Global FDI Newsletter: October – December 2024
January 30, 2025
Global FDI enforcement continued to evolve rapidly in Q4 2024, as shown by the range of developments summarized in this newsletter.
In many jurisdictions, significant statutory changes have been proposed and enacted, likely resulting in even greater scrutiny of global transactions. The US Treasury, for example, finally adopted its long-awaited outbound investment screening regime, while the Dutch government proposed to expand its FDI screening to certain advanced technologies (such as AI, nanotech, nuclear). Spain also extended until 2026 its ability to review intra-EU investments. In the UK, the first appeal against an order to unwind a transaction was dismissed.
Statistics published by various regimes show that the number of filings has remained high (and in many cases has continued to increase). Imposition of remedies (or prohibition) remains rare, though, with the notable exception of France where around 50% of the transactions approved over the last three years have been subject to mitigation measures.
This newsletter covers developments in the United States, the United Kingdom, the European Union, and a range of EU Member States.
This newsletter is edited by John Messent and Francesco Iodice.
United States
Treasury Issues Outbound Investment Program Final Rule
On October 28, 2024, the U.S. Department of the Treasury (“Treasury”) issued a long-awaited final rule implementing the U.S. Outbound Investment Security Program (the “Program”), which entered into effect on January 2, 2025. Under the Program, U.S. persons are prohibited from engaging in, or required to notify Treasury regarding, a broad range of transactions involving entities engaged in certain activities relating to semiconductors and microelectronics, quantum information technologies, and artificial intelligence (AI) systems in “countries of concern” (currently limited to China, Hong Kong, and Macau). The Program does not contemplate a transaction-by-transaction review process. Instead, parties must determine whether a transaction is prohibited, subject to notification, or permissible without notification, subject to the imposition of penalties for engaging in a prohibited transaction or failing to notify Treasury of a notifiable transaction. For further explanation, please see our alert memo here.
Treasury Issues Final Rule Expanding CFIUS Jurisdiction Over Real Estate Transactions Near Military Installations
On November 1, 2024, Treasury issued a final rule that, effective December 9, 2024, expanded the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) over real estate transactions near military installations. In particular, the final rule added almost 60 military installations to the list of military installations around which CFIUS has jurisdiction over real estate transactions. The substance of the final rule was nearly identical to the proposed rule, which we discussed in our blog post here.
Treasury Issues Final Rule Enhancing CFIUS Mitigation and Enforcement Authority
On November 18, 2024, Treasury issued a final rule that, effective December 26, 2024, enhanced CFIUS’s mitigation and enforcement authority. The final rule provides CFIUS with the authority to request or subpoena information from transaction parties—and non-parties—necessary to determine whether a transaction: (i) is within the jurisdiction of CFIUS, (ii) may raise national security considerations; or (iii) triggered a mandatory filing requirement. If CFIUS subsequently determines that a transaction is within its jurisdiction and may raise national security considerations, CFIUS may request that the parties file a CFIUS notice. Additionally, the final rule authorizes CFIUS to require parties to provide a substantive response to proposed risk mitigation terms within three business days. When determining the appropriate time frame within which to require a response, CFIUS must consider a number of factors, including the nature of the transaction, the time remaining in the CFIUS review process, and the transaction parties’ past responsiveness. Further, the maximum penalty for various violations of the CFIUS regulations has increased from $250,000 to $5 million per violation. For additional details, please see our blog here.
United Kingdom
LetterOne’s Appeal Against Divestment Order Dismissed
In January 2021, shortly after the National Security and Investments Act (NSIA) was announced but a year before it came into force, LetterOne acquired Upp, a UK broadband provider. On December 19, 2022, having called the transaction in for NSIA review under retrospective powers, the UK Government ordered LetterOne to divest the shares in Upp.
On November 20, 2024, the High Court dismissed LetterOne’s application for judicial review of this decision.[1] The Court emphasised the “institutional competence” of the Secretary of State in relation to matters of national security and the corresponding need for “judicial restraint.”
LetterOne argued that the Secretary of State acted unlawfully by ordering a full divestment as opposed to “less intrusive” measures. During the NSIA review, LetterOne had offered various alternative behavioural remedies. They challenged the Government’s decision on the grounds of human rights, public law principles, and procedural fairness.
- Human rights. LetterOne argued that the Order infringed the Human Rights Act as it was disproportionate and contrary to the right to protections of property, as the Government should have imposed less intrusive measures than divestment and should have ensured full compensation for financial loss. The Court did not accept that the divestment was disproportionate, noting that (i) proportionality is part of the legal test for making a Final Order ”so the court will be slower to upset the balance which the Secretary of State has struck,” and (ii) national security considerations are partly predictive, “warranting a high degree of judicial restraint”.
- Public law principles. LetterOne contended that the Order breached public law principles, including the Tameside duty inquiry. The Court did not accept that the Government should have considered using other statutory powers or that it took into account irrelevant considerations. The Court also rejected arguments based on alleged irrationality. The Court concluded that the high threshold of Wednesbury unreasonableness was not even arguably met.
- Procedural fairness. LetterOne argued that Order was procedurally unfair because (i) the national security risks were not sufficiently disclosed before the Order was made; and (ii) LetterOne was not given a fair opportunity to address the concerns of the Secretary of State’s advisers in relation to measures falling short of divestment. The Court found that in the context of the NSIA and the nature of national security risks, the decision ”culmination of a fair process both as regards the Claimants’ right to know the case against them and as regards the right to respond to the adverse case.”
Prohibition of Acquisition of Future Technology Devices International
On November 5, 2024, the UK Government prohibited the acquisition of Future Technology Devices International Limited (FTDI), a Scotland-based fab-less semiconductor company, by FTDI Holding Limited (FTDIHL). This was the first prohibition under the new Labour Government, and the first since December 2022.
The Final Order requires FDTIHL to sell 80.2% of FTDI “within a specified period and by following a specified process”. The Government considers that this measure mitigates risks to national security in relation to: “UK-developed semiconductor technology and associated intellectual property being deployed in ways that are contrary to UK national security” and “the ownership of FTDI being used to pose a risk to critical national infrastructure which uses FTDI products.”
The Final Order was varied on December 13, 2024, to amend the date by which FTDIHL is required to provide a draft disposal plan. FTDIHL has applied for judicial review of the prohibition.[2]
FIF II / IsotopX
On November 27, 2024, the UK Government conditionally cleared the linked acquisitions of:
- A 66.7% shareholding in IsotopX Limited, a UK-based manufacturer of Mass Spectrometers, by Nanjing Techcomp Era Scientific Instrument Co Limited; and
- 48% of the shares of Nanjing Techcomp Era Scientific Instrument Co Limited byFuture Industry Investment Fund II, a Chinese registered limited partnership.
As a result of this acquisition, Future Investment Fund II will gain control of a 32% shareholding in IsotopX Limited.
The Government required the parties, which also includes Techcomp Group International Limited and Techcomp (Europe) Limited, to:
- “Meet certain requirements relating to governance and operations, including retaining certain existing IsotopX operational activity and decision-making within the UK”;
- “Appoint a Chief Security Officer with UK Security Vetting clearance to the IsotopX senior management team, who will have oversight of security requirements relating to data, infrastructure and personnel”;
- “Meet certain requirements relating to IT equipment, data storage, access and handling”;and
- “Implement certain protocols concerning visits to the IsotopX site and business travel.”
These conditions are intended to mitigate the risk to national security relating to “the security of UK expertise and intellectual property relating to the manufacture of dual-use products which are subject to export controls, and related services.”
Bharti Televentures / BT
On December 16, 2024, the UK Government conditionally approved the acquisition of 24.5% of the issued share capital of BT Group plc (BT), a UK-based multinational telecommunications company, by Bharti Televentures UK Limited, the international investment arm of Indian conglomerate Bharti Enterprises.
The Final Order requires BT to establish a National Security Committee to oversee“strategic work that BT performs which has an impact on or is in respect of the national security of the United Kingdom.”
The UK Government considered this condition to be necessary due to BT’s role:
- “supporting the UK Government’s domestic and international initiatives in the telecommunications sector”;
- “ensuring the UK’s cyber security”; and
- “acting as a strategic supplier of services to many parts of the UK Government, including services which are in support of UK national security.”
EP Group / International Distribution Services
On December 19, 2024, the UK Government granted conditional approval for the acquisition of International Distribution Services - which owns the Royal Mail group - by EP UK.
The transaction was approved subject to the Parties ensuring the Royal Mail group “remains able to and continues to provide services that are in support of UK national security”. The UK Government consider the condition mitigates the risk to national security relating to the Royal Mail group “acting as a critical supplier of services provided to UK Government departments which are in support of national security”.
Revocation of Trina Solar / AGR Order
On October 10, 2024, the UK Government issued a Final Order conditionally approving the acquisition of AGR Solar 2 Limited by Trina Solar UK Investments Limited. Subsequently, AGR Solar 2 repurchased shares from Trina Solar, effectively unwinding the acquisition. Considering the Final Order “no longer necessary and proportionate”, the UK Government revoked the Final Order on December 13, 2024.
Report on Scope of Mandatory Notification Regime
On December 19, 2024, the UK Government published the first statutory review of the Notifiable Acquisition Regulations (NARs), which define the 17 sectors where acquisitions are subject to mandatory notification under the NSIA.
The review found that the NARs were “largely achieving their objectives” of: identifying high risk activities, minimising business burdens, and driving compliance and business confidence. The review identified “a small number” of potential improvements – such as additional activities that may warrant inclusion and changes to the NARs’ drafting and guidance.
European Union
EU FDI: State Of The Union (2024)
On October 17, 2024, the European Commission published its forth annual report on the screening of foreign direct investments into the Union, following previous editions published in October 2023, September 2022 and November 2021.
Notable findings include the follow:
- The majority of M&A-driven FDI into the EU have originated from investors in the U.S. and the UK.
- FDI continues to land primarily in Western Europe, and targets 5 sections – Manufacturing, ICT, Professional, Scientific and Technical activities, Finance, and Retail.
- 22 EU Member States have an active FDI regime; the remaining 5 are expected to join shortly.
- Despite a significant decline in the overall number of M&A in the EU, FDI filings reviewed within the EU screening cooperation mechanism have further increased – 488 in 2023 (56% leading to a decision), up from 423 in 2022, 414 in 2021 and 265 in 2020.
- 85% of those 488 filings originated from 7 EU Member States – Austria, Denmark, France, Germany, Italy, Romania and Spain.
- Only 8% of the cases went to Phase II (down from 13% in 2022); in <2% of the cases the Commission issued an opinion; in 6% of the cases another Member State submitted comments.
- 85% of notified deals were cleared unconditionally; 10% required remedies and 5% were prohibited/abandoned, in line with statistics from recent years. Notable exception is France where 44% of clearance decisions in 2023 were subject to remedies.
- Defense (26%), aerospace (22%) and semiconductors (17%) were the main sectors subject to a Phase 2 review.
For a more detailed analysis of this case, please see our Alert Memorandum.
Belgium
Updated Statistics on Belgian FDI Screening
At a conference on Belgian FDI in practice held on December 11, 2024, an official of the FPS Economy, which manages the secretariat of the Interfederal Screening Committee (“ISC”), provided updated statistics on Belgian FDI screening, covering the period from July 1, 2023 until November 30, 2024.
During this period, the ISC received 107 notifications, including one case started through an ex officio procedure.
In only eight cases a screening procedure (phase 2) was opened. Five of these cases closed including one approval with remedies. Three cases were still pending.
No investments have been blocked and 87 investments were authorized during the verification procedure (phase 1). 15 cases were still pending.
The average duration to start of the verification procedure was 5 days while the average duration from notification to the end of the verification procedure (phase 1) was 31 days.
The most impacted sectors were health (21 deals or 14.58%), data (18 deals or 12.5%), digital infrastructure (17 deals or 11.81%), electronic communication and energy (12 deals each or 8.33%), followed by dual use and transport (10 deals each or 6.94%).
Most of the foreign investors ultimately originated from the US (47 deals or 42.34%), followed by the UK (29 deals or 25.66%) and China (6 deals or 5.41%). The ISC also received notifications from foreign investors originating from other countries such as Canada, Japan and Switzerland (5 deals each or 4.5%).
Germany
The new German national security and defense industry strategy: no easing in sight.
Due to the break-up of the German government coalition and snap elections in February 2025, a new German foreign direct investment law is not expected for the time being. Further details will also depend on the outcome of the snap elections and the government coalition resulting therefrom.
However, shortly before the end of the year the current government issued a new national security and defense industry strategy. The strategy underlines the challenge posed by foreign investors in Germany and expansion efforts by German companies in third countries for Germany and Europe as a defense industry location, particularly through the potential loss of technology and know-how.
While this could be meant as a reference to investments by German defense companies in the US, the strategy paper explicitly emphasizes the protection of national know-how by way of foreign direct investment control.
The strategy also reiterates the intention to amend the German foreign direct investment control rules. Either way, it is therefore unlikely that German foreign direct investment control will be relaxed in the future – regardless of who will form the next German government.
Italy
The Italian government starts ex officio proceedings to verify ChemChina’s compliance with prescriptions over Pirelli.
On June 15, 2023, the Italian government authorized with prescriptions the renewal of a three-year shareholders’ agreement concerning Pirelli,[3] the Italian tyre-maker, between its main shareholders, China National Tire and Rubber Corp. (a state-sponsored company) and Mr. Marco Tronchetti-Provera (including through Camfin).[4] The renewal of the shareholders’ agreement appeared to have been deemed subject to the filing obligations because it impacted the control situation of Pirelli.
However, on October 31, 2024, Pirelli reported that the Italian government had started ex officio a proceeding to verify whether such prescriptions had been complied with, particularly with respect to the obligation to ensure the absence of organizational ties between Pirelli and ChemChina.
This is one of the rare cases in which the Italian government has started ex officio proceedings, and likely the first one to verify whether previously-issued prescriptions have been complied with.
Netherlands
Dutch proposal to designate more technologies as requiring heightened FDI review
The Dutch government recently consulted on a proposed amendment of the Sensitive Technology Decree which would broaden the scope of the existing Dutch general FDI regime (Vifo Act) to include several additional technologies. Due to their rapid development or recent application in systems, these technologies are often not yet covered by export controls but do have the potential to raise national security concerns. As such, the amendment seeks to bring them in scope of Dutch FDI control.
The Sensitive Technology Decree currently already designates quantum technology, photonic technology, semiconductor technology, and high-assurance technology products as “highly sensitive” technologies. The amendment now seeks to add:
- New: biotechnology, artificial intelligence, advanced materials and nanotechnology, sensor and navigation technology, and nuclear technology for medical applications.
- Previous “sensitive” technologies that have been re-classified: information security and laser satellite communications.
These “highly sensitive“ technologies will be subject to a lower notification threshold. Instead of requiring “control”, the acquisition or increase of a “significant influence” – (i) at least 10%, 20%, or 25% voting rights or (ii) the power to appoint or dismiss board members – would already trigger a notification requirement.
The consultation closed on January 31, 2025 and the government is expected to publish an updated proposal. On January 15, 2025, the Dutch government has separately announced that it will expand its export control regime to cover more advanced semiconductor manufacturing equipment and technologies per April 1, 2025. This regime was first introduced on September 1, 2023.
Spain
Despite some unexpected last-minute drama, Spain’s screening of investments from EU / EFTA investors (which was transitionally introduced in 2020 and thereafter extended, lastly through 2024) has been extended until the end of 2026.
More specifically, in late December 2024, a Royal Decree was approved to maintain the transitional mechanism until December 31, 2026. However, on January 22, 2025, the Spanish Congress rejected the validation of such decree, which as a result lapsed. Nevertheless, shortly thereafter (January 29) the Spanish government adopted a new Royal Decree to the same effect, which in February was finally validated by the Spanish Congress.
[1] R. (On the application of L1T FM Holdings UK Ltd) v Chancellor of the Duchy of Lancaster in the Cabinet Office [2024] EWHC 2963 (Admin).
[2] AC-2024-LON-003985 R. (on the application of FTDI Holding Limited) v Chancellor of the Duchy of Lancaster.
[3] Pirelli had been considered subject to the Italian FDI regime because it owns a technology for cyber sensors that, when installed in its tyres, collect data on the use and performance of the vehicle, which may be further processed and elaborated. Data processing is among the relevant FDI activities.
[4] For more details, please see our Alert Memorandum of June 29, 2023.