Foreign Direct Investment

EU Foreign Direct Investment and UK National Security

We are highly expert at navigating the Foreign Direct Investment Regimes in the EU and the UK.

On 25 March 2020 the European Commission issued Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets (the “Guidelines”), ahead of the application of Regulation (EU) 2019/452 (the “FDI Screening Regulation”) in October 2020.  This was addressed to Member States setting out what they can do in advance of the FDI Screening Regulation mechanism coming into force.  The document was part of the overall Commission response to the COVID-19 crisis. 

There are currently 15 notified national screening regimes in the EU, some of which require compulsory notification and clearance of relevant mergers backed up by criminal penalties.

The UK has its separate screening regime and does not take part in the EU FDI framework, as the UK left the EU on 31 January 2020.   The UK Government has now published the draft National Security and Investment Bill introducing an entirely new ownership vetting regime for transactions involving targets in key UK sectors.  The regime will introduce a mandatory filing requirement for all acquisitions of entities that are active in 17 specified sectors, which have been selected on the basis that the government considers that transactions involving them have the most potential for risks to national security to arise. 

There will be a mandatory waiting period of 30 working days from filing, although officials hope to be able to shorten this in straightforward cases. Transactions that close after the commencement date and that fall within the sectors specified must first be notified and cleared, otherwise they will be void.

Penalties may also be imposed for completing a notifiable transaction without approval, up to and including imprisonment. Transactions that raise national security concerns (likely to be a small minority of all notified deals) may be called in for a more detailed review and ultimately be subject to remedies. Transactions involving entities in other sectors, and any acquisitions of assets, may be notified voluntarily and the government will be able to call in such deals, if there is a potential national security issue.

Although the new law is aimed at targeting acquisitions by ‘hostile actors’, as drafted the bill’s provisions apply to all acquisitions, regardless of the identity or nationality of the buyer.  The bill does provide a mechanism for the Government to implement a ‘white list’ that will dis-apply the notification requirement for buyers based in certain jurisdictions, or for certain types of investment, but the detail of this mechanism is not yet clear. 

The Government have published a list of the 17 affected sectors for consultation, with a closing date of 6 January.  The sectors, which include computing hardware, communications, data infrastructure, engineering biology, cryptographic authentication and quantum technology, will be confirmed after the consultation ends.

Deals will be notifiable if they involve acquisitions of shares or voting rights that take the buyer through thresholds of 15%, 25%, 50% and 75% and below 15% if it involves the acquisition of material influence.

 If commencement takes place before closing, closing cannot legally take place unless and until the deal has been notified and cleared, even if in the meantime it is cleared by the CMA (where relevant).  


  • Advising a manufacturer of dual-use products on a UK acquisition.
  • Advising a software manufacturer on the public interest issues of a UK acquisition.
  • Representing a supplier of healthcare IT in front of the CMA.
  • Assisting an acquiror on Foreign Direct Investment filings in multiple EU countries.

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