Our thinking

Taiwan: Adapting to ongoing macroeconomic and regulatory uncertainty

What's inside

Key legal developments in 2023 and their implications for Taiwan

Executive summary

The past two years have witnessed significant geopolitical fracturing and macroeconomic difficulties that continue to hamper certain dealmaking. Several sectors have posted transactional lows throughout 2023, and persistent inflation and high interest rates look set to remain in place for now. Economic decoupling and growing global regulations also create transactional hurdles, while China's slowing economy and now the Israel-Hamas war add to a steady sense of market unpredictability.

And yet, with volatility comes opportunity, such as infrastructure and renewables projects, growth in the semiconductor industry, and the rise of private credit. As many companies and investors in Taiwan are discovering, economic or regulatory setbacks are an invitation to think innovatively and to recalibrate their approach. With the right information and careful planning, they can position themselves for success now and in the future.

Following our 18th Annual Taiwan Roundtable Series in September, we hope this year's report for Taiwan-focused companies and investors provides helpful guidance in a rapidly evolving political and economic landscape.

We begin with a look at the continued proliferation of foreign direct investment (FDI) regimes in the US and the European Union. The Committee on Foreign Investment in the United States (CFIUS) has ramped up its activity to an all-time high, while EU member states continue to implement, refine and expand their regimes. Many FDI focus areas overlap with those of Taiwanese companies—technology in particular—meaning early-stage analysis is critical in this arena.

We then analyze the impact of forum selection in contracts with mainland Chinese (PRC) companies. Despite the tensions between PRC and Taiwan, their economies remain inextricably intertwined, so Taiwanese companies should consider how the provision of "interim measures" in Hong Kong arbitration can benefit their business.

Next, we provide an overview of the EU's new Foreign Subsidies Regulation (FSR), which scrutinizes foreign financial contributions received by companies engaging in M&A and public tenders in the EU, and grants the European Commission the power to investigate any other potentially distortive market situation. Taiwanese companies should be aware that the FSR casts a wide net and could also encumber merger control and FDI filings.

We then turn to the growing popularity of the US International Trade Commission (ITC) for trade secrets litigation. The ITC's unique global reach means trade secret owners can make a claim of misappropriation on any product that enters the US, even if the trade secret and alleged misappropriation are entirely extraterritorial. The risk of these claims has broad implications, especially for foreign companies trying to diversify and broaden their global footprint.

Our transaction-focused piece looks at the evolution of M&A, debt finance and investment funds practices in a tough macroeconomic environment. Certain technology and renewables remain attractive for M&A and private equity, while local consumer brands are considered the next target of credit investors, and the funds space is seeing growth in the secondaries market and NAV financings.

Aligning with the Roundtable Series' "clubs and fences" theme, we consider trade and sanctions through this framework. Taiwanese companies have the difficult task of balancing often-competing interests in Asia-Pacific and the West, but they will benefit from taking advantage of regional trade clubs and nimbly navigating regulatory fences that include tariffs, sanctions and export control.

Lastly, we examine two major proposed changes to US antitrust policy by the US Federal Trade Commission (FTC) and the Department of Justice, Antitrust Division: the FTC's proposed ban on non-compete clauses and both agencies' radical proposed changes to the Hart-Scott-Rodino Form. One key takeaway examines the possible use of employee NDAs to protect company information.

We look forward to discussing these and other issues with you.

Foreign direct investment reviews increasingly impact cross-border deals

Continued emphasis on FDI around the world, particularly in the US and Europe, creates additional challenges for investors


Hong Kong arbitration clauses offer advantage to Taiwanese companies doing business in China

Provision of "interim measures" strengthens Hong Kong's position as a level playing field in arbitration against PRC counterparties

building abstract

New challenges for Taiwanese companies under the EU’s Foreign Subsidies Regulation

The bloc's new scrutiny of foreign financial contributions poses regulatory hurdles for Taiwanese investments in M&A and public tenders in the EU

EU flag

Trade secret litigation at the US International Trade Commission: A rising fence

The growing popularity of the ITC as a regulatory venue with global reach has implications for Taiwanese trade secret owners and investigation targets

construction scaffolding

Getting deals done despite the odds

M&A, debt finance and investment fund actors seek alternative routes to dealmaking in the face of a dim macroeconomic outlook

stock market graph

Taiwanese companies in a world of “clubs” and “fences”

The evolving trade and sanctions landscape reflects a new global regulatory paradigm


Major proposed changes to US antitrust rules present new hurdles

US antitrust agencies step up enforcement with proposed policy changes that create uncertainty and new regulatory burdens

train railroad
EU flag

New challenges for Taiwanese companies under the EU’s Foreign Subsidies Regulation

The bloc's new scrutiny of foreign financial contributions poses regulatory hurdles for Taiwanese investments in M&A and public tenders in the EU

5 min read

The EU's new Foreign Subsidies Regulation (FSR), which came into effect on July 12, 2023, marks the European Commission's attempt to level the playing field by addressing the potential distortive effects of non-EU subsidies on the EU market. The mandatory notification regime started on October 12, 2023.

The FSR targets companies operating in the EU that have received financial contributions from outside the EU—also known as foreign financial contributions, or FFCs—and, in particular, recipient companies that are involved in M&A and public tenders in the EU.

The Commission now has the power to investigate and assess if businesses operating in the EU have been backed by foreign subsidies, and whether these contributions impact competition in the internal market. In case of distortion, the Commission can impose various redressive measures, block M&A deals or public tender awards, and even dissolve already-concluded M&A deals.

The Commission’s investigative powers

The FSR empowers the Commission through two regimes: mandatory filings for large M&A deals and major public procurement, plus the possibility for the Commission to open investigations into any other market situation on its own initiative.

For M&A deals, the FSR imposes mandatory filing obligations for transactions in which at least one of the merging companies, the target or the joint venture is established in the EU and has generated EU-wide turnover of at least €500 million in the previous financial year, and the parties involved have received combined FFCs exceeding €50 million in the three years prior to the conclusion of the deal. No deal can be closed until the Commission's approval is received.

For EU public tenders, the filing obligation arises where the contract value is at least €250 million—or €125 million if the tender is divided into lots—and if the bidding party, on a group level, or its main suppliers or subcontractors have received FFCs of at least €4 million per non-EU country in the three years prior to the filing. Again, the tender cannot be awarded until the Commission's approval is received.

The two notifying forms were published in July alongside the FSR Implementing Regulation: Form FS-CO for M&A deals and Form FS-PP for public tenders.

The Commission may also request M&A deals and EU tenders falling below the filing thresholds to be referred to the Commission prior to their conclusion, if it suspects that these transactions may be backed by distortive foreign subsidies.

Further, the FSR permits the Commission to retrospectively investigate M&A deals or public tenders that have already been concluded—but not those closed before July 12, 2023—as well as any other market situation in which foreign subsidies may be involved.

Disclosure obligations in FSR filing forms

Under Forms FS-CO and FS-PP, companies making an FSR filing must provide a description of the M&A deal or public tender, as well as information about the parties, the financing of the deal, and the relevant FFCs received in the past three years.

All parties to a transaction, including the target, must file a detailed disclosure for all FFCs above €1 million that they have received in the three years prior to signing the deal or submitting an FSR filing of the tender, if the FFCs fall under the "likely distortive" category. This covers FFCs that:

  • Support a failing business
  • Give unlimited guarantees
  • Directly facilitate a concentration, in the case of M&A
  • Are an export financing measure not in line with the OECD Arrangement on officially supported export credits
  • Enable a company to submit an unduly advantageous public tender in the EU

FFCs that do not fall within the "likely distortive" category must be included in a general disclosure if they are individually more than €1 million and in total exceed €45 million for M&A deals or €4 million for public tenders, per non-EU country, over a three-year period. Some of these FFCs will be subject to exemptions.

Implications of the FSR

Traditional trade defense instruments have only tackled subsidized traded goods, not subsidized M&A deals, public tenders, services or other market situations. The FSR attempts to fill this gap by imposing filing obligations for large M&A deals and public tenders in the EU, and by empowering the Commission to investigate any other market situation that causes distortions to the EU's internal market.

The filing obligations may have a significant impact on Taiwanese companies doing large M&A deals and public tenders in the EU. The relatively low FFC threshold for public tenders—€4 million in the three years prior to the FSR filing—is likely to catch most bidders for major public tenders in the EU.

The potential impact of the FSR on M&A deals is also considerable, as it represents an additional hurdle to merger control and foreign direct investment filing. It remains to be seen whether the risk of the deal being investigated, and possibly blocked, under the FSR will disincentivize companies from engaging in M&A in the EU.

It will be intriguing to see how the broader investigative tool will be used in practice. The Commission may need to prioritize the industries and subsidies on which it will focus.

Finally, given the broad definition of FFCs under the FSR, the data collection process will be burdensome. Developing systems for FSR-relevant data collection will be a challenge for all multinational companies, including EU companies and those in non-EU countries such as Taiwan.

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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

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