CELIS Update on Investment Screening – January 2024
EU –European Commission announces new economic security initiatives
On 24 January 2024, the European Commission announced five initiatives aimed at enhancing EU economic security in the face of risks from profound technological shifts and increased geopolitical tensions. These initiatives follow on from the publication of the European Economic Security Strategy in June 2023.
Amongst others, the initiatives include the promotion of further discussions and action for more European coordination in the area of export controls, in full respect of existing multilateral regimes and Member States’ prerogatives, a white paper on outbound investments launching a process to identify potential security risks linked to EU investment in third countries, a white paper on enhancing support for research and development involving technologies with dual-use potential, a proposal for a Council Recommendation on enhancing research security and the proposal for a new regulation on Foreign Direct Investment Screening Regulation.
The legislative proposal of a new draft new regulation on Foreign Investment Screening, replacing the existing EU FDI Screening Regulation, aims at improving the efficiency of the system by ensuring that all Member States have a screening mechanism in place, with better harmonised national rules, identifying the minimum sectoral scope where all Member States must screen foreign investments, as well as extending the EU screening to investments by EU investors that are ultimately controlled by individuals or businesses from a non-EU country.
The Proposal for a Regulation of the European Parliament and of the Council on the screening of FDI in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council published on 24 January 2024 can be accessed here.
The European Economic Security Strategy published on 20 June 2023 can be accessed here.
France – Modifications to the FDI regime in France being effective on 1 January 2024
The French authorities have modified the réglementation relative au contrôle des investissements étrangers en France provided by the French Monetary and Financial Code (FFIR) by decree n° 2023-1293 published in the French Official Gazette dated 29 December 2023. The Decree came into effect on 1 January 2024.
Therewith comes the expansion of the type of entities falling under the FFIR – the French FDI screening, which applied to companies registered in France, has been broadened to the acquisition of control of branches of foreign companies registered in France. Furthermore, the Decree has added operations in relation with “the integrity, security or continuity of the extraction, processing and recycling of critical raw materials” to the perimeter of sensitive sectors subject to the FFIR. Lastly, in response to the COVID-19 crisis, French authorities adopted temporary measures in order to protect French listed companies from non-EU or nun-EEA investors, such as the fast track review process in relation to contemplated transactions resulting in non-EU or non-EEA investors crossing the threshold of 10 % of the voting rights of a French entity listed on a regulated market that conducts business in sensitive sectors. The Decree has made this specific regime permanent.
The Décret n° 2023-1293 du 28 décembre 2023 relatif aux investissements étrangers en France can be accessed here.
Hungary – Amendments to the Hungarian FDI Decree entered into force on 13 January 2024
The Hungarian government has issued a new Government Decree No. 566/2023 (XII. 14.) amending certain provisions of Government Decree No. 561/2022 (XII. 23.) on the different application of certain measures necessary for the economic protection of business associations in Hungary during the state of emergency. The provisions of the government decree apply from 13 January 2024.
The new Decree narrows the scope of transactions that are not subject to submitting a request for FDI clearance. Another novelty is the right of first refusal in respect of domestic strategic target companies that are to be acquired by foreign investors for the implementation of photovoltaic (solar) projects, excluding companies interested in small household power plants. The Hungarian State will therewith have a statutory preemption right before any other party, if the sale and purchase transaction subject to prior FDI approval is concluded in respect of a target which is engaged in solar power plant activities.
The Hungarian Government Decree No. 566/2023 (XII. 14.) can be accessed here.
Singapore – Significant Investments Review Bill passed on 9 January 2024
On 9 January 2024, the Singapore government passed a new Significant Investments Review Bill (“SIRB”), which allows the Minister to designate critical entities required to notify or seek approval from the Minister for ownership or control changes. The Bill was first introduced on 6 November 2023 and seeks to safeguard Singapore’s national security interests. The SIRB is expected to come into force in mid-2024.
Any entity “incorporated, formed or established in Singapore and any entity (whether local or foreign) which carries out any activity in Singapore or provides any goods and services to any person in Singapore” that the Minister considers is in the interest of Singapore’s national security may be designated as a critical entity. Within a two-year period, the Minister has “calling-in” powers to review transactions, involving an entity that was not designated as critical but has acted against Singapore’s national security interests. In those cases, targeted actions can be taken, such as directing the transacting party to dispose of its equity interest in the entity. “National security interests” are not yet defined.
The Significant Investments Review Bill No. 38/2023 can be accessed here.
Italy – Italian government blocks deal of defence giants
The Italian government has used its so-called “golden power” and opposed the takeover by France’s Safran SA of the Microtecnica Srl subsidiary, a local aerospace business. Italian Prime Minister Giorgia Meloni said, concerns about the efficiency and security of her country’s armed forces were behind the government decision.
Safran in July agreed to buy an aerospace business from Raytheon Technologies Corp. (RTX) in cash for an enterprise value of $ 1.8 billion, seeking to add flight-control and actuation activities alongside 3,700 employees. The French company makes everything from enginges to landing gear, drones, overhead bins and infrared binoculars.
RTX and Safran have appealed against the Italian government’s decision to block the latter’s $1.8 billion acquisition of Collins Aerospace’s Italian subsidiary Microtecnica.
