EU Foreign Direct Investment and UK National Security
We are highly expert at navigating Foreign Direct Investment Regimes in the UK and the EU.
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 does not take part in the EU FDI framework, as the UK left the EU on 31 January 2020. Under the UK National Security & Investment Act 2021, acquisitions of equity stakes of 25% or more in entities that are active in the UK in 17 specified sectors must be notified to the government for clearance before proceeding. These sectors include advanced materials, artificial intelligence, computing hardware, communications, data infrastructure, defence, energy, cryptographic authentication and quantum technology.
There is a mandatory waiting period of 30 working days from filing. Notifiable transactions that are not notified are legally void, unless notified and cleared retrospectively.
Criminal penalties may also be imposed for completing a notifiable transaction without approval, up to and including imprisonment.
Transactions that raise national security concerns (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. The government is 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’, the notification obligation applies to all qualifying acquisitions, regardless of the identity or nationality of the buyer. Non-UK entities and assets are caught by the regime if they supply, or are used to supply, UK customers.
CLIENTS & CASES
- 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.