Foreign Direct Investment Review Regimes in Europe

Practical impact: overview

• Wide range of “sensitive” sectors
• e.g. defence, advanced technology, data, “proximity risks”, healthcare
• Broad jurisdictional reach
• “Control”/minority interests/indirect acquisitions/SOEs
• Business/assets/non-ownership transactions (e.g. leases)
• Variety of review criteria
• e.g. resistance to activist investors
• Contractual aspects
• e.g. conditionality, co-operation obligations, long-stop date, remedies
• Monitoring of emerging risks/opportunities
• e.g. golden shares, compulsory licensing, review of foreign subsidies
• Transaction planning
• Address early/relationship with merger control process

The emerging foreign investment control landscape...

FDI restrictions on the march

Index gauging the restrictiveness of a country’s FDI rules by inter alia foreign equity restrictions; discriminatory screening or approval mechanisms.

Scope of Review

Sectors (1) – Needle in a haystack!

Sectors (2) – Needle in a haystack!

Types of buyer

• Many regimes differentiate based on whether the buyer is:
• A private investor
• A state-owned/controlled entity (thresholds typically lower)
• An offshore/tax haven incorporated entity
• In practice, any Chinese buyer (including finance providers) now attracts attention in most European jurisdictions, as well as in the USA, Canada and Australia
• Authorities may “look through” the acquisition structure to consider the ultimate controlling entities
• This is the case in particular for Germany, France, Italy and in non-EU countries (Australia, the USA)
• Temporary review of EU buyers in some EU jurisdictions due to Covid-19

Types of acquisition

• FDI reviews often include a broader concept of control
• Approval requirements may cover minority acquisitions (e.g. Schlumberger or typically PE funds)
• Minority shareholdings may be as low as 10% (e.g. USA, Germany) – the EU Commission has even suggested 5%
• A standard acquisition structure (direct acquisition of a parent company and indirect acquisition of local subsidiaries) may not require pre-closing approvals in the jurisdictions in which the local subsidiaries are located
• Examples: Austria, Canada, China or Japan