CELIS Update on Investment Screening – August 2023
Luxembourg – FDI Regime coming into force on 1 September 2023
The Luxembourg law of 14 July 2023 introduces a new foreign direct investment regime with a suspensory mandatory notification requirement in relation to investments in a broad range of sectors. Luxembourg is the latest European jurisdiction to pass broad FDI legislation and its FDI regime is coming into force on 1 September 2023.
The screening mechanism applies to investments of any kind made by a foreign investor from outside the European Economic Area, which allows the investor to participate alone, in concert or via an intermediary in the control on an entity governed by Luxembourg law, which carries out in the Grand Duchy of Luxembourg a “critical activity” listed in Article 2 of the Luxembourg FDI Law. Critical activities cover a broad range of sectors and activities within sectors as dual-use goods, energy, quantum and nuclear, transport, water, health, nanotechnologies and biotechnologies, communications, data processing or storage, AI, semiconductors and cybersecurity, aerospace, defence, finance, media and agribusiness. The notion of “critical activities” also encompasses activities as research, production or other linked activities that could allow access to sensitive information or to the premises in which critical activities are carried out.
The Luxembourg law of 14 July 2023 can be accessed here (in French).
USA – Biden Administration issued an Executive Order establishing a new Outbound Investment Program
On 9 August 2023 President Biden issued the highly anticipated Executive Order 14105, that directs the U.S. Department of the Treasury to draft regulations that will require disclosure of or prohibit certain outbound foreign investments into mainland China, Hong Kong and Macao. Along the Executive Order, the Treasury issued an Advance Notice of Proposed Rulemaking that seeks public comment on the scope of key terms to be included in regulations and the procedures that Treasury will establish to administer the new outbound investment program.
Restrictions will apply to U.S. citizen or lawful permanent resident and any entity organized under U.S. law or the laws of any jurisdiction within the U.S., including any foreign branches of such entities. The Executive Order applies to transactions in three identified sectors: semiconductors and microelectronics, quantum information technologies and certain artificial intelligence technologies. “Covered transactions” will include a variety of transaction and investment types, in addition to typical M&A activity.
To be considered either prohibited or notifiable, a transaction must include an investment into a “covered foreign person”: The Executive Order defines such a person as a person of a country of concern, which is currently limited to the People’s Republic of China, along with Hong Kong and Macao. However, it is possible, that the legislation will expand the scope of controls beyond what is envisioned in the Executive Order.
Treasury is considering comment by September 28, 2023 – the next step will be the release of a proposed rulemaking and then the final rulemaking, so that final regulations could be issued by mid- to late 2024.
The U.S. Executive Order 14105 can be accessed here.
Taiwan/ Germany – Taiwan’s TSMC to build semiconductor factory in Germany
Taiwan-based chips manufacturer TSMC announced on 8 August 2023 an investment of about 3.5 billion Euro into a microchip production plant in Dresden (Germany), its first in Europe. TSMC will invest jointly with Germany’s Bosch and Infineon and Dutch-based NXP Semiconductors and pushing the total amount of investment above 10 billion Euro.
TSMC has been expanding its production capacity outside Taiwan in the last few years with plants in the works in Japan and the U.S. state of Arizona. In Europe it will cater to the needs of the German car industry. Germany emphasizes, that TSMC’s investment will make a substantial contribution to securing the supply of semiconductor chips for Germany and Europe and to become less dependent in the field of microchips. The German government will support the project within the framework of the European Chips Acts.
The Proposal for a Regulation of the European Parliament and of the Council establishing a framework of measures for strengthening Europe’s semiconductor ecosystem (Chips Act) can be accessed here.
United Kingdom – UK government has decided on the acquisition of GE Oil & Gas Marine & Industrial UK Ltd and GE Steam Power Ltd by EDF Energy Holdings Ltd
The Secretary of State has made a Final Order pursuant to section 26 of the National Security and Investment Act 2021, coming into force on 7 August 2023.
GEAST UK Ltd, EDF’s wholly-owned subsidiary, is to gain control of the two GE businesses, which include the supply of turbines and related servicing for British nuclear submarines.
The Secretary of State considers that “a risk to national security will arise because of the critical national security and defence capabilities relating to naval propulsion systems” which are delivered through the facility of the two GE businesses. For the acquisition to go ahead, the UK government has imposed measures to mitigate national security concerns arising from the purchase by EDF of GE Steam Power Limited and GE Oil & Gas Marine and Industrial UK Limited and has determined the authority to intervene and take operational control if necessary.
The Final Order can be accessed here.
