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Foreign Investment

Our long-established global foreign investment team has extensive experience in assessing foreign investment regulatory risk and managing foreign investment reviews around the world

Foreign Investment Control

In recent years - and boosted by the pandemic and the war in Ukraine - there has been a paradigm shift in the importance and frequency of foreign investment reviews as part of the deal process. An increasing number of jurisdictions have introduced or are introducing rules restricting foreign investment - or have strengthened existing regimes. Growing technology-based security threats, geopolitical shifts and the breakdown of globalism, and a greater focus on onshoring supply chains and building domestic resilience in strategic industries have all contributed to this trend.

More than ever, it is imperative for dealmakers to consider foreign investment issues upfront in order to mitigate any potential risks and/or delays. Where the proposed investment involves a merger or acquisition, there may be overlaps with merger control filings and, potentially, the EU Foreign Subsidies Regulation, which also need to be managed carefully. Further, as foreign investment authorities increasingly co-ordinate their review of cases, it is crucial for clients to factor in the “wider picture” and align processes to get the deal through in an ever more complex regulatory environment.

Our global foreign investment team has extensive experience in assessing foreign investment regulatory risk and managing foreign investment reviews around the world, including transactions involving a wide range of sectors. Combined with our leading global antitrust practice, Linklaters is one of the world’s leading practices for foreign investment, offering truly integrated advice and assistance, including insights into changes in the political landscape.

Foreign Investment Control at Linklaters

  • Provide clear, commercial advice on foreign investment control risk at the outset of a deal and offer innovative solutions where required to deliver a successful outcome on a global level
  • Work with advisers to ensure that foreign investment considerations of the transaction are integrated into the deal and strategy
  • Offer clients a one stop shop for handling foreign investment, merger control, and foreign subsidies filings: a single, central point of contact, providing efficiencies and transparency
  • Co-ordinate and make notifications to regulatory authorities around the globe, ensuring a consistent and coherent approach and utilising the close relationships we have built with many regulators
  • Effectively mesh political, economic and legal arguments and deploy advocacy skills based on our understanding of the nature of security interests and investors of concern to achieve clearance with or without mitigation
  • Keep on top of changes depending on the political climate and the enforcement priorities around the globe 

 

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We provide seamless global support, offering foreign investment advice either directly through our own offices or through trusted local counsel in key jurisdictions and beyond. We have highlighted below the notable features of the regimes in a set of particularly key jurisdictions. Do not hesitate to reach out to us in case of questions on these jurisdictions or any other country globally.

Foreign Investment Control Thresholds by Jurisdiction

Australia

Key Facts

Under Australia’s foreign investment regime, acquisitions by a “foreign person” are subject to governmental control for reasons of “national interest” or “national security” if they fall into one of four broad categories:

(i) mandatory filing for transactions where certain valuation thresholds are met (notifiable actions); 

(ii) voluntary filing where a transaction does not meet the valuation thresholds but raises “national interest” concerns (significant actions);

(iii) mandatory filing where a transaction involves the acquisition, or the starting of a “national security business” (see below) or acquisitions of Australian land used for defence or national intelligence purposes (notifiable national security actions);

(iv) the Government also has a right to “call in” transactions that may raise national security concerns (reviewable national security actions).

Key thresholds

A pre-completion foreign investment filing with the Australian Foreign Investment Review Board (FIRB) is mandatory for notifiable actions and notifiable national security actions.

Notifiable actions

Filing thresholds are separated according to whether a transaction involves the acquisition of Australian shares/businesses on the one hand or an interest in Australian land on the other. In general, the thresholds vary by acquirer type – principally whether an acquirer is from a country that has a free trade agreement with Australia or not (higher valuation thresholds for free trade countries) – and by target type. Foreign government investors (including state-owned enterprises) also have separate thresholds (usually a nil dollar threshold) and additional filing triggers.

Notifiable national security actions

All acquisitions of direct interests (10%+) in a national security business, starting a national security business or acquiring an interest in national security land, are notifiable. The focus is on the activities of the Australian business being acquired or established and not its value. This also captures acquisitions of interests in regulated “critical infrastructure” (including electricity, gas, water, ports, data storage or processing, banking, hospitals, food and grocery, ports and public transport), regulated telecommunications businesses and businesses which provide critical goods or services to a country's defence forces.

Significant actions and reviewable national security actions

For significant actions, parties must self-assess whether a transaction raises “national interest” concerns and whether to seek FIRB approval voluntarily. National interest is not defined, however typically includes considerations regarding national security (also undefined), competition, other Australian government policies (e.g. tax), the impact on the economy and the character of the investor.

Since 1 January 2021, the Treasurer has a “call in power” to review transactions which are not notified to FIRB where they may pose a national security concern. The risk of being called in can be removed by voluntarily applying for FIRB approval.

Transactions covered by the rules

A 20% interest is typically deemed to grant control for foreign investment purposes. However, lower thresholds apply for foreign government investors, acquisitions of interests in land entities (i.e. entities where >50% of assets by value comprise interests in Australian land), certain sensitive sectors and for the acquisition of national security businesses (see above).

Key sensitive sectors

Anything that is a “national security business” is considered sensitive. Such a business is, in general terms, one which is involved in or connected with a “critical infrastructure asset”, telecommunications, personal data, defence or a national intelligence community (of either Australia or a foreign country), or their supply chains. Other sensitive sectors include media, transport, nuclear-related facilities, critical minerals and acquisitions of interests in land (particularly agricultural, residential and mining tenements) can also be considered sensitive depending on the situation.

 

For more information, see our publications below:

Belgium

Key Facts

Belgium recently adopted a foreign investment (FI) screening regime, that entered into force on 1 July 2023. 

It introduced a mandatory and suspensory notification requirement for all in-scope transactions signed from that date, meaning investors are obliged to obtain approval pre-closing of the transaction. 

Key thresholds and sensitive sectors

Investor scope

The Belgian FI regime will only screen investments by non-EU investors. This covers both companies that have their main residence outside the EU, as well as EU companies with an ultimate beneficial owner outside the EU.

Target scope 

The regime applies to direct or indirect acquisitions of voting rights in entities incorporated in Belgium. Investments in a non-Belgian target may therefore also trigger a filing if the target has a Belgian subsidiary.

Transaction scope

The Belgian regime will broadly be based on two different types of notification thresholds:

  • Acquisitions of 25% or more of a Belgian company where the activities relate to critical infrastructure, critical technologies, critical inputs, access to sensitive information, private security, freedom of media or biotech. There is no size or turnover threshold applicable for these sectors, except for the biotech sector where the Belgian company’s turnover must exceed EUR 25 million in the financial year preceding the investment. 
  • Acquisitions of 10% or more of a Belgian company that (i) is active in certain strategic sectors in Belgium (e.g. defence, energy, cybersecurity etc.) and that (ii) realised a turnover exceeding EUR 100 million in the financial year preceding the investment.

Greenfield investments are excluded from the scope of the screening regime. 

 

For more information, see our publication below:

Canada

Key facts

Canada has an extensive and long-standing foreign investment regime. Given enforcement to date, national security should be top of mind for foreign investors. In April 2020 in light of the COVID-19 pandemic, Canada announced enhanced scrutiny for foreign investments in public health, the supply of critical goods and services, or those undertaken by state-owned enterprise investors. On 24 March 2021, the government issued updated national security guidelines which formalised the broad approach to the industries and issues that may garner national security interest that had been in place during the pandemic and added detail on the key sensitive sectors for national security review purposes.

On 2 August 2022, Canada introduced a voluntary foreign investment filing regime for investments which fall outside the mandatory regime. Such investments can be reviewed under the Investment Canada Act’s national security regime and the voluntary regime aims to provide an avenue for investors to have comfort by doing any review prior to implementation.

In December 2022, the Canadian government proposed amendments, expected to be adopted and in place in 2023 that will make the notification mandatory for certain investments, even minority investments if they include governance rights, in prescribed business activities and otherwise expand the Minister’s abilities in respect of national security reviews (e.g. interim mitigation and increased penalties for failing to file). The list of prescribed business activities has not been published as of June 2023, but is expected to compare to the similar US and UK lists of industries.

Key thresholds

The Investment Canada Act (ICA) applies to non-Canadians investing in or establishing a Canadian business. There are two types of investments that are reviewed under the ICA: review of significant investments and review of investments that could be injurious to Canada’s national security.

An acquisition of control will be “notifiable” or “reviewable” depending on the transaction structure, non-Canadian’s identity, and target’s value/nature:

  • "Notifiable”: transaction is below the applicable monetary threshold; requires filing a short notification either before, or within 30 days of closing. The establishment of a new Canadian business controlled by a non-Canadian is also notifiable.
  • “Reviewable”: transaction is above the applicable monetary threshold; requires approval before closing and typically requires negotiation of undertakings with the Canadian government.

If an acquisition of a cultural business does not trigger the thresholds, a review may still be ordered.

In addition, all investments, regardless of size or whether control is acquired, can be reviewed on national security grounds, including the establishment of a new business. 

Control rules are complex, but generally: (i) acquisition of a majority of the voting or undivided ownership interests of an entity constitutes control; (ii) the acquisition of substantially all or all of an entity’s Canadian assets constitutes control; and (iii) there is a rebuttable presumption that the acquisition of at least 33.3% of voting shares of a corporation constitutes control.

Transactions covered by the rules

The mandatory filing requirements generally apply to (i) direct and indirect acquisitions of control of a Canadian business, (including minority share acquisitions of 33.3%, unless no control was acquired); and (ii) the establishment of a new Canadian business. The ICA rules apply to foreign investments in any sector.

The voluntary filing regime is available for investments by non-Canadians in a Canadian Business not involving the acquisition of control or otherwise not subject to mandatory notification or review.

Key sensitive sectors

Investments by state-owned enterprises; further, sensitive sectors include: military/defence; Canadian cultural heritage; public health; technology; sensitive personal data; critical minerals; critical mineral supply chains and critical infrastructure/goods/services, among others. 

 

For more information, see our publications below:

China

Key facts

Foreign investors should consider whether any of the five foreign investment regimes in the People’s Republic of China (PRC) listed below apply to their transactions. The key criterion is always whether a foreign investor is proposing to acquire a Chinese company / asset or is otherwise involved in an investment in the PRC. Several changes to the regimes came into effect on 1 January 2020 and 18 January 2021 (for National Security Review (NSR)). 

Key thresholds

1. National Security Review (NSR) - applies where:

  • the target is in one of the applicable categories of the Measures for the Security Review of Foreign Investment (Security Review Measures). If the foreign investment is in a Category A sector (e.g. military or national security/defence) or in locations close to Category A facilities, a pre-closing filing will be required, even if only a minority share is acquired. If the foreign investment is in a Category B sector (e.g. key technologies, important energy or infrastructure; see further detail under “sensitive sectors” below), a pre-closing filing will only be required if actual control is obtained; and 
  • the transaction takes one of the specified forms (e.g. as a merger or acquisition of equity or assets of a Chinese domestic enterprise, an investment in a new project, or establishment of a new FIE, by a foreign investor either on its own or with other investors, or an investment directly or indirectly conducted by a foreign investor in China in any other form). 

2. Pre-closing approval by the Ministry of Commerce (MOFCOM)

With the entry into force of the Foreign Investment Law (effective since 1 January 2020), China has replaced the pre-closing approval by MOFCOM with the NSR (described above) and the MOFCOM information reporting mechanism (as detailed below). Central and local governments have been promoting “streamlined” formalities for FIEs, such as the “one stop shop” reform to combine MOFCOM information reporting and SAMR registration into a single platform. However, it may take time for this system to be fully implemented across mainland China. As such, it is always preferable for foreign investors to check with local MOFCOM/SAMR branches on the application of these rules in practice.  

According to the former rules (which may or may not be applicable in practice), pre-closing approval by MOFCOM applies to the acquisition of a Chinese entity where the “foreign” investor: (i) is established or ultimately controlled by a Chinese domestic entity or Chinese individual and such domestic entity or individual is also affiliated with the target; (ii) is using offshore shares as the consideration for the acquisition; or (iii) acquires control of a famous brand or household name or control of an entity in a key industry. 

Depending on the specific rules, “control” in the above contexts can include a shareholding of 50% (or a lower ownership percentage with significant influence over the target), or effective control of the target’s business policies, irrespective of shareholding. 

3. Registration with the relevant bureau of the State Administration for Market Regulation (SAMR) - required if the investment involves a direct change in the shareholding of a FIE or changes to its legal representatives, directors, supervisors, or managers. SAMR is also responsible for reviewing transactions where the target is active in a sector (Restricted Sector) covered by the national or respective FTZ “negative list”. Restricted Sector limitations on foreign ownership/management, as well as industry specific regulatory approvals/ filings, may apply.

4. Pre-closing approval by, or filing with, National Development and Reform Commission (NDRC) at the relevant level – required for industrial/infrastructure projects invested in by a foreign investor. Not required if the target is in a financial sector. 

5. MOFCOM information reporting – MOFCOM has introduced information reporting requirements for all FIEs which came into effect from 1 January 2020, replacing the previous filing-based system for the establishment of, and changes to, FIEs. 

Transactions covered by the rules

The regimes generally apply to share purchases and some asset purchases. In addition, the NSR can apply more broadly to an investment directly or indirectly conducted by a foreign investor in China in any other form. No further clarity is provided under the Security Review Measures, or other relevant laws or regulations, on what this catch-all clause may entail. Such other forms may cover contractual control, nominee or trust arrangements, reinvestments, offshore transactions, leasing, subscription of convertible bonds etc.

Key sensitive sectors

Certain industry sectors are categorised as prohibited for investment into China (e.g. fishery, publication, and broadcasting). Sensitive sectors in the context of the NSR regime include: under Category A, military or military supporting industry; investment in the vicinity of military facilities or military industrial facilities; other businesses related to national defence / security; under Category B, key technologies; major equipment manufacturing; important agriculture products; important energy and resources; important infrastructure and transportation services; important cultural products or services; important IT and internet products or services; important financial services; and other important industries relating to national security. 

 

For more information, see our publications below:

European Union

Key facts

The European Union does not operate a separate foreign investment review regime but coordinates and encourages the harmonisation of the national foreign investment review rules of its Member States. 

To align the national investment reviews, the European Union adopted the FDI Screening Regulation, which came into effect on 11 October 2020. The FDI Screening Regulation does not establish a fully harmonized foreign investment regime in the EU, nor intends to replace the national foreign investment regimes of the different Member States. Instead, it seeks to promote best practices, cooperation and information sharing regarding foreign investment control between the European Commission and the Member States.

As of 1 July 2023, 19 Member States have active foreign investment regimes, namely Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Slovak Republic and Spain. To close the regulatory gap, a number of remaining Member States will be introducing their own foreign investment regimes (e.g. Sweden, Estonia, Ireland and Luxembourg), therefore the list of foreign investment regimes in the EU is expected to increase in the future.

Key thresholds

Since there is no separate foreign investment regime exercised by the European Union it does not contain specific acquisition thresholds, and investments are not required to be notified to the European Commission. However, the Commission can issue opinions in cases where the FDI might have an effect on security or public order in more than one Member State, or if it has relevant information in relation to the FDI. The opinions are non-binding on the Member States.  

Transactions covered by the rules

The FDI Screening Regulation considers foreign investment to be any kind of investment by a foreign investor aimed at establishing or maintaining lasting and direct links to the target, including control over the target company. The FDI Screening Regulation addresses investments by third countries, i.e. non-Member States.

Key sensitive sectors

Critical infrastructure (energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure), critical technology (artificial intelligence, robotics, semiconductors, cyber security, aerospace, defence, dual use goods/services, energy storage, quantum technologies, nuclear technologies, nanotechnologies, biotechnologies), critical input suppliers (e.g. energy or raw materials and food security), companies using and storing personal data, and media companies.

 

For more information, see our publications below:

France

Key facts

The French foreign investment regime is a long-standing and well-established mandatory regime. Where a transaction falls within the scope of the French foreign investment rules, a filing must be made to the Minister for the Economy to request an authorisation. The French foreign investment regime is suspensory, which means that the parties cannot close until they have obtained clearance from the Minister for the Economy. The Minister has the authority to authorise the transaction with or without conditions. The Minister also has the authority to block transactions by means of a reasoned decision.

Key thresholds

There are no turnover thresholds under the French foreign investment regime, and a filing may be required even where the turnover of the French target is very low. The requirement for prior approval is also not dependent on the importance of the activity at issue, compared to the overall activities of the target. For instance, a single government contract may be sufficient to trigger a filing obligation and a case-by-case assessment is required in each case.

Transactions covered by the rules

A filing to the Minister for the Economy will be triggered if a “foreign investor” (including French nationals residing outside France) acquires control, exceeds 25% of voting rights (save for investors from the European Union) or acquires all or part of the assets of a French law entity operating in certain sectors.

Since 6 August 2020, an additional threshold at which the foreign investment screening regime is triggered has been implemented, at 10% of voting rights for non-EU investors acquiring shares in listed companies.

Key sensitive sectors

Sensitive sectors include: defence, energy, water, transport, space, electronic communications, police, health, agricultural products that contribute to national food safety objectives, print and online press services for political and general information, quantum technologies, energy storage and technologies involved in the production of renewable energy. 

The list of sectors falling within the scope of the French foreign investment regime can be extended by decree (i.e., almost overnight) when needed (e.g. the Alstom/General Electric merger). 

With effect from 1 April 2020, the list of sensitive sectors is now the same for all foreign investors, regardless of whether they are located within or outside the European Union.

 

For more information, see our publications below:

Germany

Key facts

The German regime is a long-standing regime which has undergone major changes in the past five years, including a significant extension of its scope of application and sanctions. Depending on the type of sector affected, it may kick-in when acquiring 10% or more of voting rights and requires a mandatory filing for a wide range of transactions. Whether German foreign investment review is applicable depends on (i) the origin of the investor, (ii) the sensitivity of the target’s activities in Germany, and (iii) the share of voting rights acquired. 

In 2021, the regime was substantially expanded by including (i) 16 additional sectors to the scope of the mandatory and suspensory regime, (ii) the concept of atypical control to capture transactions below the relevant thresholds if the investors have certain additional rights, (iii) additional thresholds for follow-on acquisitions by the same investor, and (iv) severe sanctions including imprisonment of up to five years in cases of intent or fines in cases of negligence of up to EUR 500,000. Since 2022, the regime has undergone an in-depth evaluation and further reforms are expected in the next years.

Key thresholds

The German foreign investment regime has a three-pillar review regime and distinguishes between acquisitions triggering a mandatory filing requirement and those which only fall under a voluntary filing regime: 

  1. Specific mandatory filings are required for investments by non-German investors in the defence sector, certain infrastructure for processing state classified information and other highly sensitive (military or national security related) activities (so-called mandatory sector specific review). 
  2. Further, mandatory filings are required for investments by non-EU/EFTA investors in critical infrastructures (a broad concept applying to many sectors where the target’s activities exceed certain quantitative thresholds aligned with the average demand of 500,000 people), software specifically developed for critical infrastructure operations, as well as other sectors which the Ministry for Economic Affairs and Climate Action considers of particular relevance including cloud computing; telematics infrastructure; media; state communication infrastructure; personal protective equipment; essential drugs; medical devices; in-vitro diagnostics; satellite systems; artificial intelligence; automated and autonomous driving; robotics; semiconductors; IT security; aerospace; quantum technologies; additive manufacturing; wireless or wireline data networks; smart meters; IT for specific sensitive locations; mining of rare earth metals and similar raw material; large scale agricultural activities (so-called mandatory cross-sector review).
  3. Outside of the above-named sectors triggering a mandatory filing, a voluntary filing is possible. However, if no voluntary filing is made, the transaction can still be called-in within five years after signing and, thus, a voluntary notification may be advisable depending on the sensitivity of the target’s activities or the investor’s identity for early deal certainty.
Transactions covered by the rules

For transactions falling in the mandatory category, a filing is required if a foreign investor acquires (indirectly/directly) voting rights in the German target exceeding specific thresholds. Whether only non-EU/EFTA investors or also non-German investors are scrutinised and the exact voting rights threshold, depends on the sector of the target’s activities. In transactions involving certain highly sensitive target business activities, this regime also applies to all non-German investors and/or lowers the threshold for mandatory filings to the acquisition of 10% or more of the voting rights instead of 20%.

The voluntary filing regime applies to (indirect/direct) acquisitions of 25% of the voting rights in the German target by non-EU/EFTA investors. 

Asset deals and internal restructuring are in scope of the foreign investment rules in Germany with only limited safe harbours.

Depending on the sector, follow-on acquisitions by the same investor may trigger a new foreign investment review when the total voting shares held by an investor exceed 20%, 25%, 40%, 50% or 75%. 

Key sensitive sectors

The German FDI regime stipulates a range of sectors as particularly sensitive, however, the list is not exhaustive and even outside the list, certain sectors are considered to be sensitive and may result in the Ministry for Economic Affairs and Climate Action to call-in transactions. Taking that into account, key sensitive sectors include: defence, healthcare, medical devices and diagnostic equipment, biotechnology,  robotics, semiconductors, cybersecurity, aerospace, quantum technologies, nuclear technologies, artificial intelligence, nano technologies, supply of critical inputs (energy or raw materials as well as for food safety), access to particular sensitive information (including personal data), media, telematics, dual use services/goods, cloud computing, additive manufacturing, automated and autonomous driving, critical infrastructures such as energy, water, IT and telecommunication, finance and insurance, transport and food. Further, investments in certain companies of the “German Mittelstand”, in particular the so called “hidden champions”, may attract higher scrutiny. 

 

For more information, see our publications below:

Italy

Key facts

The Golden Powers Regulation (GPR) is the main set of rules on foreign investments in Italy. The GPR originally only provided for a mandatory filing in a limited number of sectors, i.e. defence, national security, energy, transport and communications. However, over the years, the scope of application has been substantially extended to numerous additional sectors.

Key thresholds

Notification requirements cover, among others:

  • any investor (including Italian investors) acquiring (direct or indirect) control of strategic companies (Strategic Companies) in the communications, energy, transport, health, agri-food, financial, credit or insurance sectors; and
  • non-EU investors acquiring (directly or indirectly) 10% (as well as further acquisitions exceeding the thresholds of 15%, 20%, 25% and 50%) or more of the corporate capital or voting rights, taking into account the shares and voting rights already directly or indirectly owned, of Strategic Companies in other sensitive sectors, provided that the overall value of the investment is equal to or greater than EUR 1 million. 

Lower thresholds apply for any investor (including Italian investors) in relation to acquisitions of shareholdings in a Strategic Company active in the defence or national security sectors.

Transactions covered by the rules

Transactions covered include share or asset deals, as well as resolutions, acts or transactions having, directly or indirectly, an impact on the relevant assets and relationships of a Strategic Company.

Intra-group transactions are not exempted. In addition, a notification obligation can also be triggered by resolutions/acts/transactions not linked to an M&A deal, including resolutions of a Strategic Company concerning, among other things, its relocation outside Italy or its dissolution, or amendments to its corporate object or to certain clauses of its Articles of Association and, in certain circumstances, the incorporation of a company that will carry out strategic activities.

Special rules apply for companies active in the 5G sector.

Key sensitive sectors

Sensitive sectors include defence, national security, energy, transport, communications, finance, credit, insurance, steel, agri-food sectors and 5G technologies, personal data, media, aerospace, water, health, data processing or storage, electoral or financial infrastructure and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure, dual use items and technologies, artificial intelligence, robotics, semiconductors, cybersecurity, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies.

 

For more information, see our publications below:

Japan

Key facts

The Japanese foreign investment scheme is a mandatory regime. Foreign investors are required either (i) to obtain a pre-closing approval or (ii) file a post-closing notification depending on the identity of the acquirer and the nature of the Japanese business subject to the investment. If pre-closing approval is required, closing is not permitted before the local clearance and the statutory review period is 30 calendar days.

Key thresholds

Pre-closing approval is required for any direct investment by a foreign investor in a Japanese company:

  • active in sensitive sectors (or whose Japanese subsidiary is active in sensitive sectors) and not listed on the Japanese stock exchange, regardless of the level of the shareholding or voting rights.
  • active in sensitive sectors (or whose Japanese subsidiary is active in sensitive sectors) resulting in the acquirer holding 1% or more of the shares or voting rights. For pure investment purposes (where the investor does not appoint officers to, or get involved in the business of, the Japanese company in any way), the 1% threshold may be raised up to 10% or more depending on the business of the foreign investor and/or the Japanese listed company, in which case a post-closing notification is required. Japan’s Finance Ministry has published a list of companies operating in core national security industries to come under this new foreign direct investment-notification threshold, which has been applicable since 7 June 2020 (available here).

Post-closing notification is required for any direct investment by a foreign investment in a Japanese company that is active solely in non-sensitive sectors resulting in a holding of 10% or more of the shares or voting rights.

The acquisition of a foreign entity that already holds a Japanese company does not trigger a filing.

Transactions covered by the rules

Foreign investment into Japan includes but not limited to: 

  • Direct acquisitions of shares or equity in a Japanese company by a foreign investor. This includes the shares or equity held by a party which has a special relationship with the foreign investor.
  • Acquisitions of business (including merger, company split and business transfer) of a Japanese company by a foreign investor.
  • Consent to the appointment of directors from the consenting foreign investor or a substantial change in the business purpose of a Japanese corporation.
  • Establishment of a branch in Japan or a substantial change in the kind of business purpose of the branch in Japan.
  • Loan to a legal person having its principal office in Japan where the term of the loan exceeds one year and the amount of the loan exceeds JPY 100 million equivalent.
  • Acquisition of bonds whose maturity date is more than 1 year in the future and where the outstanding balance of bonds issued by such company and held by one foreign investor exceed JPY 100 million equivalent.
  • Discretionary investment in the shares of a listed Japanese company of 1% or more.

Also, internal re-organisations may be captured if the direct parent company changes and the new parent company is a foreign investor.

Key sensitive sectors

Key sensitive sectors are:

  • Businesses which are likely to impair national security, disturb the maintenance of public order or hinder the protection of public safety (i.e. manufacture of weapons, aircrafts, artificial satellites/rockets, nuclear materials, electronic devices and IT related goods (e.g. circuits, semiconductors, optimal/magnetic discs, mobile phones, computers), software, cyber security,  healthcare (i) manufacturing medicines or pharmaceutical products (including intermediate products) for infectious diseases; and (ii) manufacturing highly-managed pharmaceutical devices). Critical minerals including rare earth and construction business regarding certain remote islands (Okino-Tori-shima, Minami-Tori-shima) have been added to this list which will be applicable to transactions effecting from 4 November 2021); and
  • Businesses which are likely to have significant adverse effect on the smooth operation of economy (for example, agriculture, forestry, fisheries, petroleum, aerospace, electric/gas/water utilities, telecommunications, leather manufacturing and transportation).

 

For more information, see our publication below:

Netherlands

Key facts

The Netherlands recently adopted a foreign investment (FI) screening regime that entered into force on 1 June 2023. The new rules balance the Netherlands' reputation as a foreign investment-friendly jurisdiction with an investment screening regime focused solely on national security concerns.

It provides for a mandatory and suspensory notification requirement for all in-scope transactions.

Key thresholds and sensitive sectors

Investor scope

The Dutch regime is a general investment control regime that applies equally to non-EEA, EEA and Dutch investors. In that sense, the FI regime is closer to a national security regime than a foreign investment control regime. The scope of the Dutch regime is primarily driven by the target and/or sector of the investment rather than by the investors’ identity.

Target scope 

The regime applies to companies based in the Netherlands that are either: (a) a "vital” supplier (including a list of key companies such as NAM, GasTerra, KLM, Schiphol Group and the Rotterdam Port Authority, as well as companies active in nuclear power, heat transportation networks, ground (fuelling) services, and significant companies active in the financial services industry); (b) an operator or manager of a high-tech campus; or (c) active in the field of sensitive technologies (such as dual-use products, military goods, quantum technology, photonic technology, semiconductor technology or high assurance products). 

To qualify as a Netherlands-based company, it suffices that an entity carries out activities and has its effective management in the Netherlands. Importantly, the regime also covers the indirect acquisition of a non-Dutch target if it has a Netherlands-based subsidiary. 

Transaction scope

The regime covers a broad scope of transaction types, including acquisitions, legal (de)mergers, full-function joint ventures, asset acquisitions (insofar as these are essential to the sensitive activities), and, last but not least, the increase of significant influence (which may arise where an investor acquires 10% of the voting rights, or involves the ability to appoint or dismiss directors) over highly sensitive technologies. This last type of transaction, in contrast to the others, does not trigger retroactive notification requirements for deals that signed after 8 September 2020.

 

For more information, see our publication below:

Russia

Key facts

The Russian foreign investment regime traditionally only applies if the transaction results in an acquisition (direct/indirect) of any shares or rights in respect of a Russian entity or its assets (noting that payments and acquisition of securities of foreign entities may be subject to separate foreign investment restrictions not covered herein).

Traditionally, the most complicated rules applied to the broad (60+) list of sensitive – strategic – sectors with certain pre-closing approvals potentially taking 6 to 12 months or longer to obtain. However, the Russian foreign investment regime is much broader than just the sensitive strategic sectors. After February 2022 the regime was expanded and now scrutinises foreign investments into Russia in more detail as well as exits of foreign investments from Russia (commonly referred to as the “Russian countersanctions regime”). This results in transactions requiring multiple foreign investment clearances (often from a number of regulators) at the same time, more transactions may be prohibited by law entirely until further notice, and the regulators are no longer statutorily bound in terms of remedies they may impose on the parties.

Key thresholds

The thresholds depend on the exact combination of: (i) the type of Russian entity (in particular, if it is engaged in any strategic activity(ies) or included in any “protected lists”); (ii) the identity of the investor (including nationality, its beneficiaries / controlling persons, e.g. whether it is or is controlled by a Hostile Nation Person/Entity, a foreign state or international organisation); (iii) the identity of the counterparty (e.g. seller) and other participants (if any) in the target (same as for the investor); and (iv) the transaction structure (asset or share deal, acquisition of control or blocking rights, etc.).

The combinations may result in: suspensory pre-closing clearance; pre-closing disclosure of UBOs; post-transaction notification or clearance; or a prohibition to acquire. Clearances may need to be sought from the GC which is essentially the entire Russian Government, a newly formed Sub-Commission of the GC (Sub-GC), the Federal Antimonopoly Service of Russia or the President of Russia. 

Filings may be triggered by the acquisition of just one share (or 1%) in a Russian entity, directly or indirectly, though traditional foreign investment filings are usually triggered by an acquisition of 5%/25%/50% or more shares (votes) in a Russian entity, or of blocking rights in respect of a Russian entity or certain types of assets owned by such entity.

Whether or not the Russian foreign investment regime is triggered should be checked in every transaction that results in an acquisition (direct/indirect) of any shares or rights in respect of a Russian entity or assets owned by a Russian entity, as well as if any party to the transaction is a Russian person/entity.

Types of Foreign Investors and Russian Targets

Strategic Entity: Russian entity engaged in an activity of “strategic significance” for Russia.

Subsoil Strategic Entity: Russian Strategic Entity which carries out geological studies, exploration and/or extraction of subsoil resources on land plots of federal significance. Following a series of court decisions, an entity which provides oilfield services on land plots of federal significance (even if not directly including geological studies, exploration and/or extraction of resources), is also a Subsoil Strategic Entity.

Strategic Fishing Entity: Russian Strategic Entity which is engaged in extraction (fishing) of aquatic biological resources.

Restricted Investor: foreign states, international organisations, foreign investors which had not disclosed their beneficiaries to the regulator and any entity controlled by them (including by several such investors in aggregate).

Ordinary Investor: entity controlled by non-Russian citizens or companies (or Russian citizens with a foreign citizenship) and not controlled by Restricted Investors (after a completed UBO disclosure).

Hostile Nation Person/Entity: primarily a person which is a foreign citizen or entity which is registered in a “hostile nation” or the primary place of business of which person/entity is in a “hostile nation”, the latter being a country which has introduced sanctions and/or other restrictive measures against the Russian Federation, Russian individuals and/or entities, and is listed in the Order of the Government of the Russian Federation No. 430-r (the list includes the UK, the EU and most other European countries, the US, Canada, as well as other countries).

Key sensitive sectors 

Over 60 different industries are regarded as being of “strategic significance”, as well as traditionally sensitive industries such as media, insurance, banking, air and space, etc. From August 2022, additional prohibitions apply to entities included in certain “protected lists” and/or engaged in the fuel and energy and natural resources sector, the financial sector, as well as entities in which the Russian Federation holds shares.

 

For more information, see our publications below:

Spain

Key facts

Spain has three alternative regimes of foreign investment (FI) screening, introduced by law in 2020 and adjusted in 2023 through an implementing regulation (applicable to FI proceedings initiated on or after 1 September 2023, irrespective of the date of signing):

  1. A general regime, applicable to non-EU or non-EFTA investors, under which the acquisition of 10% or more of the shares in a Spanish company or control of such company or a part of it (by means of a corporate transaction or an investment in assets or branches of activity), is subject to prior authorisation (from the Council of Ministers or, if the transaction value is below EUR 5 million, from the Directorate General of International Trade and Investment) if (a) the target company operates in a sensitive sector or (b) the foreign investor has certain characteristics (i.e. is controlled by a foreign government, has previous sensitive investments or has a history of illegal activity).
  2. A temporary regime, applicable to non-Spanish EU or EFTA investors, under which the acquisition of 10% or more of the shares in a Spanish company or control of such company or a part of it (by means of a corporate transaction or an investment in assets or branches of activity), is subject to prior authorisation (from the Council of Ministers or, if the transaction value is below EUR 5 million, from the Directorate General of International Trade and Investment) if (a) the target company operates in a sensitive sector, and (b) the target company is listed in Spain or the value of the investment is more than EUR 500 million. This regime applies until 31 December 2024, but it could be extended.
  3. Finally, a special regime for investments in the field of national defence, applicable to non-Spanish investors, under which the acquisition of 5% or more of the share capital of a Spanish company with any activities directly related to national defence, or the right to appoint (directly or indirectly) one member of its managing body, is subject to prior authorisation from the Council of Ministers. Under the 2023 implementing regulation, investments in the field of national defence in which the investor reaches between 5% and 10% are exempted from authorisation if the investor notifies the transaction to the Directorate General of Armaments and Materiel (within the Ministry of Defence) and the Directorate General of Foreign Trade and Investments (within the Ministry Industry, Trade and Tourism) and includes with this notification a document in public deed committing not to use, exercise or assign to a third party its voting rights nor to take part in the management bodies. Activities directly related to national defence include the production or trade of weapons, munitions, explosives and war materials, but also could include less obvious areas, such as IT, engineering, communications systems or logistical services that are necessary to military operations.
Key thresholds

For the purposes of the general regime, foreign investments are defined as investments carried out, in Spain, by investors who are residents of countries outside the EU/EFTA, or by residents in the EU/EFTA whose beneficial owners are foreign investors (i.e. where the foreign investor possesses or ultimately controls, directly or indirectly, more than 25% of the capital or voting rights in the investor, or where by other means it exercises direct or indirect control of the investor), in cases where, as result of the transaction, the foreign investor reaches ownership of 10% or more of the Spanish company, or acquires control of that company or a part of it (including by acquiring assets or branches).

Under the temporary regime, the same notion applies in largely the same way: covered investments are those carried out by residents of EU/EFTA countries (other than Spain) or by Spanish residents whose beneficial owners are (non-Spanish) EU/EFTA investors (i.e. where such investor possesses or ultimately controls, directly or indirectly, more than 25% of the capital or voting rights in the investor, or where by other means it exercises direct or indirect control of the investor) where, as result of the transaction, the foreign investor reaches ownership of 10% or more of the Spanish company, or acquires control of that company or a part of it (including by acquiring assets or branches).

For an investment under the temporary regime to trigger approval, the target company or the transaction must also meet the following conditions or thresholds:

  • The target must be a listed company in Spain (“companies listed in Spain are those whose shares are, in whole or in part, traded on a Spanish regulated market and have their registered office in Spain”), or
  • The “investment value” must be more than EUR 500 million.

If such investments also meet the additional requirements under each regime (see “Transactions covered by the rules” below), they will require prior approval by the Spanish Council of Ministers or, if the transaction value is below EUR 5 million, from a Directorate General of International Trade and Investment. 

Finally, under the special regime for investments in the field of national defence, the notion of foreign investor is the same as above: those who are residents of countries outside Spain or Spanish residents whose beneficial owners are non-Spanish investors (i.e. where such investor possesses or ultimately controls, directly or indirectly, more than 25% of the capital or voting rights in the investor, or where by other means it exercises direct or indirect control of the investor) or, if they are natural persons, that hold a foreign nationality. In those transactions, the relevant investment threshold is 5%, and there is no express minimum threshold. 

Transactions covered by the rules

Under the general regime, transactions covered are investments by non-EU/EFTA investors (above the thresholds and with the conditions mentioned above) that meet either of the two following alternative criteria:

  • the investment is made in one of the sectors that affect “public order, public security and public health” (for a detailed explanation, see “Key Sensitive Sectors” below; for example, critical technologies and dual-use items: artificial intelligence, robotics, semi-conductors, cybersecurity, quantum technology, aerospace, defence, energy, nuclear technologies, nanotechnologies and biotechnologies); or
  • regardless of the sector of the investment, the foreign investor is controlled directly or indirectly by the Government of a third country or has been involved in administrative or judicial proceedings in another Member State, its State of origin or a foreign State for criminal or illegal activities or has made investments in the past in an EU company within one of the sectors “affecting security, public order” (listed above).

Under the temporary regime, transactions covered are investments by non-Spanish EU/EFTA investors (above the thresholds and with the conditions mentioned above) in one of the sectors that affect “public order, public security and public health” (for example, critical technologies and dual-use items: artificial intelligence, robotics, semi-conductors, cybersecurity, quantum technology, aerospace, defence, energy, nuclear technologies, nanotechnologies and biotechnologies). Under this regime, the characteristics of the investor are not relevant.

Under the special regime for investments in the field of national defence, transactions covered are those that affect companies that have any activities directly related to national defence. These include not only weapons, munitions, explosives and war materials but could also cover other sectors with a less obvious connection with the military world, such as IT, communications, engineering or software, if the target company has supply agreements with the Spanish armed forces or other military institutions.

Key sensitive sectors

The following sectors are considered sensitive:

  • Critical physical or virtual infrastructure (including transport infrastructure) and the key land and property used (the content of the catalogue of critical infrastructure is secret).
  • Critical technologies and dual-use products, or key technologies for leadership or industrial capabilities, or technologies developed under programs or projects of particular interest for Spain, including: telecommunications, artificial intelligence, robotics, semiconductors, cyber security, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnology, biotechnologies, advanced materials, and advanced manufacturing systems.
  • Supply of critical inputs. In particular: energy, strategic connectivity services, raw materials and food security. 
  • Sectors with access to confidential information. In particular: personal data, or those with the capacity to control such information.
  • Media.

The Spanish government may extend this regime to other sectors if it considers that they may affect public security, public order or public health, but this extension has not happened yet.

Conversely, the Spanish government may clarify the perimeter of these sectors. This happened in the 2023 FI implementing regulation – please refer to the implementing regulation for further information. 

 

For more information, see our publications below:

United Kingdom

Key facts

The National Security and Investment Act (NSI Act) entered into force on 4 January 2022, establishing a screening regime for investments in the UK, with a mandatory notification obligation for 17 of the most sensitive sectors and a voluntary regime for other areas of the economy (coupled with a broad power for the UK Secretary of State to “call in” transactions for review). The NSI Act has an incredibly broad jurisdictional scope and no de minimis turnover, monetary value or market share thresholds. 

The public interest grounds of intervention under the Enterprise Act 2002 relating to media plurality, public health and financial stability continue to apply, but the national security ground for intervention has been repealed, as the much more far-reaching NSI Act applies. 

Key thresholds

For the mandatory regime, a “trigger event” arises where a person acquires more than 25%, 50% and 75% of votes or shares in an in-scope entity (or is able to secure or prevent the passage of any class of resolution governing the entity’s affairs).

The voluntary regime:

  • In addition to the trigger events under the mandatory regime, a different threshold applies for acquisitions involving “material influence”. This is a familiar concept from the UK merger control context (and can be triggered by acquisitions of shareholdings as low as 10-15%).
  • For assets, a person gains control where they acquire a right or interest and, as a result, is able either to (i) use the asset, or use it to a greater extent than prior to the acquisition, or (ii) direct or control how the asset is used, or direct or control how the asset is used to a greater extent than prior to the acquisition.

There are no turnover, transaction value, or market share safe harbours under the NSI Act.

The regime captures international transactions where the target has activities in the UK and/or supplies goods or services in the UK. There is no need for a target to have a UK-incorporated subsidiary.

The NSI Act applies to both UK and overseas investors.

Transactions covered by the rules

The mandatory regime under the NSI Act only applies to acquisitions of shares and/or voting rights. Conversely, the voluntary regime (and call-in power) also captures asset acquisitions. Qualifying assets include a broad range of assets such as land, tangible moveable property and, with respect to IP, any idea, information, or technique with industrial, commercial or other economic value. The NSI Act also applies to internal re-organisations where there is no change in the ultimate controlling entity.

Key sensitive sectors

The 17 sensitive sectors subject to mandatory notification are as follows: advanced materials; advanced robotics; artificial intelligence; civil nuclear; communications; computing hardware; critical suppliers to government; critical suppliers to the emergency services; cryptographic authentication; data infrastructure; defence; energy; military and dual-use; quantum technologies; satellite and space technologies; synthetic biology and transport.

 

For more information, see our publications below:

United States

Key facts

The US is one of the most mature foreign investment regimes and has a long track record of enforcement. Most reviews are conducted by the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments in US businesses and real estate. Other US foreign investment reviews may apply to investments in cleared contractors, producers of military technology, and telecommunications licensees.

CFIUS has broad authority over acquisitions of control of US businesses and has limited authority to mandate pre-closing filings involving these businesses or to assert jurisdiction over noncontrolling investments. CFIUS can initiate its own reviews of transactions over which it has jurisdiction if the parties do not submit voluntary filings.

Key thresholds

CFIUS principally reviews foreign acquisitions of control of US businesses, including US operations of non-US companies. CFIUS also reviews non-controlling investments, coupled with governance/information access rights, in US businesses engaged in critical technology, critical infrastructure, or sensitive personal data of US citizens (TID Businesses). Pre-closing CFIUS filings are mandatory for 25% voting interests in TID Businesses if a foreign government holds a 49% voting interest in the investor. CFIUS filings are also required for critical technology investments of any size if (i) the foreign investor receives control or certain governance/information access rights; and (ii) certain industries identified as sensitive are involved. The industry test is expected to be replaced with one based on the need for export licenses to share the target’s technology with the foreign investor or certain affiliates.

Transactions covered by the rules

Control is defined imprecisely by CFIUS as the power, direct or indirect, whether or not exercised, to use majority ownership, a dominant minority interest, board representation, contractual rights, or other arrangements to determine, direct, or decide important matters affecting a US business. A limited number of minority shareholder protections are excepted from the definition of control rights. CFIUS interprets the definition broadly and has found control when an investor has sought a less than 20% voting interest coupled with only one board representative.

Key sensitive sectors

Sensitive sectors include: critical technologies (certain export-controlled technologies), critical infrastructure (specific communications, energy, transport, and financial infrastructure, plus certain strategic materials and industrial resources), and sensitive personal data of US citizens (e.g., genetic data or other personally identifiable data including financial, health, security, or other qualitative factors).

 

For more information, see our resources below:

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At Linklaters, we have world-leading experience thanks to our dedicated and truly integrated global network. We are continually monitoring developments in this rapidly evolving area in order to remain ahead of the curve. We offer clients a one stop shop for handling merger control and foreign investment review filings: a single, central point of contact, as well as a consistently high level of quality.

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The team has advised on price controls, market access and liberalisation for utilities companies, as well as on the regulatory issues arising in the context of mergers and acquisitions and financing/restructuring transactions.

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