We are delighted to share that our overview of global trends in foreign direct investment (FDI) regulation has been selected as the winning Business article in the Cross-Border Issues category at this year's Concurrences Antitrust Writing Awards.
Many existing FDI screening regimes have been expanded in recent years and – particularly in the EU – a significant number of new regimes have been adopted, against a backdrop of increased global protectionism that has been accelerated by the impact of the Covid-19 pandemic and heightened geopolitical tensions.
This enhanced scrutiny and stricter enforcement of FDI regulation means that it is now more important than ever before that deal parties consider early in the transaction planning process what investment screening issues may arise, how these might be addressed, and whether they may ultimately threaten the viability of the transaction.
Our award-winning article reflects the wide-ranging experience of the Global Foreign Investment Regulation Group at Herbert Smith Freehills, drawing out key global trends which dealmakers need to be aware of in this area:
- the evolving concept of "national security" as the main public interest justification for state intervention in foreign investment, with transactions in a very wide range of sectors now potentially at risk of review;
- the widening focus beyond Chinese investment; and
- the expansion of many FDI regimes through increased use of mandatory notification requirements, lowering of notification thresholds and increased powers to impose sanctions for non-compliance.
We highlight various examples of each of these global trends in practice, with a clear focus on practical guidance for investors when navigating this increasingly fluid and uncertain regulatory environment.
We set out a number of ways in which deal risk can be minimised, both in terms of anticipating potential objections from the outset and engaging proactively and sensitively with the process of securing political support, and considering potential remedies upfront where national security concerns are likely to arise.
We also highlight key practical considerations such as the impact of notification and standstill obligations on the deal timetable, the allocation of risk within the sale and purchase agreement, payment of filing fees (which are becoming increasingly common), and the importance of a global and co-ordinated approach to securing clearances where required.
The full article can be accessed here on the Concurrences website.
* This article was first published as the introductory chapter to the 2nd edition of the Global Competition Review (GCR) Guide to Foreign Direct Investment Regulation (edited by Veronica Roberts). FDI experts from across the HSF network – including partners Kyriakos Fountoukakos, Daniel Vowden and Marius Boewe – also contributed to the UK, EU and Germany sections of the Guide, which is available to access here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
