Foreign Investment Archives - Regulatory & International Trade

Navigating EU Sanctions: How Investment Funds and Corporates Can Meet the ‘Best Efforts’ Standard

by Raminta Dereskeviciute, Sabine Naugès, Renate Prinz, Michal Chajdukowski and Ludovica Rabitti | Nov 29, 2024 | Foreign Investment, Sanctions & Export Control

With the introduction of the 14th sanctions package, entities established in the European Union are required to ‘undertake their best efforts to ensure’ that non-EU subsidiaries they own or control do not undermine EU Regulation 833/2014 imposing EU sanctions against Russia, or EU Regulation 765/2006 imposing EU sanctions against Belarus. This obligation stretches to EU citizens, including those located outside the European Union, who control corporate and fund structures around the world.

The term ‘best efforts’ is not explicitly defined within the EU regulations. On November 22, 2024, the European Commission issued guidance on how to comply with this obligation in its Frequently Asked Questions on Russia sanctions (FAQ). The clarifications, however, largely reiterate obligations set out in the Preamble to the EU Regulation 2024/1745 which introduced the ‘best efforts’ requirement in June 2024.

In this alert, we summarize the key features of this provision, with a focus on how investment funds and other global corporates can meet the ‘best efforts’ standard. In response to the Commission’s overriding emphasis on awareness of one’s operations, existing structures and ongoing activities should be reviewed, and robust sanctions compliance policies should be put into place to efficiently navigate the increasingly turbulent EU sanctions [...]

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Relaxation of Long-Standing Restrictions on Foreign Investment in the Healthcare Sector in China

by Peter Lu | Nov 27, 2024 | Foreign Investment

The demand for medical services in China is growing, with the country’s ageing population set against its potential for economic development. A joint circular released by China’s Ministry of Commerce, National Health Commission and the National Medical Products Administration in September signals a relaxation of China’s long-standing restrictions on foreign investment in the healthcare sector. Given a decline in foreign direct investment (FDI) in China generally, the announcement has garnered significant global attention.

To read the full alert, please click [...]

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BIOSECURE Act: US to Target Chinese Biotechnology Companies

by Sabine Naugès and Llewelyn Engel | Sep 26, 2024 | Compliance, Foreign Investment

On September 9, the US House of Representatives passed H.R. 8333, known as the BIOSECURE Act, targeting WuXi AppTec, BGI, MGI, Complete Genomics, WuXi Biologics and Chinese biotechnology companies more broadly.

Measures & Context

If signed into law, the BIOSECURE Act would prohibit entities that receive US federal funding from doing business with foreign biotechnology companies affiliated with the People’s Liberation Army, including the five Chinese biotechnology companies explicitly named in the bill. The bill also seeks to prevent the transfer of US persons’ genetic information to foreign adversaries.

The bill addresses concerns that foreign biotechnology companies, particularly Chinese companies, could use genetic data for surveillance or espionage.

The bill’s measures are part of a broader set of restrictive measures against China following the passage of the Secure and Trusted Communications Networks Act. This law prohibits federal agencies from purchasing telecommunications equipment from certain foreign companies, including those from China, due to security concerns, and prevents them from contracting with companies that use such prohibited equipment.

Extended Screening of Foreign Investment in France: A Risk of Incompatibility with Company Law?

by Sabine Naugès and Professor Rémi Dalmau | May 7, 2024 | France, Foreign Investment

Control of foreign direct investments in France (FDI) has been steadily tightened since 2014. The provisions of Articles L. 151-3 and R. 151-1 et seq. of the French Monetary and Financial Code (CMF), as supplemented by the Decree of December 31, 2019, organize this national screening mechanism based on the prior authorization of certain investments in sectors and activities considered sensitive.

In 2022, of the 131 FDI authorized, 70 were conditionally authorized, not without question as to the compatibility of these commitments with the free movement of capital and company law.

1. The filtering of FDI justifies questioning its compatibility with European requirements, as the European Commission or the Court of Justice is likely to consider it too restrictive. Moreover, it is by no means certain that all commitments imposed by the Minister of the Economy on the foreign investor in order to obtain authorization will pass the proportionality test of the Court of Justice of the European Union (CJEU).

The control of FDI in France is triggered when three cumulative conditions are met:

i. The investor is deemed a foreign investor within the meaning of Article R. 151-1 of the CMF, i.e. any individual of foreign [...]

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Foreign Direct Investment Control in Germany | Recent Facts and Figures

by Dr. Laura Stammwitz, Alexandra Heberle and Dr. Deniz Tschammler | Apr 29, 2024 | Foreign Investment

Under the German Foreign Investment Control regime, the Government may review foreign investments in domestic target companies above certain thresholds. The Government has only recently published interesting statistics about the development of German investment screening over the past three years (available in German only). These statistics show that foreign investments across all industries have come under heavy scrutiny by the Government. Therefore, it has become indispensable for foreign investors to review potential FDI filing obligations or consider a voluntary FDI filing during legal due diligence, regardless of the investor’s place of origin, the size of the domestic target business or the industry affected by the contemplated investment.

First Dawn Raid Carried Out by The European Commission | Another Investigative Tool Deployed Under the Foreign Subsidies Regulation

by Stéphane Dionnet, Sabine Naugès and Hendrik Viaene | Apr 26, 2024 | Foreign Investment, Foreign Subsidies, Public Procurement

Since the Foreign Subsidies Regulation (FSR) entered into force on July 12, 2023, the European Commission has increasingly started to wield the powers granted to it. It opened its first in-depth investigation into a public procurement process in Bulgaria in a case involving locomotives on February 16, 2024 (read more in our previous post here) which led to the withdrawal of the Chinese from the public tender. Subsequently on April 3, 2024, the Commission initiated two new in-depth investigations, again in a public procurement matter, this time concerning solar panels. On April 9, 2024, the Commission initiated its first ex officio investigation in the wind turbine sector.

How to Determine Which Investors Should be Disclosed Under the Foreign Direct Investment Screening Regime in France, the United Kingdom and the United States

by Sabine Naugès, David J Levine and Max Küttner | Apr 15, 2024 | Foreign Investment

Where a transaction is carried out by an investment fund, the question of which investors should be disclosed under Foreign Direct Investment will eventually surface. We consider the necessary disclosures under French, US and UK FDI screening.

There is significant potential for divergence as to how new(er) FDI rules are applied in practice, in particular in relation to common structures used by private equity. One question that arises regularly is whether the FDI regimes are catching the limited partner investors (LPs) in the same way as any other direct investors.

Foreign Investment Control in Germany | New Administrative Fees Regime

by Dr. Deniz Tschammler, Alexandra Heberle and Dr. Laura Stammwitz | Mar 25, 2024 | Foreign Investment

Since January 1, 2024, the German Government now charges administrative fees for foreign invest-ment control (FIC) proceedings.

Under the German FIC regime, the competent federal ministry, the Bundesministerium für Wirtschaft und Klimaschutz (BMWK), may review foreign investments in domestic target companies above certain thresholds. Based on a filing submitted by the direct acquirer, BMWK has two months to review the transaction and issue a clearance certificate (Phase I). In the event of remaining queries or concerns, BMWK may initiate formal investigation proceedings, which may take several months or in certain cir-cumstances even longer (Phase II). In around 90% of cases, foreign investments are cleared in Phase 1.

European Economic Security Strategy

by Sabine Naugès | Mar 22, 2024 | Foreign Investment, Outbound Investment

A Step Towards Regulating Outbound Investment in the European Union

On June 20, 2023, the European Commission and the High Representative for Foreign and Security Policy published a Joint Communication on a European Economic Security Strategy. The strategy highlighted that new economic security risks are emerging as a result of rising geopolitical tensions and the acceleration of technological developments. The strategy also underlined the need to develop a common EU approach.

Strengthening Foreign Investment Screening in France

by Sabine Naugès | Mar 6, 2024 | Foreign Investment, Energy

Decree no. 2023-1293 of December 28, 2023, on foreign investment in France came into force on January 1, 2024.

The purpose of the decree is to continue the monitoring of non-European investors exceeding the threshold of 10% of voting rights in companies listed on a regulated market, introduced by Decree No. 2020- 892 of July 22, 2020. This follows the statements made by the French Ministry of the Economy (the “MoE“) to the press on January 5, 2023, announcing that the measure would be made permanent.

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