Around the world, legal and regulatory developments continued to reshape global interconnectedness. Amid intensified geopolitical pressures, countries and regions focused their attention on issues including sanctions, competition and national security—in many cases restricting cross-border flows of goods, services, capital and data. At the same time, the imperative for global cooperation on matters such as climate change remained clear. 

White & Case helped organizations around the world as they confronted this evolving landscape. Here are some of the developments that impacted our work for clients in 2022.

Sanctions take center stage

The European Union and a broad coalition of countries, including the United States, the United Kingdom, Switzerland, Japan, Canada and Australia, imposed sanctions against Russia in response to its February 2022 invasion of Ukraine, and numerous major multinational corporations have exited Russia. The repercussions for the global economy have been far-reaching and include supply chain issues, inflation and volatile markets.

In addition, Russia’s actions in Ukraine and the international response became factors for public companies to consider when updating their annual report risk factor disclosures. The SEC specifically noted that companies should provide detailed disclosure regarding risks related to actual or potential disruptions in supply chains and new or heightened risks of potential cyberattacks by state actors or others. Russian sanctions are also among the disclosures companies should consider.

The conflict in Ukraine and subsequent sanctions have also had a chilling effect on M&A involving Russian entities. In particular, buying an asset with operations in Russia may be prohibited under sanctions laws in certain circumstances, so the possibility must be carefully considered. The Office of Foreign Assets Control, the sanctions implementation agency of the US Treasury Department, has issued multiple rounds of new and updated guidance on what types of deals may be permissible, although much of the guidance remains highly complex and is sometimes unclear from a compliance standpoint.

COP27 highlights global challenges

In November 2022 the international climate conference COP27 took place in Sharm El-Sheikh, Egypt. The location of the annual conference provided an opportunity to draw attention to the climate challenges facing the global south, which include the need for finance to respond to loss and damage associated with the adverse effects of climate change, food and water security, supply chain issues and disparities in the technologies provided in developed economies and emerging markets. 

Over the years, sessions of the climate conference have helped to shape policy around the world. The US federal government, for example, took action to support a reduction in domestic greenhouse gas emissions by 50 percent to 52 percent based on 2005 levels by 2030. To promote the investment needed to reach that goal, in 2022 the US Congress passed the Inflation Reduction Act, the largest public investment in the US energy space in modern history. 

Meanwhile, the EU has viewed the energy crisis as an opportunity to accelerate its transition toward energy independence, seeking to become the first climate-neutral continent by 2050. Recognizing that the transition presents challenges to energy companies, the EU has designed and implemented a broad range of support measures to facilitate the transition and allow them to remain competitive. For example, the EU revised its state aid rules to allow its member states to finance and track energy transition purchases throughout the energy value chain. As a result, there has been more interest in new energy technology from energy industry participants.

Competition authorities flex their muscles

In the United States, federal antitrust enforcement agencies acted to further shift the competition agenda away from the consumer welfare standard. The agencies increased enforcement across sectors, including by strengthening merger control, by targeting antitrust enforcement on labor markets—with specific attention to employer-employee non-compete provisions—and by reviving enforcement on interlocking directorates, which result when one person serves as an officer or director of more than one competing corporation. New appointments at both the Federal Trade Commission and Department of Justice signaled greater enforcement action to come—with buyout firms a particular target. The US Congress and various state legislators also became increasingly aggressive in proposing game-changing antitrust laws, and private plaintiffs were emboldened to challenge company conduct.

By year-end, US and European merger control filings had failed to match the historic highs of 2021, reflecting the impact of the economic cooldown. Filings, however, remained above historic averages, and the downward trend was not universal. Filings were up in Brazil and Saudi Arabia, while merger assessments in Australia rose and Egypt adopted a new merger control regime. The European Commission (EC) received endorsement of its recent change in Article 22 policy from the EU’s General Court. This development is likely to embolden the EC to call in for review suspected so-called “killer acquisitions” even if the transactions do not fulfill any merger control thresholds in the EU.

Other developments included the EU’s adoption of the Foreign Subsidies Regulation (FSR), which gives the EC powers to intervene to tackle foreign subsidies distorting competition in the EU. Due to apply by mid-2023, the FSR will have a major impact on companies that engage in M&A and public tenders in the EU, and that have received financial contributions from non-EU countries.

Across Europe dawn raids, which were suspended during the pandemic, were on the rise. The EC and national competition authorities revived these unannounced inspections to clear their backlog. Additionally, the Digital Markets Act entered into force in the EU, introducing new rules for certain core platforms including search engines, social networks and messaging services that act as digital sector “gatekeepers.”

The focus on FDI expands and intensifies

Around the world, foreign direct investment (FDI) regimes continued to proliferate and mature. Within the EU, Belgium and Sweden both introduced new legislation that, if enacted, would take effect in Q1 2023. Outside the EU, Switzerland is also considering an FDI regime. In the UK, a new investment screening regime took effect in January 2022.

FDI scrutiny remained a priority for the US government. In September 2022 President Biden issued the first-ever Presidential Directive defining national security factors for the Committee on Foreign Investment in the United States (CFIUS) to consider in evaluating transactions. Specifically, the Executive Order directed CFIUS to consider issues relating to supply chain resilience, impact on US technological leadership, assessment of aggregate investment trends in industries, cybersecurity risks and sensitive data.

Global trade faces ongoing challenges

The world trading system faced uncertainty in 2022. Serious institutional questions regarding the functioning of the World Trade Organization (WTO) remained unresolved and arguably intensified. No significant negotiations advanced under the auspices of the WTO, and the organization’s Appellate Body—once seen as a model for other international agreements—remained without any members and inoperable. At the same time, one of the recognized “exceptions” to the WTO principles of non-discrimination—preferential trade agreements—continued to increase dramatically. As of December 1, 2022, there were 355 regional trade agreements in force, up from just 37 in 1995 when the WTO was created.

Individual WTO Members confronted myriad challenges in 2022, including inflation, unequal income distribution, poverty and a global health crisis. Citing national security and national economic interests, countries around the world adopted national programs that appeared to conflict with their commitments to the multilateral system. Concepts such as “near shoring,” “national industrial policy” and “national content requirements” challenged the bedrock principles of the multilateral trading system—non-discrimination, national treatment and negotiated tariff bindings—all of which had previously led to the globalization of supply chains.

Despite these challenges, global trade carried on, and governments continued to rely on the trade regulatory structure established by the WTO. Global trade reached a record US$28.5 trillion in 2021. Even if 2022 levels decrease, international trade remains unquestionably strong.

Cryptocurrencies face ongoing scrutiny amid broader regulatory trends that affect tech firms

Around the world, regulators continued their close watch over cryptocurrencies and other digital assets. Concerns that Russian actors could use cryptocurrencies to evade sanctions related to the invasion of Ukraine presented another reason for regulatory scrutiny.

In the United States, federal regulators vowed to work to prevent attempts to circumvent sanctions by using cryptocurrencies. For example, the Senate Banking Committee held a hearing that signaled their regulatory interest in the crypto ecosystem, and particularly in the potential use of cryptocurrencies to get around US sanctions. At the US Treasury Department, Secretary Yellen described cryptocurrency as a “channel to be watched” for avoiding the sanctions’ impact, and both the Office of Foreign Assets Control and Financial Crimes Enforcement Network have moved to clarify and emphasize their efforts to enforce sanctions related to cryptocurrencies. The US banking regulators, seeing the volatility in the cryptocurrency space and the losses incurred by banks, have acted to limit the ability of US banks to engage in, or provide services to, the cryptocurrency industry.

Along with the increased regulatory focus on cryptocurrencies—and on the areas of data protection, cybersecurity and online content—cross-border disputes involving technology companies were on the rise. As a result, technology companies are increasingly looking to international legal forums to bring claims against states, especially where the prospects of obtaining redress in domestic courts are slim.

Investment treaty arbitration—a binding international dispute resolution mechanism that arises from consent by two or more States in a treaty—is one option that technology companies are increasingly considering. As more of them seek to use this tool, arbitral tribunals may need to apply common treaty provisions to new and emerging technologies, considering issues that may include whether digital and delocalized or decentralized assets qualify as protected investments in the host state’s territory and which methodologies may apply to quantify damages in the technology sector.

Photo by Artur Debat © Getty Images
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