Now in its fifth year of annual publication, White & Case's Foreign Direct Investment Reviews provides a comprehensive look into the evolving foreign direct investment (FDI) laws and regulations in a number of key jurisdictions around the world. In this edition, we have added four new jurisdictions—India, Mexico, Spain and Sweden—to the ones covered in prior editions. We have also expanded the section dedicated to the European Union, with essential information related to European FDI developments at the macro level and in various jurisdictions.
Once the exclusive domain of sectors traditionally associated with national security, FDI reviews worldwide are extending their reach into transactions in healthcare, high-tech, real estate and a growing list of other sectors. FDI considerations now reside among the top-five major issues in any cross-border M&A transaction.
Within Europe, Germany, Italy, Spain, France and others have increased their FDI control measures this year, while still more are set to do likewise. Even as its Member States expand their individual FDI regimes, the EU has continuously refined its FDI direction throughout 2020, with a March guidance paper and a June white paper building atop the Screening Regulation that came into full effect on October 11. The EU aims to enact a "strong EU-wide approach to foreign investments screening in a time of public health crisis and related economic vulnerability."
Meanwhile in the US, the Committee on Foreign Investment in the United States (CFIUS) has expanded its jurisdiction to reach certain pure real estate transactions, as well as certain noncontrolling but non-passive investments in sensitive companies referred to as "TID US businesses." Some investments in TID US businesses are even subject to mandatory filing requirements.
Then there is COVID-19. The pandemic has brought FDI restrictions into sharper focus, and accelerated regulatory movement across the US, Europe and elsewhere. For the duration of the pandemic, and surely for years afterward, parties to cross-border transactions will need to redouble their due diligence in assessing whether their transactions will require (and pass) an FDI review, either voluntary or mandatory.
Investors need to understand FDI restrictions as they are today, and how these laws are evolving over time in order to avoid disruption to realizing synergies, achieving technological development and integration, and ultimately securing liquidity.
White & Case Global Head of Foreign Direct Investment Reviews and US National Security/CFIUS