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.
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.
Explore Trendscape Our take on the interconnected global trends that are shaping the business climate for our clients.
Jonathon Jackson (White & Case, Law Clerk, Tokyo) contributed to the development of this publication
Japan's Ministry of Finance (MOF), together with industry sector ministries, reviews FDIs under the Foreign Exchange and Foreign Trade Act (FEFTA). FEFTA requires FDI review for a broad scope of transactions, with a hair-trigger filing threshold, subject to exemptions available in public market transactions.
Depending on the type of business in which the target entity is engaged, FEFTA requires a foreign investor to submit a prior notification or a post-transaction filing through the Bank of Japan to the MOF and relevant ministries in relation to each action constituting inward direct investment or designated acquisitions. A prior notification is a request for permission to conduct the action that is "inward direct investment" or "designated acquisitions."
Foreign investors include: individuals who do not reside in Japan, termed "non-residents"; entities or other groups established under laws or regulations of, or having their principal offices in, foreign countries; entities in which a foreign individual or entity holds 50 percent or more of the total voting rights; partnerships operating in the investment business of which 50 percent or more of the total capital has been contributed by foreign entities, foreign groups or non-residents, or the majority of general partners are non-residents; and entities in which the majority of directors or representative directors are non-residents.
The MOF and Japan's ministries with jurisdiction over the target entity's business review two types of transactions: designated acquisitions and inward direct investments.
A designated acquisition is a transaction where a foreign investor acquires any shares—even just one share—of a non-listed company from another foreign investor.
Inward direct investments can cover many scenarios, for example, where a foreign investor acquires 1 percent or more of a listed target entity's outstanding shares or total voting rights, or acquires any shares of an unlisted target entity from a resident shareholder.
Inward direct investments also include transactions where a foreign investor consents to material changes to the business purposes of an unlisted target company, regardless of ownership percentage, or a listed target company where the foreign investor owns one-third or more of the target company's total voting rights.
Transactions are also defined as inward direct investments where the foreign investor consents to shareholder meeting proposals to nominate that foreign investor or certain related parties to the board or certain other extraordinary transactions such as a sale of the company, regardless of ownership percentage for an unlisted target company, or when holding 1 percent or more of the voting rights for a listed target company.
Other scenarios include where the foreign investor obtains proxy voting authority at an unlisted company, or proxy voting authority equivalent to 10 percent or more of the total voting rights of a listed company; or acquires the right to exercise 1 percent or more of a listed company's voting rights.
Also covered are situations where the foreign investor obtains the agreement of other foreign investors to jointly exercise their respective beneficially owned voting rights, where the aggregate beneficially owned voting rights across all relevant foreign investors account for 10 percent or more of the total voting rights of a listed company; if a foreign investor lends to a Japanese company more than ¥100 million (US$665,000), where the company's debt to the foreign investor accounts for more than 50 percent of the company's debt; or where the foreign investor purchases corporate bonds that meet certain criteria, including that they amount to more than ¥100 million and account for more than 50 percent of the company's debt.
Foreign investors are required to make a prior notification or a post-transaction filing through the Bank of Japan to the MOF and relevant ministries with respect to certain inward direct investments.
Prior notification filings may be required depending on whether the target entity is engaged in designated industries or the characteristics of the foreign investor—nationality and location, including region—and whether the investor qualifies for exemptive relief.
A foreign investor that has obtained a prior notification filing approval for any inward direct investments is also required to make a post-transaction filing within 45 days of the completion of the transaction.
A foreign investor is required to submit a prior notification filing with regard to a designated acquisition if the target company is engaged in designated industries. Post-transaction filings are not required for a designated acquisition unless the foreign investor claimed an exemption from prior notification filings for its stock acquisition.
Foreign investors must have made their prior notification filings within the six-month period prior to the completion of the transaction. In other words, approvals are valid until six months from the date on which the filings were officially received by the Bank of Japan.
By default, transactions subject to a prior notification filing cannot be closed until the expiration of a 30- calendar-day waiting period from the date on which MOF and the ministry having jurisdiction over the transaction received the filing. However, the waiting period may be shortened to two weeks. The MOF and the relevant ministries can extend the waiting period up to five months if necessary for the review.
If the MOF and the relevant ministry find the transaction under review problematic in terms of national security, they may recommend that the foreign investor change the transaction or discontinue the transaction after consultation with the Council on Customs, Tariff, Foreign Exchange and other Transactions. The foreign investor must notify the MOF and the relevant ministry of whether it will accept the recommendation within 10 days after receiving such recommendation. If the foreign investor does not provide notice or refuses to accept the recommendation, the MOF and the relevant ministries may order a modification of the content of the transaction or its termination before the expiration date of the waiting period.
Foreign investors are categorized into three types under the exemptions from the prior notification filings: foreign financial institutions; general investors; and non-qualified foreign investors. The coverage of the exemption differs depending on the type of foreign investor involved.
All of the exemptions are subject to the requirement that the foreign investor comply with the following three exemption conditions: first, that the foreign investor and its closely related persons will not serve on the board of the target company as directors or audit and supervisory board members; second, that the foreign investor will not make proposals at shareholders' meetings to dispose of material businesses in designated industries; and finally, that the foreign investor will not access sensitive confidential technologies that are related to the target company's business in designated industries.
In principle, the applicability of a designated industry is determined based on the issuer's actual business. In practice, however, a filer makes the classification judgment based on publicly available information, such as company websites and commercial registries, as well as input from the issuer, if available.
To help this assessment, foreign investors may refer to, but cannot rely on, the MOF list of public companies, designating businesses as being involved in "non-core sectors," "core sectors" or "undesignated sectors."
For investors that wish to make flexible and speedy investments in response to market trends, such as investment funds, it is worth considering making a prior notification filing a bit more frequently than every six months for possible investments in a target company.
Sometimes, after making a prior notification, filers receive questions regarding their own business, intended transactions with the issuer and so on from the ministries, and may be asked to make covenants in a filing relating to possible transactions.
The Ministry of Economy, Trade and Industry introduced the following covenants as examples on its website: not to make a proposal to the company to abolish or transfer a certain business that would disrupt supply chains of defense-related items; not to access the confidential information of the company; or to eliminate influence from a foreign government. There is, however, room to negotiate the language of the proposed covenants, and filers can suggest changes to the ministries.
No major changes to Japan's FDI review regime are expected within the next year. According to a public release from the MOF in June 2024, the number of pre-filings in the 2023 financial year (April 2022 to March 2023) was 2,871, the largest number ever, showing a slight increase from 2,859 in FY 2021 and a larger increase from 2,426 in FY 2022. The number of filings made for investments in cybersecurity- related businesses continues to be the highest, and this trend should continue in the coming years.
There are sometimes significant delays in reviews by the government and, somewhat frequently, filers are requested to withdraw a filing so that the government can unofficially extend the review period. These requests are likely to increase as the number of filings increases. Filers should consider filing as early as possible, as filers are able to make a FEFTA filing anytime within the six-month period prior to the planned transaction.
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