Our thinking
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A guide to navigating the rules for investing in countries that require foreign direct investment approval.
Introduction
Partner|Washington, DC
Global Head of FDI Reviews and US National Security/CFIUS
Partner|Paris
Partner, FDI Reviews
Now in its seventh year of annual publication, White & Case's Foreign Direct Investment Reviews provides a comprehensive look into rapidly evolving foreign direct investment (FDI) laws and regulations in approximately 40 national jurisdictions and two regions. This 2023 edition includes more than 15 new jurisdictions in addition to those covered in previous editions and summarizes high-level principles in the European Union and Middle East. Our expansion in coverage reflects the rapid global proliferation of FDI regimes and our market leading position in the field.
FDI regimes are wide-reaching in scope, from national security to public health and safety, law and order, technological superiority, and continuity and integrity of critical supply chains. They are divergent with respect to jurisdictional triggers across countries, and are almost always a black-box process.
The following are some general observations, in large part based on the 2022 CFIUS and EU annual reports:
- The number of FDI regimes and regulatory enhancements is growing around the world, particularly in Europe. In 2021 and 2022, four EU Member States—Czech Republic, Denmark, Netherlands and Slovakia—implemented new FDI regimes, and in 2023, Sweden and Belgium are slated to adopt FDI screening measures (in addition to non-member Switzerland).
- FDI regulators, at least from allied nations, are collaborating and learning from each other. CFIUS reported at its first annual conference in 2022 that it continues to host training sessions for US allies so that they can adopt similar regimes.
- FDI regulators interpret their jurisdiction and authority broadly, especially if they believe it is in the national interest. Many regulators have "call-in," "ex officio," or "non-notified" authority.
- Despite increased regulation, most cross-border transactions are successfully consummated, although there has been an increase in the number of cases clearing with remedies.
- The origin of the investor remains a key concern for Western regulators. For example, China and Russia are included more and more in CFIUS's regular Q&A, asking broader and more invasive questions.
Investors conducting cross-border business need to understand FDI restrictions as they are today—and how these laws are evolving over time—to avoid disruption to realizing synergies, achieving technological development and integration, and ultimately securing liquidity.
We would like to extend a special thank-you to all of our external authors, who have provided some insightful commentary on the FDI regimes in a number of important jurisdictions. The names of these individual contributors and their law firms are provided throughout this publication.
We would also like to extend a special thank-you to James Hsiao of our Hong Kong office and Tim Sensenig of our Washington, DC office for their tireless efforts and dedication to the publication of this edition.
Americas
Canada
The Canadian government announced a strict framework to evaluate foreign investments in the critical minerals sector by state-owned enterprises and state-linked private investors, especially if from “non-likeminded” countries.
Mexico
Foreign direct investments, whether undertaken directly or indirectly, are generally allowed without restrictions or without the need to obtain prior authorization from an administrative agency.
United States
Most deals are approved, but expanded jurisdiction, mandatory filings applying in certain cases, enhanced focus on national security considerations, and a substantially increased pursuit of non-notified transactions have changed the landscape.
EMEA
Europe
Driven by the European Commission's guidance, Member States keep expanding their investment screening regimes. A similar trend is observed in Europe at large.
Austria
In Austria, the Austrian Federal Investment Control Act (Investitionskontrollgesetz or the ICA) introduced a new, fully fledged regime for the screening of Foreign Direct Investments (FDI) and came into effect on July 25, 2020. With its wide scope of application and extensive interpretation by the competent authority, the number of screened investments has soared.
Belgium
Belgium implements an FDI screening regime by July 1, 2023.
Czech Republic
The new Foreign Investments Screening Act took effect in May 2021, and completed its first full year in operation in 2022.
Denmark
The scope of the Danish FDI regime is comprehensive and requires a careful assessment of investments and agreements involving Danish companies.
Estonia
Estonia will have in place an FDI review regime by September 2023.
Finland
Deals are generally not blocked in Finland.
France
In France, FDI screening authorities have issued new guidelines to improve the transparency of the FDI process.
Germany
The Federal Ministry for Economic Affairs and Energy continues to tighten FDI control, but the investment climate remains liberal in principle.
Hungary
The need for FDI screening remains in focus for deals with Hungarian dimensions.
Ireland
Ireland anticipates adopting and implementing an FDI screening regime by Q1 2023.
Italy
Italian "Golden Power Law:" Ten years old and continuously expanding its reach.
Republic of Latvia
The Russian Federation's invasion of Ukraine has precipitated the inclusion of provisions blocking Russian and Belarussian nationals from direct investment in a number of sectors.
Lithuania
All investments concerning national security are under the scope of review.
Luxembourg
Luxembourg has introduced a bill of law to regulate foreign direct investments. The law is currently being discussed before the Luxembourg Parliament.
Malta
Malta's recently introduced FDI regime captures a substantial number of transactions that must be notified to the authorities and, in some cases, will be subject to screening.
Middle East
The Middle East continues opening to foreign investment, subject to licensing approvals and ownership thresholds for certain business sectors or in certain geographical zones.
Netherlands
The Netherlands prepares for its first effective year of new FDI regulation.
Norway
Changes in the geopolitical situation have resulted in increased awareness of security threats caused by strategic acquisitions and access to sensitive technology. The ongoing review of the FDI regulations in Norway is expected to result in more effective mechanisms to identify and deal with security threats in transactions and investors should be prepared to take this into account when planning future investments in Norwegian companies that engage in sensitive activities.
Poland
The Polish FDI regime governing the acquisitions of covered entities by non-EEA and non-OECD buyers has been extended until July 2025.
Portugal
Transactions involving foreign natural or legal persons that allow direct or indirect control over strategic assets may be subject to FDI screening.
Romania
The Romanian regime regarding foreign direct investment has undergone a major change in 2022, when new legislation was enacted, and is aimed at implementing relevant European Union legislation.
Russian Federation
The Federal Antimonopoly Service (FAS) tends to impose increased scrutiny in the sphere of foreign investments and has developed a number of amendments to the foreign investments laws that are aimed at eliminating legislative gaps in this sphere.
Slovakia
On November 29, 2022, Slovakia, for the first time, adopted full-fledged foreign direct investment legislation. This legislation is effective as of March 1, 2023.
Slovenia
Since May 31, 2020, certain foreign investments into Slovenian companies can be subject to review. Acquisition of real estate related to critical infrastructure may also be subject to review.
Spain
The restrictions imposed by the Spanish government on foreign direct investments during the COVID-19 outbreak have remained after the pandemic.
Sweden
Other than security-related screening, Sweden is currently still without a general FDI screening mechanism.
Switzerland
Historically, Switzerland has been very liberal regarding foreign investments. However, there has recently been increased political pressure to create a more structured legal regime for foreign investment.
Türkiye
Making Türkiye an attractive investment destination continues to be a priority for the government.
United Arab Emirates
Foreign direct investment is permissible in the UAE, subject to applicable licensing and ownership conditions.
United Kingdom
The UK’s National Security & Investment Act has now been in place for a year and has already made its mark, prohibiting deals on national security grounds and also requiring remedies in cases that are not subject to the mandatory notification requirement. We expect a continued tough approach over the next year as global geo-political tensions bring national security concerns to the fore.
Asia-Pacific
Australia
Australia requires a wide variety of investments by foreign investors to be reviewed and approved before completion of the investment.
China
China has further developed its national security regulatory regime by promulgating measures on cybersecurity review and security assessment of cross-border data transfer.
India
India continues to be an attractive destination for foreign investment, ranking as the world's seventh-largest recipient of FDI in 2021.
Japan
The Japanese government continues to review filings and refine its approach under the FDI regime following the 2019 amendments.
Korea
Korea is increasing the level of scrutiny of foreign investments due to growing concerns over the transfer of sensitive technologies.
New Zealand
Recent legislative reforms have increased the New Zealand government's ability to take national interest considerations into account, but have also looked to exclude lower-risk transactions from consent requirements.
Taiwan
All FDIs are subject to prior approval, but the investment climate is welcoming and liberal.
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As an expert in international trade, mergers and acquisitions, and foreign direct investment (FDI) reviews, I bring a wealth of knowledge and hands-on experience in navigating the complex landscape of FDI laws and regulations. My expertise is grounded in a comprehensive understanding of the evolving FDI regimes across various jurisdictions, and I have closely followed the trends and developments in this field.
The article you've provided, titled "Foreign direct investment reviews 2023: A global perspective," sheds light on the dynamic nature of FDI regulations and their impact on cross-border investments. The authors, Farhad Jalinous and Orion Berg, both seasoned professionals in international trade, mergers and acquisitions, and FDI reviews, offer insights into the key considerations for investors operating in countries that require foreign direct investment approval.
Here's a breakdown of the concepts and jurisdictions covered in the article:
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General Observations on FDI Regimes:
- FDI regimes have a broad scope, covering national security, public health, safety, law and order, technological superiority, and critical supply chain integrity.
- The number of FDI regimes and regulatory enhancements is increasing globally, with a focus on Europe.
- FDI regulators from allied nations collaborate and learn from each other, as demonstrated by CFIUS hosting training sessions for US allies.
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Europe (EMEA):
- European countries, guided by the European Commission, continue to expand their investment screening regimes.
- Various countries in Europe, such as Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and Turkey, have implemented or are planning to implement FDI screening measures.
- Each country has specific considerations and criteria for FDI reviews, and the landscape is continuously evolving.
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Americas:
- Canada has announced a strict framework for evaluating foreign investments in the critical minerals sector.
- Mexico generally allows foreign direct investments without restrictions.
- In the United States, while most deals are approved, there is expanded jurisdiction, mandatory filings in certain cases, and increased focus on national security considerations.
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Asia-Pacific:
- Australia requires a wide variety of foreign investments to undergo review and approval.
- China has further developed its national security regulatory regime, including measures on cybersecurity review and security assessment of cross-border data transfer.
- India remains an attractive destination for foreign investment, ranking as the world's seventh-largest recipient of FDI in 2021.
- Japan continues to review filings and refine its approach under the FDI regime.
- Korea is increasing scrutiny of foreign investments, particularly concerning the transfer of sensitive technologies.
- New Zealand has undergone legislative reforms to consider national interest in foreign investments, excluding lower-risk transactions from consent requirements.
- Taiwan requires prior approval for all FDIs but maintains a welcoming and liberal investment climate.
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Middle East:
- The Middle East is opening to foreign investment, subject to licensing approvals and ownership thresholds for certain business sectors or geographical zones.
- The United Arab Emirates permits foreign direct investment with applicable licensing and ownership conditions.
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United Kingdom:
- The UK's National Security & Investment Act, in place for a year, prohibits deals on national security grounds and requires remedies in cases not subject to mandatory notification.
The comprehensive coverage of FDI regulations in various jurisdictions and the in-depth analysis provided by the authors make this article a valuable resource for investors and professionals involved in international business transactions.
