Foreign Direct Investment Review Regimes Are Well-established and Active; Outbound Investment Regimes Are on the Horizon

• Publication year: 2024
• Citation: Vol. 1 No. 3

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Chase D. Kaniecki, Samuel H. Chang, B.J. Altvater, and William S. Dawley ^*

In this article, the authors offer suggestions for boards of directors to take given the active global foreign direct investment landscape and the possibility of countries adopting outbound investment rules.

Boards of directors are now facing a well-established, complex, and active global foreign direct investment (FDI) landscape in which transactions will regularly trigger multijurisdictional FDI filing and approval processes. This is the case not only with respect to well-known FDI review regimes such as the Committee on Foreign Investment in the United States (CFIUS) but also with newly established, modified, and/or expanded non-U.S. FDI review regimes, particularly in Europe. Indeed, as governments around the world have become increasingly empowered and willing to scrutinize, and in some cases prevent, transactions they deem objectionable, FDI approvals have become a significant regulatory issue for many cross-border transactions.

Moreover, while existing FDI review regimes focus on inbound investment (i.e., investment by foreign persons into the relevant jurisdiction), the United States is developing, and the European Union is considering, restrictions and prohibitions on certain outbound investments (i.e., investments by U.S. and EU persons outside of the United States and European Union). If adopted, such restrictions and prohibitions could complicate, disrupt, and in some cases prohibit certain cross-border investments by U.S. or EU investors involving "countries of concern."

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Recent FDI Developments

Most existing FDI review regimes focus on national security- or national interest-related concerns, such as (1) access to defense-related or otherwise sensitive export-controlled technology or other information (e.g., personal data), and (2) potential disruption to essential public services, supply chains, or critical or sensitive infrastructure. However, the jurisdictional thresholds, review timelines, and substantive tests vary by country, sometimes significantly.

Moreover, FDI review analyses are often subjective and driven by factors of interest to each particular country, including factors that may not be known to the transacting parties. To further complicate matters, FDI review authorities have broad discretion to assert jurisdiction over transactions and to determine what does or does not qualify as a relevant concern. All of these...