The Shifting Landscape of Foreign Direct Investment Review
Foreign direct investment (FDI) regimes continue to evolve at a remarkable pace, raising new questions for cross-border transactions and creating uneven expectations for investors. WLG’s Antitrust, Competition & FDI Group recently held a virtual meeting to compare experiences and observations from across the network, with an overview from Frank Jiang of Zhong Lun Law Firm on developments in China, followed by insight from Kai Neuhaus of CMS Germany on the developments on the EU level and in Germany.
Shifting Definitions and Expanding Jurisdictional Reach
The group noted that what constitutes FDI is not at all uniform. While some jurisdictions limit reviews to controlling stakes, others scrutinize even minority investments or contractual rights that could grant influence over sensitive operations. In certain jurisdictions, a transaction may fall under FDI rules even without equity acquisition—such as through long-term licensing, significant supply arrangements, or IP-heavy collaborations. For practitioners, this wide scope means that deal teams must take into consideration potential low review triggers and, therefore, look at FDI issues far earlier in a transaction's lifecycle.
National Security as the Core Driver—But with Different Expressions
National security remains the central policy rationale, but how countries interpret it varies widely. Frank Jiang noted that China's system continues to emphasize technology and industrial security, cybersecurity, and supply-chain resilience, applying reviews to sectors well beyond traditional defense-related industries. For Europe, Kai Neuhaus described how the EU's framework has encouraged EU Member States to create broad screening rules, leading to more filings and longer timelines across the region. As most governments include emerging technologies, data-rich businesses, and critical infrastructure to their lists of sensitive sectors, the boundaries of security continue to be open-ended.
Greater Scrutiny Does Not Always Mean More Prohibitions
Despite heightened political attention, most reviewed transactions are still cleared—sometimes with conditions. Members shared examples of instances where authorities required governance-related safeguards, limitations on access to sensitive information, or commitments regarding supply continuity. These remedies are becoming more standardized, but the level of transparency and predictability differs significantly by jurisdiction. Some authorities communicate openly throughout the process, while others maintain limited engagement, prolonging uncertainty for investors.
Managing Timing: The Practical Constraint for Cross-Border Deals
A recurring theme was the continuing impact of FDI timelines on deal execution. Even where clearance is predictable, the review period itself can disrupt transaction sequencing, regulatory filings, or financing. Several members noted that parallel merger-control and FDI processes (and other possible regulatory requirements such as export control and sanctions) are requiring careful coordination to avoid bottlenecks and bridge potential disconnects. For clients, the need to plan for multiple potential reviews—and to negotiate conditionality accordingly—is now a standard part of structuring cross-border deals.
Working Across Jurisdictions: What Clients Expect from Counsel
Participants emphasized that clients value early, jurisdiction-specific guidance on whether filings will be required, how long the review process may take, and where political sensitivities might exist. This often means conducting multi-country FDI assessments simultaneously with commercial due diligence. Lawyers are also being asked to anticipate where voluntary filings may be strategically advisable, even if not technically mandatory. Across all markets, the group agreed: proactive planning is now essential, particularly for technology-driven or infrastructure-related investments.
A Converging Trend, But Still a Fragmented Landscape
While global approaches to FDI screening share common principles, substantial differences remain in scope, timing, and enforcement. Counsel must balance that fragmentation with the reality that investors expect a cohesive narrative about risks and requirements across jurisdictions. The discussion underscored that staying current with each country's framework—and understanding how those frameworks interact—is a core part of advising on international transactions.
Members-only: View presentations by Frank Jiang and Kai Neuhaus on the event record's Quick Links here.