National security to impact corporate activity further in 2023
Controls over foreign investment into ‘sensitive’ or ‘critical’ industries are set to be tightened in a growing number of countries in the year ahead. So predict lawyers at global law firm Hogan Lovells, who have published an alert outlining ‘Five important FDI aspects for transactions that parties and advisors should consider in the New Year.’
According to the firm, European countries will be at the forefront of activity: ‘In the EU, the vast majority of Member States already have FDI screening instruments in place,’ they note. ‘In 2023, important hubs for business activity and incorporation of companies such as Ireland, the Netherlands, Belgium and Luxembourg are expected to follow. Croatia, Cyprus, Estonia, Greece, Sweden and Switzerland also have plans underway to amend or introduce national security screening mechanisms.’ In addition, they say, ‘a number of non-European countries have recently announced plans to modernise their investment control regimes – for example, Canada in December 2022.’
The number of industries set for greater controls is also likely to increase, says the firm: ‘In a time of multiple global challenges such as climate change, supply chain issues, war and building back gingerly from the pandemic, “national security” is a concept broad enough to cover many things. With this in mind, expect 2023 to bring even more sectors of the economy under the FDI review spotlight, including traditional areas such as fossil fuels, [more modern ones like] renewable energy activities as well as battery technology for storage and e-mobility.
‘Also, the technology and communication space with anything involving artificial intelligence, automotive components required for connected and autonomously driving cars, and network technology enabling encryption and safe data storage – all obvious candidates for FDI screening scrutiny in 2023. It goes without saying that semiconductors or critical life sciences sectors such as vaccines will continue to feature highly on the agenda of many regulators.’
Tom Blass, editor of WorldECR, said: ‘2022 saw an uptick in national governments acting to intervene in corporate deals on national security grounds – and against a backdrop of continuing concerns – and tension between the need for economic bounce-back and strategic investments by potential adversaries, experts say that trend is set to continue, with governments turning to regulatory tools (e.g., CFIUS, in the United States, the EU FDI Screening Regulation), and equivalents across Europe, Asia and elsewhere – as a go-to tool for calibrating security needs against corporate activity.
‘Such regulations typically put compliance at the heart of deal-making to an unprecedented degree, and it becomes incumbent on companies, lawyers, compliance professionals to understand the scope and application of such regulations, and the steps they need to undertake to ensure that their corporate activities go to plan.’
Further reading
In line with the expected developments, WorldECR is delighted to announce the publication of Foreign Direct Investment Controls – A Global Perspective, which takes a deep dive into the investment clearance rules for 15 key non-US jurisdictions – see www.worldecr.com/books
See the Hogan Lovells alert at: https://www.engage.hoganlovells.com/knowledgeservices/viewContent.action?key=Ec8teaJ9VapwCa8O2gAGUl7eOOGbnAEFKCLORG72fHz0%2BNbpi2jDfaB8lgiEyY1JAvAvaah9lF1P4Yhmok33cA%3D%3D&nav=FRbANEucS95NMLRN47z%2BeeOgEFCt8EGQcV7IzHUHOGQ%3D&emailtofriendview=true&freeviewlink=true
