CELIS Update on Investment Screening – October 2023
Germany – Upcoming Investment Screening Act and the 20th Amendment to the AWV
There is a new Investment Screening Act upcoming in Germany – the new law is expected to separate the foreign direct investment screening rules from the German Foreign Trade Laws (contained in AWG and AWV), restructuring them into an isolated law. A preliminary draft is predicted to be published in the first quarter of the year 2024. Among other things, the key new features will be an expanded scope regarding research cooperation, intellectual property and greenfield investments, a clarification of atypical acquisition of control and exemption of Intra-Group restructurings, the introduction of presumptive examples and the revision of case groups, the recalculation of FDI Screening thresholds and procedural changes. So far, however, the BMWK hat not published any plans to introduce an outbound investment screening of German investments abroad.
Ahead of the mentioned major reform of the German FDI law, the 20th Ordinance amending the German Foreign Trade and Payments Ordinance of 27 September 2023 entered into force on 5 October 2023. Therewith, technical changes regarding form, timing and eligibility have been made. It establishes new offences that will be subject to fines and lays the foundation for an extensive digitalization of the FDI procedure.
The 20th Ordinance amending the German Foreign Trade and Payments Ordinance of 27 September 2023 can be accessed here (in German).
Bulgaria – Bulgarian parliament supplemented FDI screening regime with detailed provisions on 18 October 2023
The Bulgarian parliament approved a bill on the amendment of the Investment Promotion Act on 20 September 2023 and subsequently supplemented it with detailed provisions on 18 October. Currently being under a second parliamentary review, the final vote is expected to be in November this year.
The bill implements the screening mechanism under the Regulation (EU) 2019/452. It requires the prior screening on foreign direct investments originating directly or indirectly from a non-EU controlled entity and therewith aims to establish a robust and effectively coordinated system to scrutinize foreign investments in order to foster economic growth, while ensuring national security. A newly created Inter-ministerial Council for Screening of Foreign Direct Investments will have the control over the screening process.
EU – Foreign Subsidies Regulation becoming fully operational on 12 October 2023
On 10 July 2023 the European Commission has adopted the rules for implementing the Foreign Subsidies Regulation (FSR), which detail the procedural aspects of the implementation of the FSR. The FSR is directly applicable as of 12 July 2023 and the mandatory requirement to notify foreign subsidies will apply from 12 October 2023.
The FSR requires the notification to the European Commission where at least one of the merging parties, the acquired undertaking or the joint venture, must have group-wide turnover of at least €500 million in the EU and the total combined value of all foreign financial contributions received by the parties exceeds €50 million in the previous three years. For public procurement procedures, notification is mandatory where the estimated overall contract value is at least €250 million and the tenderer received foreign financial contributions of at least €4 million per third country over the previous three years. Additionally, the Commission may call in concentrations and public procurements that do not meet the above criteria where it suspects the existence of distortive subsidies.
The Implementing Regulation (EU) 2023/1441 of 10 July 2023 can be accessed here.
France / USA – French government blocks the acquisition by a US foreign investor of Canadian and French subsidiaries in nuclear, petrochemicals and aeronautics sectors
On 6 October 2023, the French Minister of Economy formally notified its decision not to authorize a foreign investment by the U.S. company Flowserve Corporation under Article L151-3 of the Monetary and Financial Code. Flowserve Corporation is a leading provider of flow control products and services for the global infrastructure markets.
In doing so, the prohibition marks already the second public veto by the French Ministry for the Economy against US investors, which are particularly rare. The rejected acquisition concerns two French subsidiaries of Velan Inc., Segault and Velan SAS, which manufacture and supply valves for French nuclear submarines and nuclear reactors.
The prohibition highlights France’s determination to retain control over supply chains in highly sensitive sectors and to block a transition in a situation, where security issues are substantial.
UK / Ireland – Acquisition of Speed Fibre DAC by Cordiant Digital Infrastructure Ltd has been cleared under the United Kingdom’s National Security and Investment Act 2021
The transaction of digital infrastructure investor Cordiant Digital Infrastructure Ltd. has been cleared under the UK’s National Security and Investment Act 2021. Cordiant has agreed to buy Speed Fibre, which operates 5,400 kilometres of owned and leased broadband fibre and wireless backhaul across Ireland, from the Irish Infrastructure Fund for an enterprise value of EUR190.5 million. The investment screening review process of the UK’s Department for Business, Energy and Industrial Strategy was required, because an element of Speed Fibre’s network extends into Northern Ireland.
Cordiant is owner and operator of digital infrastructure assets in the UK, the European Economic Area and North America. Once the deal is closed, Speed Fibre becomes the fourth digital infrastructure platform acquired by Cordiant since its launch in year 2021.
USA – Biden Administration is tightening its restrictions on the export of artificial intelligence chips
US chip designer Nvidia reported, that an updated directive by Washington had put new restrictions on exports of some advanced AI chips to China into immediate effect.
Indeed, Commerce Secretary Gina Raimondo announced, that the Biden administration is tightening its restrictions on the export of AI chips. Advanced artificial intelligence chips, such as Nvidia’s H800 and A800 products, will be affected. The regulations also expand export curbs beyond mainland China and Macao to twenty-one other countries with which the US maintains an arms embargo, including Iran and Russia.
Raimondo told reporters, that “these export controls are intended to protect technologies that have clear national security or human rights implications” and the goal is to “limit the People’s Republic of China access to advanced semiconductors that could fuel breakthroughs in artificial intelligence”.
