CELIS Update on Investment Screening – January 2022

(c) Steffen Hindelang

Germany – Second Amendment to Ordinance on the Designation of Critical Infrastructures enters into force and will cause more FDI Screening

On 1 January 2022, the second amendment to the Ordinance on the Designation of Critical Infrastructures (“BSI-KritisV”) entered into force. The amendment constitutes an overhaul of the ordinance, which significantly lowers the thresholds that have to be met in order to be considered as critical infrastructure, especially in the energy and IT sectors. In addition, the terminology has been adapted in such a way to cover more companies in the respective sectors. Since the investment screening procedure pursuant to Section 55a (1) of the Foreign Trade and Payments Ordinance ("AWV") includes takeovers of domestic companies operating critical infrastructure within the meaning of the Act on the Federal Office for Information Security ("BSIG") and since the latter refers to the above-mentioned ordinance to define these infrastructures, the scope of investment screening is broadened. Thus, it is to be expected that the number of cases for investment screening will increase.

For further information on the new thresholds under the BSI-KritisV, you may consult the ordinance in German here.

Germany – Takeover of German wafer producer by Taiwan enterprise fails due to lacking approval by the Federal Ministry for Economic Affairs and Climate Action

On 31 January 2022, several journalist reported that the takeover of German wafer producer “Siltronic” by the Taiwan enterprise “Globalwafers” failed due to lacking approval by the Federal Ministry for Economic Affairs and Climate Action. According to “Globalwafers”, the German government's approval had not been granted by the end of January and thus the deadline for the offer to take over “Siltronic's” shares had expired. According to the journalist sources, the authorities of other countries had already given their approval and the Federal Government of Germany was even said to have been offered a “golden share” or clauses that could reverse the takeover if necessary. However, the Ministry did not approve the takeover in time.

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EU – CJEU rules that Commission had competence to examine whether the implementation of the Micula award constituted state aid and that Achmea applies

On 25 January 2022, the CJEU ruled that the EU Commission had competence to examine whether the implementation of the Micula award constituted state aid as the measure in question has been granted after Romania’a accession to the EU. Furthermore, the findings in Achmea applied from the moment of Romania’s accession to the EU and thus, rendered the consent to arbitration in the respective bilateral investment treaty inapplicable.

If you are interested in the findings of the CJEU, you may consult the judgement here.

(c) Steffen Hindelang

UK – National Security and Investment Act enters into force

On 4 January 2022, the National Security and Investment Act entered into force enabling the government to screen and intervene in transactions which are said to threat the United Kingdom’s national security. The new legislation will introduce a mandatory notification regime for transactions in 17 sensitive sectors as well as a voluntary notification regime for transactions in other sectors. The Investment Security Unit will only upon such notification screen those transactions within specified timeframes to impose certain conditions on, to unwind or block them.

For further information regarding the new investment screening regime, you may have a look at an earlier update on it here or at the National Security and Investment Act itself here.

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Australia – Government provides funding for implementation of a new Information and Communication Technology (ICT) Platform

On 14 January 2022, the government of Australia announced that it will provide funding for the implementation of a new Information and Communication Technology (ICT) Platform in order to streamline the administration of the foreign investment framework which has been reformed at the beginning of the year 2021. To cover all interests, the government has started start consultations with stakeholders on the platforms design.

If you want to know more about the governments initiative you might be interested in the press release, which can be accessed here, or the underlying legislation which can be found on the governments website here.

US – Chinese investment in US plan maker under national security review

On 18 January 2022, it has been reported by several journalist sources that the Committee on Foreign Investment in the United States (CFIUS) and other federal agencies (including the Federal Bureau of Investigation) started reviewing the investment of a Chinese government-backed company which seeks to acquire nearly 47% of the stake in the US plan maker Icon Aircraft Inc. The investigations have been launched by a small group of shareholders which accused the Chinese company of technology transfer to China and thus, threatening national security.

US – New legislative initiative proposing an outbound investment screening regime  

On 25 January 2022, the House of Representatives proposed the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act of 2022 (“America COMPETES Act”). The proposal is a package which shall strengthen the US position vis-à-vis China through enhanced funding in the areas of technology and science. In addition, the legislative package contains a proposal to create an inter-agency process which would allow the US to screen and regulate outbound investment (“National Critical Capabilities Reviews”). The outbound investment screening regime shall prevent to become dependent on China regarding critical parts of supply chains and production capabilities. According to the proposal, a committee modelled on CFIUS would be able to review transactions that might threaten “national critical capabilities.” However, the proposal still lacks specificities and detail.

If you are interested in getting to know more on the initiative, you may consult the whole America COMPETES Act here. The proposal for an outbound investment screening regime can be found at page 2167.

Russia – Federal Antimonopoly Service (FAS) proposes amendments to the Law on Foreign Investments

On 25 January 2022, the Federal Antimonopoly Service (FAS) announced that it proposed amendments to the Federal Law No. 57-FZ of 29.04.2008 "On the Procedure for Foreign Investments in Business Entities of Strategic Importance for Ensuring the Country's Defense and State Security". The proposed amendments shall ensure that transactions which have occurred in violation of the law can be sanctioned by the transfer of shares or property to the state in cases, for example, where the investor ceased its activities under the respective transaction.

For more information, you may consult the non-official translation of the underlying law here or the press release here.