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National security reviews 2018: A global perspective

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A guide to navigating the rules for investing in countries that require national security approval

Navigating national security reviews worldwide

As governments in various countries tighten their grip on national security reviews of foreign direct investment, the need for better assessment and calibration of the associated regulatory risk in cross-border transactions is greater than ever before

Nowhere is this trend more evident than in the United States, with the August passage of the Foreign Investment Risk Review Modernization Act (FIRRMA), which expanded the range of transactions that are subject to review by the Committee on Foreign Investment in the United States (CFIUS), and the more recent release of a pilot program under FIRRMA that instituted mandatory declarations for a broad range of transactions and put in place penalties—up to the full value of the transaction—for failure to comply. With CFIUS set to clamp down still further in coming months, CFIUS compliance is rapidly moving to the very top of the due diligence list for cross-border transactions involving US businesses.

The US is far from alone. As you will read in the pages that follow, the European Union, United Kingdom, Germany, France, China and other nations are also incrementally ratcheting up their reviews. In the UK, for instance, the government is proposing radical new legislation to allow it to intervene in cases that raise potential national security concerns. The UK government itself estimates that, under the new law, approximately 50 cases a year may end up with some form of remedy to address such concerns. In France, the new PACTE law is likely to strengthen the sanctions mechanism, extend the list of sectors subject to review and introduce some transparency into the process through annual reporting on a no-name basis of reviewed cases.

The pages that follow offer a common-sense guide to investing in major jurisdictions, a snapshot of recent regulatory changes in each, and guidance on making sound investment decisions in a time fraught with regulatory uncertainty.


United States

Deals are generally approved, but a new law increases the number and types of deals reviewed.

circuit board


While few deals are challenged in Canada, national security reviews are becoming more common and complex

satellite dishes

European Union

Proposed European foreign direct investment regulation— a first step toward harmonized European investment controls

aerial view of a river through a city in Western Europe


Deals are generally not blocked in Finland.

Helsinki, FInland


New legislation has been proposed to expand the scope of French national security reviews, especially in the technology sector, and to strengthen the powers of French authorities to impose sanctions

solar panels


Federal Ministry for Economic Affairs and Energy is enforcing a stricter regime for foreign direct investment reviews

Frankfurt, Germany


Deals are generally not blocked by the Italian government. However, in connection with the clearance process, conditions may be imposed that can have a significant impact on the investment

Milan, Italy

Russian Federation

New amendments potentially require foreign investors to disclose information about beneficiaries, beneficial owners and controlling persons as part of pre-clearance

nuclear power plant

United Kingdom

National security interventions have, with one exception, involved defense considerations

Laser in a quantum optics lab


Australia requires a wide variety of investments by foreign businesses to be reviewed and approved before completion

electric plant  transformer


China is attempting to implement a more structured and comprehensive system to keep a closer eye on economic deals that might have security implications

data center


Japan’s implementation of the 2017 amendments to FEFTA must be watched closely to see whether Japan will adopt a more aggressive stance

Tokyo Station

National security reviews 2018: Russian Federation

New amendments potentially require foreign investors to disclose information about beneficiaries, beneficial owners and controlling persons as part of pre-clearance

8 min read

Of 229 applications reviewed in the last ten years, the Government Commission approved 216.

The Government Commission on Control Over Foreign Investments in the Russian Federation (the Government Commission), which was established by the Russian government in 2008, is responsible for the review of applications. The Government Commission is headed by the Chairman of the Russian government and composed of the heads of certain ministries and other government bodies.

Although the final decision on the application is made by the Government Commission, all the preparatory work (i.e., reviewing an application's completeness, liaising with relevant government bodies) is done by the Federal Antimonopoly Service (FAS). FAS, among other things, performs a preliminary review of the application and prepares materials for a further assessment by the Government Commission.


An acquirer must file if the proposed acquisition would result in the acquirer's control over an entity engaged in activities of "strategic importance" to Russian national defense and security (a Strategic Entity). The acquirer is required to obtain the consent of the Government Commission prior to the acquisition of control over a Strategic Entity; otherwise, the respective transaction is void.

To apply for the consent, the acquirer must submit an application to FAS with attachments, which include, among other things, corporate charter documents of the acquirer and the target, information on their groups' structures (including the whole chain of control over both the acquirer and the target), transaction documents and a business plan for the development of the target post-closing.


The Government Commission reviews transactions that result in acquisition of control over Strategic Entities. Foreign investors must also obtain the Government Commission's consent for certain transactions involving the acquisition of a Strategic Entity's property.

The list of activities of "strategic importance" currently comprises 46 activities that, if engaged in by the target, cause the target to be considered a Strategic Entity. The 46 activities encompass, among others, areas related to natural resources, defense, media and monopolies. The activities include not only those directly related to the state defense and security (e.g., operations with nuclear materials, production of weapons and military machines), but also certain other indirectly related activities (e.g., TV and radio broadcasting over certain territories, extraction of water bioresources and publishing activities).

The criteria for determining control are rather wide and are lower (25 percent) for a target that is involved in the exploration of "subsoil blocks of federal importance" (e.g., oil fields with a certain size of reserves, uranium mines, and subsoil blocks subject to exploration within a defense and security zone).

Foreign public investors (i.e., foreign investors controlled by foreign states or international organizations) are prohibited from obtaining control over Strategic Entities (for Strategic Entities involved in exploration of subsoil blocks of federal importance, that would mean the limit is 25 percent) or acquire more than 25 percent of a Strategic Entity's property, and must obtain consent of the Government Commission for acquisitions of the reduced stakes in Strategic Entities. In 2017, the special, stricter regime established for foreign public investors was extended to "off-shore companies" (entities registered in jurisdictions from a list approved by the Ministry of Finance, including among others the UAE, Jersey, BVI and Bermuda). Amendments adopted in June 2018 replaced the category of an "off-shore company" with the category of a "non-disclosing investor" (i.e., an investor refusing to disclose to FAS the information about its beneficiaries, beneficial owners and controlling persons). Non-disclosing investors from any jurisdiction are subject to a more restrictive regime similar to the regime applicable to foreign public investors. In the absence of any clarifications regarding the application of the amendments, the new provisions may be interpreted broadly, meaning that a foreign investor planning to enter into a transaction in respect of the Strategic Entity would likely need to make a prior disclosure of its controlling entities' beneficiaries and beneficial owners in order to avoid being treated as a "non-disclosing" investor.

Certain transactions in respect of Strategic Entities or their property are exempt from the necessity to obtain the Government Commission's approval (e.g., transactions in which the acquirer is ultimately controlled by the Russian Federation, constituent entities of the Russian Federation or a Russian citizen who is a Russian tax resident and does not have any other citizenship, as well as certain "intra-group" transactions).

Amendments to Russia's foreign investment laws introduced in 2017 gave the Chairman of the Government Commission the right to decide that prior approval is required with respect to any transaction by any foreign investor with regard to any Russian company, if this is needed for the purpose of ensuring national defense and state security. Upon receipt of such a decision from the Government Commission, FAS will notify the foreign investor about the need to receive approval for a prospective transaction. Any transaction made in breach of this requirement is void. What transactions could potentially fall under the requirements of this amendment are yet to be determined in practice. According to FAS clarifications expressed in media, in practice this rule will apply to very exclusive cases only.


Generally, a review of the application assesses the transaction's impact on state defense and security.

FAS initially requests opinions of the Ministry of Defense and the Federal Security Service as to whether the transaction poses any threat to the Russian defense and security. Additionally, if the target has a license for dealing with information constituting state secrecy, FAS requests information from the Interagency Committee for the State Secrecy Protection on the existence of an international treaty allowing a foreign investor to access information constituting state secrecy.

Russian law does not provide for more details on the review's scope or the criteria on which the transaction under review is assessed.


The year 2018 was the anniversary year for the Russian Strategic Investments Law, which was adopted in 2008. During these 10 years FAS considered 516 applications by foreign investors, of which 229 were sent for review by the Government Commission (other applications either did not require approval and were returned to applicants, or were withdrawn by applicants themselves). Of 229 applications reviewed, the Government Commission approved 216. The top-three attractive spheres of investments were fuel and energy complex, sea ports and airports.


At the early stage of a transaction, a foreign investor should analyze whether the target company qualifies as a Strategic Entity and whether the planned transaction triggers the necessity of the Government Commission's consent in light of the recent amendments. It is also advisable to analyze whether such consent would be needed in case the acquirer is qualified as a "non-disclosing" investor. This will allow the investor to start filing preparations and then file its application sufficiently in advance to manage the filing's impact on the timing of the transaction.

If the planned transaction does not require prior consent but such would be needed if the acquirer is qualified as a "non-disclosing" investor, it is necessary to disclose to FAS in advance information on the acquirer's beneficiaries, beneficial owners and controlling persons.


The statutory period for reviewing the application is three months from the date of its acceptance for review. The Government Commission can extend the review period for an additional three months.


  • Russia's foreign investment laws were again amended in 2018
  • The most significant amendment is a replacement of the category of an "offshore company" with the category of a "non-disclosing investor" (i.e., investor not disclosing the information about its beneficiaries, beneficial owners and controlling persons)
  • Noteworthy, amendments do not address the information disclosure requirements to offshore companies only, which means that, literally interpreted, they apply to all categories of foreign investors. Foreign investors deemed as "non-disclosing" investors will be subject to special, stricter rules applicable to foreign public investors. However, amendments do not specify when and how a foreign investor must be making a relevant disclosure with the FAS. Thus, in the absence of any clarifications regarding the application of the amendments, these provisions may be interpreted broadly, meaning that a foreign investor planning to enter into a transaction in respect of the Strategic Entity would likely need to make a prior disclosure of its controlling entities' beneficiaries and beneficial owners in order to avoid being treated as "non-disclosing" investor
  • Amendments clarified the application of criterion of the "aggregate control" over Russian Strategic Entities, which exists where several unrelated foreign public investors, and from June 2018 also "non-disclosing" investors, collectively own more than 50 percent of shares in the Strategic Entity. Pursuant to the amendments, when assessing existence of the "aggregate control" over Strategic Entities that are public companies for the purposes of the Russian Tax Code, the shares belonging to "non-disclosing" investors should not be counted. It is unclear whether this principle will also apply to acquirers (foreign investors) that are public companies for the purposes of the Russian Tax Code



- Most transactions submitted to the Government Commission for review are approved. Such approval contains the term within which the respective acquisition needs to be completed. The acquirer can subsequently apply to the Government Commission with a substantiated request to extend this term, if necessary

- The Government Commission can approve the transaction subject to certain obligations imposed on the foreign investor. Until recently, the list of such obligations was exhaustive and established by law. Amendments of 2016 allowed the Government Commission to impose any type of obligation on the foreign investor. Those obligations may include the obligation to invest certain amounts of funds into activities of the Strategic Entity, or to process bioresources or natural resources extracted by the Strategic Entity on Russian territory

- The Government Commission can reject the application for approval of the acquisition


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National security reviews 2018: A global perspective


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