In 2020, the COVID-19 pandemic brought foreign direct investment (FDI) restrictions into sharper focus and accelerated movement toward enhanced screening on a national level across Europe and elsewhere. Germany, Italy, Spain and France are among countries that have already increased their FDI control measures in response to the pandemic, while others are set to do likewise.

The dependency of US companies on foreign supply chains to satisfy COVID-19 needs—such as personal protective equipment and pharmaceuticals—has become an area of focus for US regulators, including not only the Committee on Foreign Investment in the United States (CFIUS) but also federal agencies such as the US Department of Health and Human Services.

In light of the pandemic, the European Commission issued formal guidelines to European Union Member States that aim to ensure a “strong EU-wide approach to foreign investments screening in a time of public health crisis and related economic vulnerability,” reminding Member States that they are empowered to impose measures to address identified risks to security or prohibit a foreign investor from consummating a transaction.

For the duration of the pandemic, and surely for years afterward, parties to cross-border transactions will need to redouble their due diligence in assessing whether their transactions will require (and pass) an FDI review—either voluntary or mandatory. Given the curtailed response time of authorities, those expecting only voluntary review may be tempted to close without waiting for a government response—but doing so exposes parties to penalties and delays if their internal assessment proves too optimistic.

With FDI reviews intensifying globally and regulatory regimes presenting a fast-changing target, the watchwords for successful cross-border transactions continue to be: caution and patience.

Read more about FDI regimes.