2023 M&A Annual Review 9 UK: The first two years under the UK National Security and Investment Act (NSIA) saw 17 remedies cases, five of which involved either prohibiting or unwinding transactions. The UK government is reviewing the operation of the regime and consulting on some potential amendments, including refinements to the scope of certain mandatory sectors and the possible introduction of exemptions for certain categories of transactions (including internal reorganizations).10 China: The PRC has a far-reaching investment control regime with potentially low nexus requirements, broadly drafted sectors, and a lack of guidance. Although there is little publicly available information on how China has exercised its FDI review authority, China continues to scrutinize, delay, and in some cases scuttle sensitive transactions. South Korea and Singapore: South Korea and Singapore11 are undertaking modest expansions of existing review programs to capture investment in more companies considered critical to national security interests. Formal U.S. Outbound Investment Review Announced In August, President Biden issued a long-anticipated executive order addressing investments by U.S. persons in companies that engage with certain categories of technology and products located in the PRC. The new outbound investment program (often referred to as “reverse CFIUS”) covers certain investments in semiconductors and microelectronics, quantum information, and AI systems.12 The program is not yet effective or in final form, and key constituencies are sure to weigh in as the rulemaking process continues.13 We can expect this form of outbound screening to expand to other jurisdictions, including the UK, where the UK government recently reminded stakeholders that the NSIA regime already applies to outward investment, albeit only in the limited situations where asset transfers take place. Global Sanctions and Export Controls Increase Governments continued to increase trade and financial sanctions (including those imposed by the U.S., UK, and EU against Russia in December 2023) and export control restrictions, as well as related enforcement actions (including actions by the U.S. that resulted in large settlements with Binance). Governments affected by such restrictions adopted additional countermeasures (such as conditions imposed by Russia on investors from “unfriendly countries” attempting to exit Russia). Global companies thus face increasingly complex and potentially conflicting requirements that can affect sales and divestitures as well as acquisitions and post-closing integrated operations. 8 9 10 11 12 13 For more information, see our Aug. 8, 2023, client alert, The Long and Winding Road: Key Points from the CFIUS Annual Report. For more information, see our Oct. 12, 2023 client alert, Notification Obligations Under the EU Foreign Subsidies Regulation Enter into Force Today. For more details, see our Nov. 17, 2023 client alert, Government Consults on Potential Changes to the UK’s Investment Screening Regime. For more details, see our Dec. 1, 2023 client alert, Singapore Announces Targeted Investment Review Regime. For a description of the new outbound investment program, see our Sept. 28, 2023 Lawfare article and our August 10, 2023 client alert, High Walls and Small Gardens: Biden Administration Unveils Outbound Investment Screening. Some of the commentary received is discussed in our Dec. 14, 2023 client alert, Outbound Investment Review Program – Themes from Industry Comments. For more information, see client alerts: The Long and Winding Road: Key Points from the CFIUS Annual Report, Notification Obligations Under the EU Foreign Subsidies Regulation Enter into Force Today, Government Consults on Potential Changes to the UK’s Investment Screening Regime, and Singapore Announces Targeted Investment Review Regime. Some of the commentary received is discussed in our Dec. 14 client alert, “Outbound Investment Review Program – Themes from Industry Comments.”
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