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Katherine Kingsbury

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On Wednesday 28 April, the UK Parliament adopted the National Security & Investment Law (“NS&I Law”).  The law received Royal Assent the following day and will come into legal effect in late 2021.

The NS&I Law will introduce mandatory notification and pre-clearance requirements for transactions in 17 ‘core’ sectors.  This long-awaited piece of legislation, has passed through Parliament substantially un-amended, except that the investment threshold for mandatory notification has been raised from the acquisition of a 15 per cent. to 25 per cent. interest in shares or voting rights in an acquisition target. The UK Government retains extensive discretion to “call-in” investments for review, both within and outside the 17 ‘core’ sectors, including (i) acquisitions of control of assets and (ii) equity investments below the 25% threshold where “material influence” is acquired, if it reasonably suspects that a transaction gives rise to national security risks.

In the period since the National Security and Investment Bill was published in November 2020, the UK has left the European Union and the UK government has moved to refresh its approach to inward investment more generally (with a particular focus on technology). Through the launch of the Advanced Research and Innovation Agency (“ARIA”); a renewed focus for the UK’s Infrastructure Bank; the establishment of a planned new ‘Office for Investment’ (led by Lord Grimstone); and the establishment of the Investment Security Unit (“ISU”, which will receive and manage notifications under the NSI Law), the landscape for investment in the UK is much-changed. Investment-related concerns feature across a range of UK Government policies and priorities, not least the UK’s Integrated Review of foreign and defence policy (published in March 2021) having highlighting a number of tense relationships with countries from which investment may attract greater scrutiny.

During this period, the UK government has continued to use its existing powers to investigate transactions on national security grounds under the public interest invention regime established under the Enterprise Act 2002. Of particular interest in this regard was the decision, on 19 April 2021, by the Secretary of State for the Department for Culture Media & Sport to issue a public interest intervention notice in respect of the proposed acquisition of the UK semi-conductor company ARM Limited by Nvidia Corporation.

Scrutiny of Foreign Investment

The adoption of the NS&I Law brings the UK in line with many other countries that have enhanced their powers to scrutinise foreign investment during the past two years and particularly over the last year, influenced by COVID-19 and other global trade and supply concerns. The UK’s Five-Eyes partners all have well-established regimes for the review of foreign investment – several of which have been recently updated.  The European Union began cooperating in the review of foreign direct investment (“FDI”) in October 2020 under the EU FDI Regulation and via individual Member State laws, newly adopted or recently expanded.

What is significant about the UK’s NS&I Law is that is introduces mandatory notification obligations for investments into the UK where none have existed before – contrasting with the UK’s merger control regime under which filing is voluntary and associated public interest intervention laws (each under the Enterprise Act 2002) under which the UK Government discretion to intervene in transactions where certain defined public interest considerations are raised.

Under the NS&I Law, transactions subject to mandatory filing obligations and completed without clearance will be deemed void, ushering in a suspensory review regime in the UK for qualifying transactions for the first time. This change in approach has led to concern from the UK’s business and investment and innovation communities, as well as politicians, that the NS&I law will act to deter investment in the UK. There is concern, in particular, that uncertainty for investors is presented by the absence of a definition “national security”, potentially allowing the UK Government considerable discretion in the application of the new NS&I regime.…
Continue Reading UK National Security & Investment Law is Approved by Parliament

On Wednesday 28 April, the UK Parliament adopted the National Security & Investment Law (“NS&I Law”).  The law received Royal Assent the following day and will come into legal effect in late 2021.

The NS&I Law will introduce mandatory notification and pre-clearance requirements for transactions in 17 ‘core’ sectors.  This long-awaited piece of legislation, has passed through Parliament substantially un-amended, except that the investment threshold for mandatory notification has been raised from the acquisition of a 15 per cent. to 25 per cent. interest in shares or voting rights in an acquisition target. The UK Government retains extensive discretion to “call-in” investments for review, both within and outside the 17 ‘core’ sectors, including (i) acquisitions of control of assets and (ii) equity investments below the 25% threshold where “material influence” is acquired, if it reasonably suspects that a transaction gives rise to national security risks.

In the period since the National Security and Investment Bill was published in November 2020, the UK has left the European Union and the UK government has moved to refresh its approach to inward investment more generally (with a particular focus on technology). Through the launch of the Advanced Research and Innovation Agency (“ARIA”); a renewed focus for the UK’s Infrastructure Bank; the establishment of a planned new ‘Office for Investment’ (led by Lord Grimstone); and the establishment of the Investment Security Unit (“ISU”, which will receive and manage notifications under the NSI Law), the landscape for investment in the UK is much-changed. Investment-related concerns feature across a range of UK Government policies and priorities, not least the UK’s Integrated Review of foreign and defence policy (published in March 2021) having highlighting a number of tense relationships with countries from which investment may attract greater scrutiny.

During this period, the UK government has continued to use its existing powers to investigate transactions on national security grounds under the public interest invention regime established under the Enterprise Act 2002. Of particular interest in this regard was the decision, on 19 April 2021, by the Secretary of State for the Department for Culture Media & Sport to issue a public interest intervention notice in respect of the proposed acquisition of the UK semi-conductor company ARM Limited by Nvidia Corporation.

Scrutiny of Foreign Investment

The adoption of the NS&I Law brings the UK in line with many other countries that have enhanced their powers to scrutinise foreign investment during the past two years and particularly over the last year, influenced by COVID-19 and other global trade and supply concerns. The UK’s Five-Eyes partners all have well-established regimes for the review of foreign investment – several of which have been recently updated.  The European Union began cooperating in the review of foreign direct investment (“FDI”) in October 2020 under the EU FDI Regulation and via individual Member State laws, newly adopted or recently expanded.

What is significant about the UK’s NS&I Law is that is introduces mandatory notification obligations for investments into the UK where none have existed before – contrasting with the UK’s merger control regime under which filing is voluntary and associated public interest intervention laws (each under the Enterprise Act 2002) under which the UK Government discretion to intervene in transactions where certain defined public interest considerations are raised.

Under the NS&I Law, transactions subject to mandatory filing obligations and completed without clearance will be deemed void, ushering in a suspensory review regime in the UK for qualifying transactions for the first time. This change in approach has led to concern from the UK’s business and investment and innovation communities, as well as politicians, that the NS&I law will act to deter investment in the UK. There is concern, in particular, that uncertainty for investors is presented by the absence of a definition “national security”, potentially allowing the UK Government considerable discretion in the application of the new NS&I regime.…
Continue Reading UK National Security & Investment Law is Approved by Parliament

On October 11, 2020, the EU FDI Screening Regulation (EU) 2019/452 – the “Regulation”) entered fully into force.

The Regulation, which was approved and adopted in March 2019, establishes a framework for the screening of foreign direct investments (“FDI”) by EU Member States in which decision-making powers rest at the Member State level. Significantly, from October 11, an element of EU-level cooperation in FDI is introduced and in particular will bring into effect (i) regular information sharing among Member States and the European Commission about transactions subject to national FDI screening, and (ii) a mechanism through which other Member States and the European Commission can coordinate and comment on FDI that has an “EU-dimension”.

In this blogpost, we look at the overall status of national measures in FDI at this juncture and describe in overview the EU-level cooperation and information sharing mechanisms.

National investment screening mechanisms 

While the Regulation does not require Member States to introduce their own screening mechanism at a national level, the European Commission has recommended that all Member States do so – and particularly encouraged this in the context of the COVID-19 pandemic (see our earlier alert and blog post). Accordingly, and in order to fully implement the Regulation, Member State laws have been (or are being) adapted to allow local regulators to take account of national security concerns of other Member States.

Fifteen Member States – Austria, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal, Romania, Spain and Slovenia (and Norway and the United Kingdom) – currently have national investment screening mechanisms in place. Several other Member States are in the course of reforming their FDI laws or adopting new FDI screening measures.

Upfront FDI filing analysis becomes crucial – further Member State developments ahead

The FDI landscape in the EU has therefore been very dynamic in recent months and changes continue at pace. Many Member States have introduced mandatory filing requirements with standstill obligations until clearance is received.  Often these filing obligations are triggered at very low thresholds. These FDI filing requirements are so significant and varied that FDI has become a key issue to consider upfront in M&A transactions involving foreign investors – and at the same importance as the merger control filing analysis.. In addition to adopting new long-term measures in FDI screening, several Member States (such as France, Germany, Italy and Spain) adopted emergency measures related to COVID-19, and some of which have temporary application (until the end of the calendar year or for the duration of the pandemic).

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Continue Reading New era of FDI in the European Union – EU FDI Regulation now in full force and effect

Foreign Direct Investment Regulation

The EU Regulation on Foreign Direct Investment (2019/452) (the “EU FDI Regulation”) will enter into force fully on October 11, 2020. Most notably, on this date, a cooperation and information sharing mechanism among Member States and the European Commission in respect of foreign direct investment (“FDI”) that…

On June 22, 2020, the UK Government introduced legislation to Parliament that further strengthens its ability to intervene in transactions on national security and other public interest grounds.

Specifically, the UK Government has sought additional powers to intervene in transactions where there is need to preserve the capability of the UK to respond to a…

On 17 June 2020 the European Commission (“Commission”) published a White Paper on new enforcement powers regarding foreign subsidies. This initiative pursues two objectives, first it sets out a general policy approach for foreign subsidies, and second, it provides a number of proposals  to address a perceived regulatory gap. More specifically, the White Paper suggests…

The FDI space in Europe remains dynamic. Less than five months from the entering into force of the EU FDI Regulation, and just two months since the European Commission asked the Member States to both strengthen and “vigorously” implement the tools available to them and, where appropriate, introduce new FDI screening mechanisms –on which

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