FDI Review Regimes Ramp up Globally and Enhance Enforcement; U.S. Outbound Investment Regime Goes into Effect

In 2025, boards of directors face a well-established and active global foreign direct investment (FDI) landscape where regulatory review continues to expand and develop.

Last year, the Committee on Foreign Investment in the U.S. (CFIUS) issued a final rule enhancing its mitigation and enforcement authority. Non-U.S. FDI review regimes, particularly in Europe, have become more active, with a number of new regimes entering into effect and an increasing number of transactions subject to regulatory scrutiny. The European Commission proposed a new EU-wide FDI Screening Regulation in March 2024, which aims to overhaul the existing EU FDI regime. As concern grows over access to and control over artificial intelligence (AI), semiconductors and other advanced and critical technologies, FDI approvals have become a significant regulatory issue for many cross-border transactions.

On January 2, 2025, the long-awaited U.S. Outbound Investment Security Program (the Program) became effective. Under the Program, U.S. persons are prohibited from engaging in, or required to notify the U.S. Department of the Treasury (Treasury) regarding, a broad range of transactions involving entities engaged in certain activities relating to semiconductors and microelectronics, quantum information technologies and AI systems in “countries of concern” (presently limited to China, Hong Kong and Macau). In early 2024, the European Commission began a consultation and assessment process for developing an outbound investment review program focused on the risk of leakage of “emerging and sensitive technologies,” and plans to publish a proposed policy response towards the end of 2025.

Recent FDI Developments

Most existing FDI review regimes focus on national security- or national interest-related concerns, such as (1) access to defense-related or otherwise sensitive export controlled technology or other information (e.g., personal data) and (2) potential disruption to essential public services, supply chains or critical or sensitive infrastructure. However, the jurisdictional thresholds, review timelines and substantive tests vary by country, sometimes significantly. Moreover, FDI review analyses are often subjective and driven by factors of interest to each particular country, including factors that may not be known to the transacting parties. To further complicate matters, FDI review authorities have broad discretion to assert jurisdiction over transactions and to determine what does or does not qualify as a relevant concern. All of these factors combine to provide unique challenges to cross-border investors and strategic acquisitions.

We highlight below major 2024 developments relating to certain key FDI review regimes:

• U.S. In December 2024, two new rules went into effect expanding CFIUS’s enforcement authority. First, the Treasury issued a final rule that expands CFIUS’s ability to review certain real estate transactions by foreign persons near listed military bases and installations. The final rule adds 59 military bases and installations to the existing list and expands CFIUS’s jurisdiction to review certain real estate transactions near eight military bases and installations on the existing list. This rule came on the heels of the Biden administration’s May 2024 order requiring a company majority owned by Chinese nationals to divest land—which was not notified to CFIUS when acquired, but subsequently investigated by CFIUS following a tip—near a Wyoming military base.[1] Second, Treasury issued a final rule that modified and expanded CFIUS’s mitigation and enforcement authority. The rule enhanced CFIUS’s authority by expanding CFIUS’s authority to investigate non-notified transactions; strengthening CFIUS’s subpoena power, including in connection with the review of non-notified transactions; requiring transaction parties to substantively respond to mitigation proposals within three business days; and expanding CFIUS’s authority for civil monetary penalties, including increasing the maximum penalties for failing to make mandatory filings, violating material provisions of mitigation agreements and making material misstatements and omissions outside of an active CFIUS review (such as during monitoring and compliance periods).
• European Union. On January 24, 2024, the European Commission proposed a new EU FDI Screening Regulation. If adopted by the European Parliament and Council, the new regulation would (1) make investment screening compulsory in the EU, (2) harmonize procedural rules and expand the scope of investment screening, (3) reaffirm and clarify substantive analysis guidelines and (4) reinforce cooperation between enforcement authorities through ten key changes to the existing regime.[2] Adoption of the new regulation is not expected until 2027 at the earliest. On October 17, 2024, the European Commission published its fourth annual report on the screening of foreign direct investments into the EU. As of this writing, 22 of 27 EU member states have an active FDI regime. Ireland’s FDI regime went into effect on January 6, 2025 (after several delays), and the remaining four member states are expected to join the FDI block over the course of 2025. The number of filings undergoing screening within the EU FDI screening cooperation mechanism increased in 2024, continuing the upward trend from prior years.[3] 
• United Kingdom. The UK FDI review regime has been in effect for approximately three years. In May 2024, the UK government published updated guidance on the application of the National Security and Investment Act and updated the policy statement in which it sets out the factors that the Secretary of State expects to use when deciding whether to exercise its power to “call in” transactions for full national security review.[4]
• Singapore. In January 2024, Singapore’s Parliament passed the Significant Investments Review Act, which went into effect in March 2024 and implements a limited FDI regime whereby foreign investment into “designated entities” – Singaporean companies on an enumerated list–are subject to notification or approval requirements, depending on the level of control acquired.

Outbound Investment Regimes Commence

As noted above, in October 2024, Treasury issued a Final Rule implementing the Program. Under the Final Rule, U.S. persons will be prohibited from making or knowingly directing, or required to notify the U.S. government regarding, certain investments in entities engaged in certain “covered activities” relating to semiconductors and microelectronics, quantum information technologies and artificial intelligence in “countries of concern” (presently defined to include just China, Hong Kong and Macao). Although previously referred to informally as “Reverse CFIUS” in industry circles, the Program does not contemplate a case-by-case review of outbound investments. Instead, the Program will require parties to determine whether a given transaction is either prohibited, subject to notification or permissible without notification, which would require parties to determine whether (1) a “U.S. person” is making or knowingly directing (2) a “covered transaction” with (3) a “covered foreign person”–namely, a “person of a country of concern” engaged in certain defined activities involving “covered activities.” Each of those terms is defined in the final rule.

In January 2024, the European Commission issued a White Paper on outbound investment control. The White Paper noted that neither the dual-use export control system nor the EU FDI Regulation (nor the domestic FDI regimes) govern outbound investments, which entail the risk of leakage of “emerging and sensitive technologies.” The White Paper in turn kicked off a consultation and assessment phase, which will culminate in a summer 2025 risk assessment of the EU Member States’ monitoring and review of certain outbound investments, and an autumn 2025 publication of the European Commission’s assessment and proposal for a policy response.[5] And in April 2024, the United Kingdom likewise indicated that it is considering more substantive changes to the rules on outward investment, following in the footsteps of the U.S. and EU.[6] If outbound investment policies similar to that of the U.S. Outbound Investment Security Program are proposed and adopted, such policies could further complicate investments by U.S., UK and EU persons in certain Chinese industries.

Given the consequences that FDI review regimes can have for cross-border transactions, and the implications of new outbound investment regimes, boards of directors would be well advised to stay up-to-date on related developments in key jurisdictions, particularly in North America, Europe and Asia.[7] In addition, boards of directors should ensure that they are directing their management teams to conduct thorough due diligence and analysis in connection with cross-border transactions, especially transactions involving companies involved in sensitive sectors or activities (i.e., companies in the semiconductor or artificial intelligence industries, companies that collect and maintain sensitive (including personal) information and companies with government relationships) or companies with ties to China and other possible “countries of concern,” like Russia and Belarus. Management should also be directed to consider how FDI filing and clearance timelines overlap with other regulatory processes (including, for example, merger control/antitrust filings), and consider risk allocation when identifying closing conditions and agreeing to regulatory efforts provisions.

[1] For additional details, see our May blog post available here.

[2] For additional details, see our March alert memo available here.

[3] For additional details, see our November alert memo available here.

[4] For additional details, see our May blog post available here.

[5] For additional details, see our January blog post available here.

[6] While the UK National Security and Investment Act nominally applies to outward investment in some circumstances, the UK Government stated in April 2024 that it would “launch a dedicated analytical team to deepen understanding of potential risks of outward investment in sensitive sectors.”  See Cabinet Office, “Press release: Deputy Prime Minister to boost economic defences against threats to British economic model” (April 18, 2024), available here.

[7]  As of the date of this publication, most countries in Central and South America and Africa generally have no or very limited FDI review regimes, although those countries may separately limit or prohibit foreign investment or ownership in certain industries or companies.  However, Mexico is considering the creation of an FDI review regime.