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In recent years, the concept of national security has evolved beyond ‘conventional’ expectations. Today, national security includes everything from defence and critical infrastructure to artificial intelligence (AI), communications and advanced technology sectors, healthcare, nanotechnology, the media, healthcare, food security and water. All of these disparate areas are considered fundamental to national security and thus require some degree of government oversight and protection. To that end, governments around the world are establishing new or strengthening pre-existing foreign direct investment (FDI) review regimes to, among other things, require filings for certain transactions, to expand jurisdictional reach to additional sectors and businesses, and to provide regulators with greater authority.

UNITED STATES

Proskauer Rose LLP

“Today, foreign investment activity in the US functions within an enforcement climate of historically high levels of reviews, both of notified transactions, and of sua sponte investigations of transactions that were not subject to notification and filing requirements. There were over 100 transactions identified through the non-notified or non-declared process in the most recent Committee on Foreign Investment in the United States (CFIUS) reporting year that were put forward to CFIUS for consideration. Macroeconomic and geopolitical trends are also significantly impacting the flow of inbound capital into the US, though not uniformly.”

UNITED KINGDOM

Clifford Chance LLP

“Like many others around the world, the UK government has been alert to a perceived threat of hostile investors owning or controlling critical businesses or infrastructure in the UK, and introduced a new regime under the National Security and Investment Act 2021 (NSIA) in January 2022 to facilitate its review of transactions from a national security perspective. The NSIA has expanded the government’s jurisdiction to review a broader set of transactions than under the predecessor regime.”

FRANCE

Linklaters LLP

“Foreign investment projects in France grew sharply in 2021, exceeding the levels seen in 2019. In 2021, France welcomed 1607 investment projects and 328 cases were filed with the Ministry for the Economy under the French foreign direct investment (FDI) regime. In the wake of a record year in 2021, investment bankers were predicting another solid year of corporate takeovers and mergers in 2022, however many transactions have been postponed because of the war in Ukraine, accelerating inflation, rising interest rates and scarcity of credit.”

BELGIUM

CMS Belgium

“The Belgian economy has traditionally been characterised by high foreign direct investment (FDI). In 2021, it remained one of the EU countries that attracted the most foreign investments. Belgium is attractive in terms of investment because of its strategic geographic position at the crossroads of the main European markets, as well as its quality of transport, logistics and telecommunications infrastructure, its trade specialising in semi-processed and semi-finished goods, its multilingual and qualified labour force, and its high levels of purchasing power.”

NETHERLANDS

Clifford Chance LLP

“The Netherlands is still considered one of the most competitive economies due to the country’s stable political climate, developed financial sector and strategic location. Foreign investment in the Netherlands is increasing again after the coronavirus (COVID-19) pandemic, potentially to investment levels seen prior to the pandemic. The global trend of increasing scrutiny on foreign investments is also impacting the Netherlands. As a member of the European Union (EU), investments in the Netherlands may also be subject to the EU foreign direct investment (FDI) coordination mechanism, as well as the forthcoming EU Foreign Subsidies Regulation.”

GERMANY

Linklaters LLP

“Germany remains open for investment and continues to attract significant inbound investment activity. However, there has been a clear trend of greater foreign investment control. This process began in 2016 when sensitive cases like Midea/Kuka and Fujian Grand Chip/ Aixtron were subject to substantial public discussion. This trend was subsequently boosted by the enactment of the EU Screening Regulation in 2019, as well as the outbreak of the coronavirus (COVID-19) pandemic and the war in Ukraine. Today, protecting critical infrastructure and technology has become a primary focus for the government.”

SPAIN

CMS Spain

“Foreign direct investment (FDI) regulations in Spain are directly influenced by political agendas and foreign investment policies. The declared aim of the country’s FDI regulations, when passed in March 2020, was to protect “Spanish listed companies, and also unlisted companies” which “are witnessing the devaluation of their assets” as a result of “the global crisis caused by COVID-19”, from foreign investors that “launch acquisition operations” and might take advantage of the situation. However, in our opinion, these FDI regulations are here to stay and are an important piece of the geopolitical policies of the Spanish government.”

ITALY

Herbert Smith Freehills

“The Italian market has demonstrated a remarkable degree of resilience, despite the uncertain macroeconomic and geopolitical situation. Indeed, the number of deals closed during the first nine months of 2022, which saw more than 1000 announced transactions, was in line with the number of deals recorded in the same period of 2021, while deal values almost doubled. Italy has exceeded its average annual performance achieved pre-coronavirus (COVID-19) with respect to inbound investments, and saw a significant increase in greenfield projects.”

CHINA

Clifford Chance LLP

“Despite the global economic downturn and fluctuating geopolitical relationships between China and the West, foreign investments into China have rallied recently, with an increase of 9.9 percent as of November 2022 compared to 2021. Foreign investments in the high-tech sector contributed significantly to this growth, recording a 31.1 percent increase in 2022, which dovetailed with the Chinese government’s policy initiative to encourage foreign investments in advanced technology manufacturing and high-tech service areas.”

INDONESIA

TNB & Partners

“Foreign investment in Indonesia continues to increase, and has reached record levels in various sectors, despite the impact of the coronavirus (COVID-19) pandemic and the wider global economic crisis. Some sectors, including technology, telecommunications, manufacturing and renewables, have demonstrated an upward trend compared to other sectors. With 5.7 percent economic growth in the third quarter of 2022, the highest among Association of Southeast Asian Nations (ASEAN) countries, Indonesia’s positive macroeconomic outlook, in addition to an increase in consumption and export growth, are expected to attract massive flows of inbound capital.”

CONTRIBUTORS

Clifford Chance LLP

CMS Belgium

CMS Spain

Herbert Smith Freehills

Linklaters LLP

Proskauer Rose LLP

TNB & Partners