National Security

Belgium introduced an FDI screening mechanism anticipated to enter into force on July 1, 2023, adding yet another jurisdiction in the EU which has adopted national measures to implement the EU’s FDI Regulation (EU) 2019/452. The new Belgian regime may place additional compliance obligations on companies, and, for some investments, it will entail modifications to initially planned transactions. For companies considering transactions – directly or indirectly – in Belgium, the new regime creates an additional layer of deal conditionality, besides merger control and the EU Foreign Subsidies Regulation (also due to be implemented this year – see our previous blogpost here).

Key Takeaways:

  • The FDI screening mechanism will cover key sectors for the Belgian economy; for example, critical infrastructures, essential technologies or raw materials, defense, and energy;
  • Notification is mandatory and the investors cannot close the transaction before the foreign investment has been cleared, or they risk incurring hefty fines;
  • The preliminary assessment phase can take up to 30 calendar days and where a more in-depth review is required, this can take up to an additional month, but extensions and suspensions are possible.
  • The Interfederal Screening Commission (“Screening Commission”) will review the notifications. The competent minister will clear the investment, impose remedies, or prohibit the investment where no remedies can overcome the concerns over Belgian national security, public order or strategic interests.

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Continue Reading Belgium takes action to screen foreign direct investment (FDI) on its territory

On the heels of Russia’s invasion of Ukraine, pandemic-induced supply chain disruptions, and U.S.-China tensions over Taiwan, 2022 accelerated a sweeping effort within the U.S. government to make national security considerations—especially with respect to China—a key feature of new and existing regulatory processes. This trend toward broader national security regulation, designed to help maintain U.S. strategic advantage, has support from both Republicans and Democrats, including from the Biden Administration. National Security Advisor Jake Sullivan’s remarks in September 2022 capture the tone shift in Washington: “…[W]e have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies…That is not the strategic environment we are in today…[w]e must maintain as large of a lead as possible.”

This environment produced important legislative and regulatory developments in 2022, including the CHIPS and Science Act (Covington alert), first-ever Enforcement and Penalty Guidelines promulgated by the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) (Covington alert), President Biden’s Executive Order on CFIUS (Covington alert), new restrictions under U.S. export control authorities targeting China (Covington alert), and proposals for a new regime to review outbound investments by U.S. businesses (Covington alert). The common thread among these developments is the U.S. government’s continuing appetite to use both existing and new regulatory authorities to address identified national security risks, especially where perceived risks relate to China.

With a Republican majority in the U.S. House of Representatives riding the tailwinds of this bipartisan consensus, 2023 is looking like a pivotal moment for national security regulation—expanding beyond the use of traditional authorities such as trade controls and CFIUS, into additional regulatory domains touching upon data, communications, antitrust, and possibly more. In parallel, the U.S. focus on national security continues to gain purchase abroad, with foreign direct investment (“FDI”) regimes maturing in tandem with CFIUS, and outbound investment screening gaining traction, for example, in the European Union (“EU”). It is crucial for businesses to be aware of these developments and to approach U.S. regulatory processes with a sensitivity towards the shifting national security undercurrents described in greater detail below.…

Continue Reading Will 2023 Be an Inflection Point in National Security Regulation?