Canada
The Canadian government continues to scrutinize foreign investments by state-owned enterprises and state-linked private investors, especially if from "non-likeminded" countries.
Now a full decade in publication, White & Case's 2025 Foreign Direct Investment Reviews continues to provide a comprehensive look at foreign direct investment (FDI) laws and regulations across various countries and regions worldwide.
In this edition, we continue to offer key datapoints that can help inform parties and their advisors as they evaluate the new set of challenges presented by FDI screening requirements in cross-border transactions that span multiple countries.
FDI screening is continuously evolving, in fact, maturing. It is imperative to stay on top of the FDI requirements as transactions—be it mergers and acquisitions, investments, public equity offerings, or financial restructurings—are negotiated. Understanding the challenges, the potential remedies that could be required for approval and the proper allocation of FDI risk are key ingredients in avoiding unpleasant surprises related to timing, certainty and business plan execution.
With a new administration in the United States, a renewed US commitment to open foreign investment from allied countries, increased EU FDI cooperation, and the new geo-political lines and balances that are being drawn, the dynamics around FDI screening will be a driving consideration in the selection of investors in cross-border transactions. We continue to believe that most cross-border transactions will be successfully consummated in 2025, but understanding the evolving risks around FDI considerations will be critical.
The Canadian government continues to scrutinize foreign investments by state-owned enterprises and state-linked private investors, especially if from "non-likeminded" countries.
Foreign direct investments, whether undertaken directly or indirectly, are generally allowed without restrictions or without the need to obtain prior authorization from an administrative agency.
In the US, most FDI deals are approved without mitigation, but the landscape is evolving based on a combination of expanded jurisdiction and authorities, mandatory filings applying in certain cases, enhanced focus on a broad array of national security considerations, increased rates of mitigation, further attention to monitoring, compliance and enforcement, and a substantially increased pursuit of non-notified transactions.
The European Commission continues to be a driver of FDI screening across the EU, with Member States now moving toward coordinated enforcement.
The wide scope, low trigger thresholds and extensive interpretation of the Austrian FDI regime require a thorough assessment and proactive planning of the M&A process.
The Belgian FDI screening regime entered into force in July 2023. Investors and authorities alike are still coming to grips with the regime and the limited guidelines that help parties navigate it.
In 2024, Bulgaria established an FDI screening mechanism. Foreign investors' obligation to file for investment clearance did not become effective in 2024, but this should change soon.
The Czech Foreign Investments Screening Act took effect in May 2021, establishing the rights and duties of foreign investors and setting screening requirements for Czech targets.
The scope of the Danish FDI regime is comprehensive, and requires a careful assessment of investments and agreements involving Danish companies.
Estonia's FDI screening mechanism closed its first effective year in 2024.
FDI deals are generally not blocked in Finland, but the government is able to monitor and, if necessary, restrict foreign investment.
French FDI screening continues to focus on foreign investments involving medical and biotech activities, food security activities or the treatment, storage and transmission of sensitive data. The nuclear ecosystem is subject to very close scrutiny.
Following numerous amendments over the past years, Germany's FDI review continued in full swing in 2024, with further significant updates expected in the coming years.
Hungarian FDI regulation stands as a rock amid global economic storms, although there were few major changes in 2024.
Ireland's Screening of Third Country Transactions Act entered into force on January 6, 2025.
Italy's "Golden Power Law" review more tan ten years old and continuously expanding its reach.
The law in Latvia provides for sectoral FDI regimes for specific corporate M&A, real estate dealings and gambling companies.
All investments concerning national security are under the scope of review in Lithuania.
The Luxembourg FDI screening regime is now a year old, and the first notification filings have been made.
Malta's FDI regime regulates specific transactions that must be notified to the authorities and may potentially be subject to screening.
The Middle East continues to welcome foreign investment, subject to licensing approvals and ownership thresholds for certain business sectors or in certain geographical zones.
The Netherlands is set to expand its investment screening regime by extending the general mechanism to more sectors and by introducing additional sector-specific regulations.
Norway's foreign direct investment regime is in the process of being expanded, with more profound changes expected in the future.
After revision of the Polish FDI regime in 2024, the way the authorities are assessing transactions is evolving.
In Portugal, transactions involving acquisition of control over strategic assets by entities residing outside the EU or the EEA may be subject to FDI screening.
While far-reaching in its scope, compared to other EU countries, the Romanian FDI regime is generally perceived as investor-friendly.
The year 2024 was not marked by any major changes in the sphere of regulation of foreign investments in Russia, and the regulator continues to implement the course taken earlier in 2023.
After two years of foreign investment regulation in Slovakia, a supportive climate for foreign investments remains.
Slovenia's updated FDI regime now extends to branch offices and introduces new challenges for foreign investors navigating critical sectors.
Since 2020, certain foreign direct investments are subject to scrutiny in Spain and, since then, additional formalities have been introduced, specifically by a developing FDI regulation that entered into force on September 1, 2023. The FDI analysis is becoming increasingly crucial in the context of investments in Spain.
In its second year of operation, the Swedish FDI Act has become a standard component of a large portion of all transactions involving Swedish companies.
Apart from limited sector-specific regulations, there is currently no general FDI regime in Switzerland. An FDI Act is expected to come into force in 2026 at the earliest.
Strengthening Türkiye's position as a key investment hub remains a government priority.
Foreign direct investment is permissible in the UAE, subject to applicable licensing and ownership conditions.
FDI in the UK is covered by the National Security and Investment Act 2021, and in 2024 the government continued to update information and guidelines concerning the legislation.
Australia's FDI regimes underwent some modifications in 2024, designed to streamline the process of carrying out investments.
China continues to optimize its foreign investment environment by reducing investment restrictions, opening up market access and lowering investment thresholds into listed companies.
FDI continues to be an area of focus for the Indian government, which has announced plans to attract further foreign investment into the country.
The Japanese government expands business sectors subject to Japan's FDI regime to secure stable supply chains and mitigate the risk of technology leakage and diversion of commercial technologies into military use.
The Republic of Korea continues to welcome foreign investment, offering enhanced incentive packages and easing regulations while heightening scrutiny over transactions involving strategic industrial.
New Zealand has recently seen a period of stabilization of the overseas investment regime. However, following the formation of the coalition government at the end of 2023, this government has proposed significant changes to the overseas investment rules for 2025, making it easier for overseas investors to acquire New Zealand assets.
Taiwan continues to promote FDI under a two-track screening mechanism for foreign and PRC investors.
China continues to optimize its foreign investment environment by reducing investment restrictions, opening up market access and lowering investment thresholds into listed companies.
Explore Trendscape Our take on the interconnected global trends that are shaping the business climate for our clients.
In China, the Foreign Investment Law (FIL) and its implementation regulations create the framework for the foreign investment security review (FISR) system. The Measures for Security Review of Foreign Investments further develop the scope of FISR. Nonetheless, the FISR measures describe the targeted sectors in broad strokes, leaving substantial room for further interpretation and clarification.
If a transaction falls within the scope of FISR, either the foreign investor or the Chinese party must file an application with the FISR office of the National Development and Reform Commission before the start of the transaction in order to meet the regulatory filing requirements. If the parties fail to file an FISR application and commence a transaction, and the FISR office determines that it falls within the scope of FISR, the FISR office has the authority to require the filing parties to suspend the transaction and submit an FISR application.
In practice, various regulatory authorities will closely cooperate with each other in monitoring foreign investment activities in China. For example, if an antitrust filing is required for a transaction and such transaction is likely to fall within the scope of FISR, the antitrust regulatory authority may share the relevant information of such transaction with the FISR office for further review and clearance before processing the antitrust filing. Based on the review of the relevant information, the FISR office may notify one of the parties to a transaction to submit an FISR application.
Under the FISR measures, the FISR office has the authority to review a broad range of direct and indirect investment activities conducted by foreign investors. These include greenfield investments, to initiate a new project or establish a new enterprise in China, either independently or jointly with other investors.
Investments involving the acquisition of equity interest or assets of an enterprise in China can also be reviewed. This category covers transactions between two foreign parties involving the indirect acquisition of equity interest or assets of a Chinese enterprise, such as share transfer at the shareholder level outside China.
The FISR office can also review investments in China through other structures. This category is broadly defined in order to give the regulator great flexibility in interpretation, and foreign investments through a variable interest vehicle, along with public offerings of Chinese enterprises through merging with special purpose acquisition companies (such as de-SPAC transactions) will likely fall into this category.
Given the broad definition of foreign investments, foreign investors should evaluate carefully before entering into a transaction to avoid FISR compliance risks.
A foreign investment transaction is subject to FISR if: it involves sectors related to national defense and security, such as arms and arms-related industries or in geographic locations in close proximity to military facilities or defense-related industries facilities; or it involves sectors significant for national security, such as critical agricultural products, energy and resources, equipment manufacturing, infrastructure, transportation services, cultural products and services, information technology and internet products and services, financial services and key technologies; and will result in foreign investors obtaining "actual control" of the target enterprise.
Foreign investors will be deemed to have "actual control" over a target enterprise if they hold more than 50 percent of the equity interest in the enterprise. Even if foreign investors hold less than 50 percent of the equity interest in such enterprise, they can exert significant influence at the shareholder or board level by virtue of voting rights; or other circumstances under which foreign investors can exert significant influence over the operational decision-making, personnel, finance and technology of the target enterprise.
In addition, although not explicitly stipulated under relevant laws and regulations, the FISR office may consider the following factors in reviewing the FISR applications in practice: whether the foreign investor is, directly or indirectly, connected to any foreign government or any political parties of a foreign country; whether the Chinese enterprise involved has customers that are state-owned enterprises or entities in military, defense, financial, transportation or public utilities sectors; whether the products or services provided by the Chinese enterprise involved are otherwise readily available in the Chinese market; and whether the Chinese enterprise involved has access to the important data of its customers or collects any personal data within China.
The FISR measures provide the typical timeline and process for the FISR review of a transaction. Upon the receipt of an application, the FISR office will make a preliminary decision on whether a transaction is subject to general review within 15 working days.
If the FISR office decides that a transaction should be subject to general review at the conclusion of the preliminary review, it will conduct and complete the general review within 30 working days of the date it made its preliminary review decision.
If the FISR office determines that a transaction should be subject to special review at the conclusion of the general review, it will conduct and complete the special review within 60 working days. Under special circumstances, the FISR office may extend the special review at its own discretion and will inform the applications with a written notification. The FISR office will issue its final decision to applicants after the completion of the special review.
During the FISR office's review, parties to a transaction are prohibited from proceeding with a transaction. In other words, the FISR must be completed prior to the closing of a transaction.
Foreign investors should continue to be mindful of the legislative and enforcement developments on China's FISR regime, and pay special attention to transactions that might fall within the industries that are more likely to trigger FISR concerns.
Foreign investors should be cautious when completing acquisitions before obtaining FISR approval, as they might be forced to divest the acquired equity interest or assets in China if the transaction ultimately fails the FISR approval process.
Due to enforcement uncertainties and the broad scope of captured industries, foreign investors interested in sensitive industries may wish to conduct a comprehensive pre-transaction analysis before proceeding with the transaction to avoid compliance risks.
Foreign investors may consider scheduling pre-application consultations with officials from the FISR office to determine FISR risk before commencing the formal application process to reduce transaction uncertainties.
China has promulgated a set of more broad and detailed laws and regulations to establish its FISR regime, and the broad language in certain provisions of the FIL and the FISR measures leaves room for regulators to apply their interpretation and clarification on the operation of China's FISR system. Given the current and rapidly changing geopolitical situation, China will likely continue its efforts to promulgate additional rules to strengthen FISR implementation.
However, in view of the promulgation of the guidelines, more implementing regulations and rules are likely to be rolled out to optimize the foreign investment environment in China, including improving the quality of foreign capital utilization, guaranteeing the national treatment of foreign-invested enterprises, strengthening the protection of foreign investment, improving the facilitation of investment and operation, and increasing fiscal and tax support.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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