets

298、 of the acquired business are deemed relevantin essence,deals that“substitute”the acquisition of a shareholding above the relevant threshold,defined in the AWV as the acquisition of a definable part of an enterprise,or all relevant resources needed for the enterprise,or a definable part thereof.PROC

299、ESS CONSIDERATIONS AND TIMELINE The BMWi must be notified of any transaction subject to a mandatory review.All transactions that require filings are subject to a“standstill obligation.”In particular,the following are prohibited:allowing the acquirer to directly or indirectly exercise voting rights;d

300、istributing profits to the acquirer;and granting the acquirer access to certain sensitive data before clearance has been or is deemed to be granted.In addition,the purchasing agreement(also under the voluntary regime)is subject to the condition subsequent(auflsend bedingt)to a prohibition.Under the

301、mandatory regime only,any closing steps are provisionally void(schwebend unwirksam)until clearance.The review timeline is two months for the initial review that determines whether to open a formal review,which then lasts another four months,starting upon receipt of all necessary documentation.The BM

302、Wi has broad discretion in formal review cases regarding the point at which filings are complete so that the statutory deadlines are triggered.The BMWi can extend the formal review period by another three months(four months in exceptional cases).In addition,the period available to conduct the formal

303、 review measures is suspended in case of additional information requests,and for as long as negotiations on mitigation measures are conducted between the BMWi and the parties involved.Such considerations outside the official review timeline can therefore have a significant impact on the transaction

304、timetables.Even if the transaction does not trigger a notification obligation,foreign investors often decide to initiate the review process by voluntarily submitting an application to the BMWi for a non-objection certificate(Unbedenklichkeitsbescheinigung)in order to obtain legal certainty.After com

305、plete submission of the application,the BMWi has two months to decide whether to issue the certificate or open the formal review procedure.Upon expiration of this period,the non-objection certificate is deemed to have been issued if no review procedure has been opened.In the past,a key benefit of vo

306、luntarily applying for a non-objection certificate was that the acquirer could get legal certainty within two months,as opposed to the three-month period that the BMWi takes to initiate an ex officio review.Given that the initial review period has been reduced to two months for all notifiable cross-

307、sectoral review cases,that benefit is gone,and other considerations will determine whether applying for a non-objection certificate is feasible.31Foreign direct investment reviews 2020:A global perspectiveexpansion of the review to certain activities in the media sector in 2018/2019,the German regul

308、atory framework has undergone severe revisions throughout 2020.The most relevant developments are:Expansion of the review to a number of health-related activities(primarily triggered by the COVID-19 pandemic)Lowering of the assessment criterion from“threat”to“probable impediment”to public order and

309、security Stronger scrutiny regarding structure,origin and past conduct of investors Clarification that the review also applies to asset deals Introduction of a standstill obligation for all notifiable transactions Introduction of criminal sanctions for breaches of a standstill obligation and adminis

310、trative orders Harmonization of review timelines Establishment of a national contact point for European coordinationRECENT DEALS REVIEWED BY THE BMWI Since 2016,the number of deals reviewed by the BMWi has continuously increased.From January 2016 to December 2018,185 transactions have been subject t

311、o BMWi investment reviews,of which 75 acquisitions were attributed directly or indirectly to a Chinese acquirer.In 2018,78 transactions were reviewed by the BMWi,almost double the 41 reviews of 2016.From 2018 to 2019,the numbers continued to rise significantly to 106 cases,with the complexity of the

312、 review cases also increasing.POWERS AND SANCTIONSIn order to safeguard public order or security,the BMWi mayin accordance with a number of other ministriesprohibit transactions or issue“instructions”(taking the form of mitigation measures or“remedies”).Clearances subject to“remedies”(such as compli

313、ance commitments in the form of a trilateral agreement between the ultimate acquirer parent,target and the German Government)have become a common form of resolving issues.For acquisitions included in the cross-sectoral review procedure,the imposition of mitigating measures requires approval by the G

314、erman Federal Government.To enforce a prohibition,the BMWi can prohibit or restrict the exercise of voting rights in the acquired company,or appoint a trustee to bring about the unwinding of a completed acquisition at the expense of the acquirer.Breaches of the standstill obligation or against order

315、s by the BMWi are subject to criminal sanctions,including imprisonment of up to five years or criminal fines.Negligent violations are considered an administrative offense,punishable by an administrative fine of up to 500,000.Any BMWi decision can be challenged before a German court.However,this is o

316、ften not a practical option for the parties(sometimes in light of timing or publicity concerns),and the government enjoys broad discretion as to what constitutes a probable impediment to public order or security.RECENT REVISIONS OF THE REGULATORY FRAMEWORKFollowing the reduction of the investment th

317、reshold from 25 percent to 10 percent and the According to the BMWi,almost all of the cases in which security concerns were identified in 2019 and 2020 were resolved through contractual arrangements(which is becoming the tool of choice,especially in deals involving German targets that have activitie

318、s viewed as critical for the German healthcare system).Based on the recent and planned AWG and AWV revisions,the BMWi expects the numbers to rise by approximately 40 cases per year over the upcoming years.In addition,the BMWi expects an additional 130 cases per year from other European authorities b

319、ased on the EU cooperation and notification scheme.The BMWi expects to have to issue written opinions in a significant number of these cases.Only one veto by the BMWi has become public since 2018.According to some press sources,in July 2020,the German Government vetoed Chinese Vital Material Co.s pr

320、oposed acquisition of PPM Pure Metals GmbH,part of the French Recylex group and a manufacturer of certain metals used in semiconductors and infrared detectors,including for military applications.The BMWi decided to veto the deal despite the fact that PPM had filed for bankruptcy two months earlier.3

321、2White&CaseOther noteworthy interventions include the following:In July 2018,the German Federal Government had decided to prevent the acquisition of a 20 percent stake in the power grid operator 50Hertz by a Chinese investor by arranging for an investment by the state-owned Kreditanstalt fr Wiederau

322、fbau(KfW),because it did not have jurisdiction to block the deal under the then pertinent FDI regime.The government officially confirmed that the acquisition by KfW was aimed at protecting critical infrastructure for the energy supply in Germany In August 2018,the BMWifor the first timehad threatene

323、d to veto a Chinese inbound transaction.In the end,the Chinese investor dropped its attempt to acquire German toolmaker Leifeld ahead of the expected veto.This decision would have been the first prohibition of a transaction under the German investment control regime In contrast,in February 2020,the

324、BMWi cleared the acquisition of German locomotive manufacturer Vossloh by Chinese train manufacturer CRRC.Triggered by the COVID-19 pandemic,the BMWi announced in June 2020 that the KfW will acquire 23 percent of CureVac,a biopharmaceutical company that develops vaccines for infectious diseases like

325、 COVID-19 and drugs to treat cancer and rare diseases,in order to avoid its potential acquisition by any foreign investor.TRENDS IN THE REVIEW PROCESS The current market climate is characterized by the BMWis substantially increased awareness and persistent efforts toward enhanced scrutiny,including

326、regarding a potential use of key technologies,in military applications.But the overall number of approved transactions clearly shows that the investment climate in Germany remains liberal for the overall majority of transactions.The recent clearance of the CRRC/Vossloh transaction is a clear sign th

327、at Germany generally continues to welcome foreign direct investment.However,there is also a clear trend toward the use of“remedies”to mitigate security concerns.In the same vein,the German investment in CureVac may be seen as a first step toward more scrutiny in the healthcare sector.In fact,the BMW

328、i justified the decision by citing German security interest.HOW FOREIGN INVESTORS CAN PROTECT THEMSELVES Parties to M&A transactionswhether public or privateshould carefully consider the risk of foreign investment control procedures typically starting at the front-end of the due diligence process.Gi

329、ven the potential for considerable FDI review risks,it may be appropriate for the parties to initiate discussions with the BMWi even before the signing and/or announcement of a binding agreement.From an investors perspective,regulatory conditions and covenants relating to the regulatory review proce

330、ss serve to protect the acquirer from having to consummate a transaction under circumstances in which the German Federal Government has imposed regulatory conditions or mitigation measures that would change the nature of or the business rationale behind the proposed transaction.Contractual undertaki

331、ngs intended to protect the acquirer from these risks may take the form of regulatory material adverse change clauses and/or covenants that specify the level of effort that the investor must expend in order to obtain the necessary regulatory approval.OUTLOOK It remains unknown whether the implementa

332、tion of the European screening mechanism,which came into force in October 2020,the overall number of deals approved shows the continuous openness of Germany towards foreign direct investments The German Federal Government announced that it will expand further the list of critical activities subject

333、to notification obligation based on the EU Screening Regulation.The list will probably include companies active in the field of artificial intelligence,robotics,quantum technology and biotechnology,and may expand to other areas included in the EU Dual Use Regulation It remains unknown whether the implementation of the European screening mechanism,which will come into force in October 2020,will fur