CELIS Update on Investment Screening – June 2024

European Union – European Commission opens first in-depth investigation

On 10 June 2024, the European Commission (EC) opened its first in-depth investigation into the planned acquisition of sole control of PPF Telecom Group (PPF), a European telecommunications company headquartered in Czechia, by a state-controlled buyer from the United Arab Emirates (UAE), the Emirates Telecommunications Group Company PJSC (ETGC).

The EC has “significant indications” to conclude that ETGC has benefited from foreign subsidies which distort the internal market, in the form of an unlimited guarantee from the United Arab Emirates and credit granted by banks controlled by the United Arab Emirates, which directly facilitate transactions. The Commission is concerned that these subsidies may have improved the ability of ETGC to complete the acquisition and the future competitive position of the merged entity in the EU, by increasing its ability to finance its activities in the EU on preferential terms.

This case illustrates the potential impact of the FSR on the timing of mergers and acquisitions, as discussions with the Commission prior to notification and the subsequent in-depth investigation led to lengthy delays in proposed acquisitions of ETGC.

The EC now has 90 working days, until 15 October 2024, to decide whether to issue a no-objection decision, prohibit the transaction or accept commitments that could be offered by the UAE buyer to remedy the alleged distortion.

CELIS Update on Investment Screening - June 2024

United States – US Department of the Treasury issues a Notice of Proposed Rulemaking to implement the Outbound Order

On 21 June 2024, the U.S. Department of the Treasury issued a Notice of Proposed Rulemaking (NPRM) to implement the Executive Order 14105 of 9 August 2023 “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern” (the Outbound Order).

The Outbound Order specifically directs the Secretary of the Treasury (the Secretary) to issue regulations that (1) prohibit U.S. persons from engaging in certain transactions involving certain technologies and products that pose a particularly acute national security threat to the United States and (2) require U.S. persons to notify Treasury of certain other transactions involving certain technologies and products that may contribute to the threat to the national security of the United States. The Outbound Order identifies three categories of national security technologies and products to be covered by the program: semiconductors and microelectronics; quantum information technologies; and artificial intelligence.

The NPRM reflects Treasury’s consideration of the comments received on the ANPRM and provides the public an additional opportunity to submit comments on the new program. Written comments on the NPRM may be submitted by August 4, 2024. The NPRM will be followed by final implementing regulations at a later date.

The NPRM, Provisions Pertaining to U.S. Investments in Certain National Security Technologies and Products in Countries of Concern, can be accessed here.

The Executive Order 14105 of August 9, 2023, can be accessed here.

CELIS Update on Investment Screening - June 2024

France – French Treasury publishes its annual report 2024

On 4 June 2024, the French Treasury published its annual report 2024, which presents the key figures for 2023. Overall, the report shows continuity in the trends of the review process for French FDI. With a slight decrease from 325 in 2022 to 309 in 2023 in the context of reduced M&A activities, the number of applications submitted to the Ministry of the Economy has remained stable.

44% of the transactions reviewed in 2023 were subject to conditional clearance, which remains a French specificity in the EU. Particularly in the electronic technology sector, the percentage of conditional authorisation is higher (56%), which results from the increasing sensitivity of certain activity like semi-conductors or AI.

Similarly to 2022, 70% of the applications were submitted on behalf of non-EU investors from the US, the UK and Canada. Applications of European investors, mostly from Germany, Luxembourg, and the Netherlands, amounted to 30%. The largest group of investors submitting applications are banks, sovereign wealth funds and private equity funds, which account for around 40% of applications.

The report emphasises the importance of semiconductors by highlighting their importance due to the wide range of industrial applications that are critical to the energy and digital transitions and highlights recent EU initiatives in this area, such as the “European Chips Act”.

The annual report 2024 of the French Treasury can be accessed here (in French).

CELIS Update on Investment Screening - June 2024

Global – UNCTAD publishes World Investment Report 2024  

The World Investment Report 2024 of the United Nations Conference on Trade and Development has been published. Global FDI flows are down 2% to US $1.3 trillion in 2023 as trade and geopolitical tensions weigh on the slowdown in the global economy.

Tighter financing conditions led to a 26% decline in international project finance deals, which are crucial for infrastructure investment. International project finance is crucial for the poorest countries, making them more vulnerable to the global decline in this type of investment. Crises, protectionist policies and regional realignments are disrupting the global economy and fragmenting trade networks, the regulatory environment and global supply chains. This undermines the stability and predictability of global investment flows and creates both barriers and isolated opportunities.

Investment is increasing in several high value-added manufacturing sectors, such as the automotive and electronics industries, in regions and countries with easy access to key markets. However, many developing countries remain marginalised and struggle to attract foreign investment and participate in global production networks.

While the outlook for 2024 remains challenging, the report notes that modest growth remains possible for the year, citing the easing of financing conditions and efforts to facilitate investment in domestic policies and international agreements.

The World Investment Report 2024 of the United Nations Conference on Trade and Development can be accessed here.

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