1、 Note:This IPM was prepared by Vicente Guazzini,Anastasia Leskova and Massimo Meloni under the supervision of Joerg Weber and the overall guidance of James Zhan.This document can be freely cited provided appropriate acknowledgement is given to UNCTAD.It has not been formally edited.SPECIAL ISSUE 9 S

2、EPTEMBER 2022 IPM HIGHLIGHTS THE EVOLUTION OF FDI SCREENING MECHANISMS key trends and features At least 37 countries introduced a regulatory framework for the screening of investments on national security grounds since 1995.Key objectives included harmonizing or codifying dispersed provisions and pr

3、actices on FDI entry,enhancing the protection of sensitive sectors from foreign takeovers,and ensuring sufficient publicity and visibility of the relevant regimes.Investment screening for national security was adopted predominantly by developed economies from Europe(22 out of 37),while the remainder

4、 of the schemes were adopted by a few developed and developing countries in other regions:9 countries in Asia,2 in North America,2 in Oceania,1 in Latin America and 1 in Africa.The trend towards the adoption or revision of FDI screening mechanisms accelerated in the second half of the 2000s,particul

5、arly after the global economic crisis,and reached a peak in 2020-2021,in the aftermath of the COVID-19 pandemic,both of which heightened concerns about potential foreign takeovers in sensitive sectors.Over the past five years,the scope and coverage of the“national security”concept was expanded,resul

6、ting in several new economic sub-sectors being considered as strategic.Governments also moved to subject new forms of critical know-how and strategic technologies to screening,including economic activities involving access to sensitive personal information or capable of shaping public opinion.Invest

7、ment screening for national security comprises a patchwork of very diverse approaches,but some efforts to enhance regulatory alignment and achieve a higher level of harmonization are ongoing between jurisdictions within the European Union.In the context of the expanding use and scope of investment s

8、creening mechanisms,it is ever more relevant to take a balanced approach to policymaking,so as to enhance the States ability to address essential security concerns without weakening its FDI promotion efforts in the interest of sustainable development.By reviewing different models and regulatory opti

9、ons,this IPM highlights some policy practices that can help enhance the predictability,transparency,and administrative efficiency of screening regimes,by clarifying the procedural rules applicable to investors,and providing decision-making guidance for the implementing authorities.FEBRUARY 2023 ISSU

10、E 25 2 ISSUE 25 FEBRUARY 2023 IPM Introduction With an increasing number of economies adopting security-related investment screening regimes and the expansion of the concept and coverage of“national security”,1 policymakers are still attempting to find a balanced approach that preserves the attracti

11、veness of a country to investments,while strengthening the States ability to address potential national security threats posed by both foreign and national investments in strategic sectors.The present Investment Policy Monitor(IPM)provides an overview and analysis of dedicated regimes for investment

12、 screening,outlining emerging trends and common features(see Box 1 for UNCTADs approach).The analysis highlights the existence of a patchwork of different mechanisms,in which the key definitions,the coverage and the governance of investment screening varies significantly from country to country.In t

13、he absence of a common model applicable to security-related foreign direct investment(FDI)screening,this IPM can offer policymakers considering the introduction or revision of a screening mechanism an overview of different approaches to address national security risks and provide them with a general

14、 understanding of the existing legislative options to design a system for reviewing investments in areas deemed worthy of protection.1 See:Clifford Chance(2022).Box 1Box 1 UNCTADs methodological approach on investment screening At the current stage of policy developments in this field,the depth and

15、detail of screening mechanisms in force varies greatly among different jurisdictions.As an unfolding regulatory trend,so far there is little uniformity in the level of complexity and normative elaboration among existing regimes,as well as a significant disparity in the availability of official infor

16、mation.These disparities mean that the contours of what constitutes a dedicated regime for investment screening are not set in stone.For the purpose of the analysis,this study relies on UNCTADs Investment Screening Database,which adopts the following methodological approach:-Screening involves the d

17、iscretionary use of regulatory powers by public authorities,to be exercised on a case-by-case basis(thus not bound by statutory bans on FDI),and which involves national security considerations;-Only nationwide screening is considered,thus excluding sub-national level reviews;-Sectoral exclusions to

18、FDI or negative-list schemes are not considered as screening;-Prohibitions on foreign ownership of land based on border-related or territorial integrity grounds are not considered as screening.Source:UNCTAD 3 ISSUE 25 FEBRUARY 2023 IPM Section A illustrates the trend towards the adoption of investme

19、nt screening mechanisms to address national security risks from 1995 to 2022.In light of the recent peak of legislative activities in this area,particular attention is given to measures adopted during the 2020-2022 period in the context of the COVID-19 pandemic,as well as screening measures adopted

20、in response to the war in Ukraine.Section B presents an overview of the differing policy approaches to address national security concerns.Issues of scope and rationale of investment screening and factors that are taken into consideration during the screening process,as well as screening governance a

21、re among those discussed.A.Key trends in FDI screening for national security The concept of foreign investment screening on national security grounds is not new.Some countries use a general safeguard clause on national security in their investment laws that provides sufficient legal ground to reject

22、 unwanted foreign investments.Others include sector-specific restrictions where foreign participation above certain limits would be considered detrimental to national security.However,in recent years a new trend to adopt sophisticated procedures specifically dedicated to investment screening on nati

23、onal security grounds can be identified.This shift in legislative practices can be explained by the intention of countries to harmonize or codify existing dispersed provisions and practices on FDI entry and to ensure sufficient publicity and visibility of the security-related investment screening re

24、gimes.The first signs of the current trend started to appear in the second half of the 2000s.Between 2006 and 2009,the number of countries making use of investment screening for national security increased threefold(from 3 to 9).In the aftermath of the global economic and financial crisis,and in par

25、allel with the expansion of outward FDI from developing countries,more developed countries began to introduce dedicated regimes for the screening of investments.By 2014,a total of 17 countries had incorporated elements of investment screening to their national investment policies.Starting from 2016,

26、countries have introduced a significant number of amendments to existing investment screening regulations,mostly seeking to expand their scope.Most of these reforms took place in 2020 and 2021,when 17 and 12 countries respectively adopted amendments to their screening regimes.Figure 1 shows that the

27、 peak of regulatory activity came in 2020,when the world economy faced risks associated with the COVID-19 pandemic.The number of countries introducing new screening regimes had been steadily growing for the previous decade and the pandemic did not change this trend but rather accelerated it.4 ISSUE

28、25 FEBRUARY 2023 IPM Figure 1:Number of countries introducing or expanding security-related investment screening(1995-2022)Source:UNCTADs Investment Policy Monitor In total,from 1995 to 2022,at least 37 countries introduced new regulatory frameworks for the screening of investments that include nati

29、onal security considerations.2 An additional 8 countries are undergoing a consultative or legislative process expected to lead to the adoption of a new mechanism,in response to the potential threat posed to its national security from some investments.3 Out of the 37 countries that have established i

30、nvestment screening for national security in the reviewed period 22 are developed economies from Europe.In other regions,these regulations are used only by a few developed and developing countries(9 countries in Asia,2 in North America,2 in Oceania,1 in Latin America and 1 in Africa).2 These countri

31、es are Australia,Austria,Canada,China,Czechia,Denmark,Finland,France,Germany,Hungary,Iceland*,India,Israel*,Italy,Japan,LAO Peoples Democratic Republic*,Latvia,Lithuania,Malta,Mexico*,the Netherlands,New Zealand,Norway,the Philippines*,Poland,Portugal,the Republic of Korea,Romania,the Russian Federa

32、tion,the Kingdom of Saudi Arabia*,Slovakia,Slovenia,South Africa*,Spain,Thailand*,the United Kingdom of Great Britain and Northern Ireland,and the United States of America.Countries for which no sufficient data on investment screening regulations are available are marked by an asterisk(*).These are

33、not considered in the analysis of section B.3 These are:Belgium,Croatia,Estonia,Greece,Ireland,Luxembourg,Sweden,and Switzerland.See:European Commission(2021)2202530354005540Introduces investment screeningExpands existing investment screeningCumulative num

34、ber of countries with investment screening 5 ISSUE 25 FEBRUARY 2023 IPM Recent trends Regulatory changes towards a tightening of screening procedures for national security enacted over the past five years focus on three substantial aspects.Firstly,they expanded the scope of sectors targeted by the s

35、creening mechanism,in order to cover new activities increasingly considered as strategic.Secondly,they lowered the threshold rule triggering the FDI review,whether such thresholds refer to transaction value or percentages of foreign capital participation.Thirdly,they broadened the definition of inve

36、stment or control that triggers the FDI screening(i.e.,by expanding the screening criteria or rationale,the scope of acquisitions and the type of investors falling under the screening regime).Other regulatory changes during the period included an extension of initial review timeframes(e.g.,the discr

37、etionary period during which the authorities can block an investment)and the introduction of sanctions and penalties for non-compliance with obligatory filing obligations.The expansion in the scope of FDI screening indicates that national authorities are increasingly concerned by foreign ownership o

38、f companies operating in new services activities perceived as strategic.Also,governments have stepped up scrutiny over entities engaged in business activities involving access to sensitive personal information or capable of modifying the balance of public interest values such as the pluralism of the

39、 press or the shaping of public opinion.Finally,governments have recently moved to include new forms of critical know-how and strategic technologies under the scope of FDI screening mechanisms(Box 2).Box Box 2 2 Regulatory changes expanding FDI screening scope since 2018(Policy examples)Activities r

40、elated to the protection of sensitive information In 2019,Italy amended its screening regime to include“access to sensitive information,freedom and pluralism in the media”;In 2020,Slovenia introduced a temporary FDI screening mechanism whose scope includes acquisition of businesses which entail“acce

41、ss to sensitive information,including personal data,or the ability to control such information;the freedom and pluralism of the media”;In 2021,Malta amended its FDI screening procedure to include“access to sensitive information,including personal data,or the ability to control such information”;In 2

42、021,Canada published new“Guidelines on the National Security Review on Investments”,stipulating a set of national security factors to be taken into account by the authorities in their review of FDI transactions.Such factors include“the potential of the investment to enable access to sensitive person

43、al data that could be leveraged to harm Canadian national security through its exploitation”.Sensitive personal data under the guidelines covers a wide range of data on individuals;In 2022,Australia included a prior approval requirement for foreign investments targeting a“business or entity that has

44、 access to bulk sensitive personal information of over 100,000 Australian”.According to the authorities,sensitive personal information may include,non-exhaustively,medical and/or psychological information,psychometric and profiling information,financial information of individuals and genetic informa

45、tion;In 2022,the United States strengthened the FDI screening mechanism.An Executive Order of the President(No.14083)directed the Committee on Foreign Investment in the United States(CFIUS)to consider five 6 ISSUE 25 FEBRUARY 2023 IPM In addition,between 2020 and 2022,at least 12 jurisdictions intro

46、duced 25 screening measures in response to the COVID-19 pandemic(Box 3).The vast majority of these measures were either aimed at further restricting foreign investments by screening a wider scope of investments,transactions and investors or at creating more elaborate and detailed screening regimes(1

47、5 measures).In addition,several temporary security-related measures introduced during the COVID-19 pandemic were steadily extended for further periods or upgraded into a permanent screening regime(10 measures).The ongoing war in Ukraine was another driver of current trends to accelerate the introduc

48、tion of dedicated screening regimes focused on managing national security and public order risks brought by inward foreign investments,with Canada,Italy and the European Union(EU)enacting screening-related policy measures in response to the war in Ukraine(Box 3).BoxBox 3 3 Recent changes to FDI scre

49、ening legislation(2020-2022)(Policy examples)Measures adopted in response to Covid-19 pandemic*In 2020,Australia introduced temporary changes to the foreign investment review framework that are designed to protect national interests while dealing with the economic implications of the spread of COVID

50、-19.In 2020,Canada enhanced scrutiny of FDI related to public health or involved in supply of critical goods as a response to opportunistic investment behavior in the context of the COVID-19 pandemic;In 2020,France,in response to the COVID-19 pandemic,included biotechnology in the list of sectors an

51、d critical technologies subject to review;specific factors when conducting national security reviews,including risks to sensitive data of United States citizens.New strategic technology sub-sectors In 2018,Lithuania amended its screening regime to include“information technology hardware and software

52、 of the State Enterprise Centre of Registers,software platforms and data of the main state registers and state information systems that process critical information”;In 2020,Japan expanded the scope of its screening regime by including“manufacturing industries related to highly-controlled medical de

53、vices”;In 2022,Australia published a Guidance Note on national security matters regarding foreign investment,in which it orders a prior approval requirement for acquiring direct interest in the national internet domain administration(.au);In 2022,in the United States,Executive Order No.14083 mention

54、ed above also directed the CFIUS to consider,among others,the transactions effect on the resilience of critical supply chains and on the technological leadership of the United States in specified industries,when conducting national security reviews.Source:UNCTADs Investment Policy Monitor 7 ISSUE 25

55、 FEBRUARY 2023 IPM In 2020,Germany stipulated that foreign acquisitions of at least 10 per cent stock in German companies developing,manufacturing or producing vaccines,medicines,protective medical equipment and other medical goods for the treatment of highly infectious diseases require prior govern

56、mental authorization;In 2020,Hungary introduced a temporary foreign investment screening mechanism applicable to investors from both inside and outside the European Union in 21 industries,including health care,pharmaceutical,medical device manufacturing,but also some non-medical industries;In 2020,I

57、ndia introduced the regime of prior authorization for all investments originating from countries that share land boarders with India“for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic”;In 2020,Italy lowered the screening threshold and expanded t

58、he scope of FDI screening to cover the financial,credit and insurance sectors,infrastructure,and critical technologies,including energy,transport,water and health,food security,access to sensitive information(personal data),artificial intelligence,robotics,semiconductors,cyber-security,nanotechnolog

59、y and biotechnology;In 2020,Japan expanded the scope of screening by including“manufacturing industries related to pharmaceuticals”and“manufacturing industries related to highly-controlled medical devices”into the list of companies subject to specific notification requirements.In 2020,New Zealand in

60、troduced a“national security test”that allows the Government to decline consent for certain transactions ordinarily screened if they are considered contrary to New Zealands national interest;In 2020,Poland temporary extended the scope of FDI screening and widened the list of sectors/activities falli

61、ng under the screening regime to include energy,gas and oil production,storage,distribution and transportation,manufacture of chemicals,pharmaceuticals and medical instruments,telecommunication and food processing;In 2020,Slovenia introduced a 3-year temporary FDI screening mechanism that applies,am

62、ongst others,to critical infrastructure,transport,water,aviation,media,data processing,artificial intelligence,medical and pharmaceutical technology,the supply of critical inputs;In 2020,Spain introduced a temporary screening procedure for all foreign investors from outside the European Union who ac

63、quire 10%or more of the share capital or an effective management or control of a Spanish company in the sectors of critical infrastructures,critical technologies and dual-use products,supply of fundamental inputs,sectors with access to sensitive information,and media;In 2022,Italy made the temporary

64、 COVID-related screening regime permanent.Furthermore,it broadened the scope of transactions falling under the FDI screening regime to include procurement of services and assets related to 5G networks and cloud services,and additional strategic assets and technologies in connection with cybersecurit

65、y and gave the Government authority to review acquisitions by investors from the European Economic Area(EEA);Measures adopted in response to the war in Ukraine*In 2022,Canada issued a“Policy Statement on Foreign Investment Review and the Ukraine Crisis”,indicating that,with respect to national secur

66、ity reviews,should it be determined that an investment,regardless of its value,has ties,direct or indirect,to an individual or entity associated with,controlled by or subject to influence by the Russian State,this will support a finding by the Minister that there are reasonable grounds to believe th

67、at the investment could be injurious to Canadas national security;In 2022,Italy introduced urgent measures to counter the economic and humanitarian effects of the Ukrainian crisis.Among others,it expanded a notification obligation to new subjects and widened the definition of non-EU individuals or e

68、ntities;In 2022,the European Union adopted the“Guidance to the Member States concerning foreign direct investment from Russia and Belarus”,where it urged EU Member States to implement the FDI Screening Regulation to address risks related to security or public order related to FDI from the Russian Fe

69、deration and Belarus.Source:UNCTADs Investment Policy Monitor Note:*Measures classified as such when the State has explicitly justified their introduction on the basis of the COVID-19 pandemic crisis or the war in Ukraine.8 ISSUE 25 FEBRUARY 2023 IPM B.A review of dedicated regimes for investment sc

70、reening The analysis in this section covers 29 countries that have adopted dedicated regimes for investment screening,understood as those establishing a comprehensive set of substantive and procedural rules on the screening of foreign and national investments on national security grounds,which were

71、available to UNCTAD for review.4 Such regulatory frameworks typically set out explicitly the scope,coverage,rationale and conditions under which the scheme is applicable,including a procedural timeframe and an expiry period for the exercise of the blocking power by the relevant authority,as well as

72、a clearly defined set of rights,obligations,sanctions and remedies for the investors concerned.Accordingly,this section does not cover those FDI review mechanisms whose main focus is competition,domestic market protection,local SME promotion or other grounds,which include only a single provision res

73、erving the States right to block a foreign acquisition on national security grounds.As illustrated below,there is no unified approach to FDI screening for national security reasons,with significant differences as to the scope,clarity and the transparency of the various mechanisms.Indeed,the complexi

74、ty of applicable rules,the wide margin of regulatory discretion and the lack of predictability inherent in several regimes may become significant barriers to investment and represent an increasing administrative burden for host country authorities.In this context countries should seek to balance the

75、 safeguard of essential security concerns with the promotion of FDI,so as to ensure that restrictions on investment,or conditions on transaction,do not exceed what is required to protect national security.At the OECD level,guidelines to help countries design and implement FDI screening policies,so t

76、hat they achieve their national security goals with the smallest possible impact on investment flows,were adopted in 2009.5 More recently some harmonization attempts have been made at the European Union level.Through“Regulation(EU)2019/452 of the European Parliament and of the Council of 19 March 20

77、19 establishing a framework for the screening of foreign direct investments into the Union”,the European Union sought to establish a Union-wide coordination and cooperation mechanisms on screening,including through a set of recommendations and principles governing the screening of investments.6 Scop

78、e and rationale of investment screening Two main approaches in national legislation are identified to determine the main subject of the screening mechanism.One approach is to discriminate on the basis of the economic grouping/s of origin of the investor.At least 12 countries define foreign investors

79、 subject to screening in whole or in part as entities or citizens not 4 For country-specific examples see:Baker McKenzie(2017);C.S.Goldman(Ed.)(2017);Dechert LLP(2022)and Jones Day(2018).5 The guidelines include the principles of non-discrimination,transparency of policies and predictability of outc

80、omes,proportionality of measures,and accountability of implementing authorities.In particular,they state that governments should rely on measures of general application which treat similarly situated investors in a similar fashion(non-discrimination),with regulatory objectives and practices made as

81、transparent as possible so as to increase the predictability of outcomes(transparency/predictability).Restrictions on investment,or conditions on transaction,should not be greater than needed to protect national security and should be avoided when other existing measures are adequate and appropriate

82、 to address a national security concern(regulatory proportionality).Finally,in order to ensure accountability of the implementing authorities,oversight procedures should be established,including internal government oversight,parliamentary oversight,judicial review,and periodic regulatory impact asse

83、ssments(OECD,2009).6 Such recommendations include the introduction of provisions on transparency of screening rules and procedures;the protection of confidentiality of the information made available to the State;the establishment of screening timeframes and the possibility to seek judicial recourse

84、against screening decisions of the national authorities,among other procedural elements.Furthermore,the Regulation mandates the European Commission to act as an advisory body on screening of FDI projects regarding EU-funded projects and programs.These involve development of critical infrastructure o

85、r critical technologies in sectors such as energy,transportation,telecommunications or scientific endeavors such as research on atomic energy and space exploration.9 ISSUE 25 FEBRUARY 2023 IPM belonging to the European Union.Not belonging to the European Economic Area is used as a discriminant facto

86、r by at least 4 countries,to the European Free Trade Association(EFTA)by 4 countries and to the OECD by one country.A second approach is based on the public or private nature of the foreign entity subject to screening.In this regard,at least 11 countries have enacted special screening provisions tar

87、geting specifically acquisitions of national entities by foreign State-owned entities.In terms of scope,screening procedures for the identification of national security risks can be classified in three categories.Cross-sectoral screening procedures are those that apply to transactions of a certain n

88、ature(e.g.,critical infrastructure,dual use products and technologies etc.),rather than to specific sectors(21 countries).This approach is present in the majority of screening regimes and allows countries to preserve a broad level of regulatory discretion in such a sensitive topic as national securi

89、ty.Sector-specific screening is also frequently utilized and can be applied in parallel or in addition to cross-sectoral screening(20 countries).Much less frequent is entity-specific screening(e.g.those applying to natural monopolies or specific companies)(4 countries).Detailed information about the

90、 rationale or criteria behind the screening process is provided by all analyzed countries except for two.In the wide range of criteria put forward,“public order”is the main screening criterion for 11 countries,while“national security”and“national interest”are offered as the key rationale in 6 and 5

91、countries respectively.Five countries provide more than one criterion(figure 2).The same criteria,however,can have different definitions depending on the regime considered.7 This is not surprising,as essential security concerns are self-judging and each country has a right to determine what is neces

92、sary to protect its national security(OECD,2009).The existence of such a wide range of often undefined criteria,however,can be a source of uncertainty for investors,with potentially deterrent effects on FDI.Figure 2.Investment screening rationale Source:UNCTAD,using M 7 For examples,under national s

93、ecurity interests Norway understands country sovereignty,territorial integrity and democratic governance,including security interests related to defence and emergency preparedness,economic stability and freedom of action.Finland defines its key national interest as securing military national defence

94、,functions vital to society,foreign and security policy objectives,and safeguarding public order and security.For more on this see:UNCTAD(2019).10 ISSUE 25 FEBRUARY 2023 IPM Assessment factors and legal certainty in investment screening In order to increase the legal certainty and predictability of

95、the screening process for investors,several countries have introduced provisions that set out in detail the factors to be considered by the authorities in the screening process,as well as the aspects or investor features that are taken into consideration for the assessment of an investment project(B

96、ox 4).BoxBox 4 4 Examples of factors considered in the screening of investments In Austria,when assessing a possible threat to security or public order,particular account shall be taken of whether an acquiring person is controlled directly or indirectly by the government of a third country;whether a

97、n acquiring person,or a natural person who holds a senior position in an acquiring legal entity,is or has been involved in activities that have or have had an impact on security or public order in another member State of the European Union,and whether there is a significant risk that an acquiring pe

98、rson,or a natural person who holds a management position in an acquiring legal entity,is or has been involved in illegal or criminal activities.8 In Canada,the authorities will take into account the following factors:the effect on employment,on resource processing,on the utilization of parts,compone

99、nts and services produced in Canada and on exports from Canada;the degree and significance of participation by Canadians;the effect of the investment on productivity,industrial efficiency,technological development,product innovation and product variety in Canada;the effect of the investment on compe

100、tition within any industry or industries in Canada;the compatibility of the investment with national industrial,economic and cultural policies,taking into consideration industrial,economic and cultural policy objectives enunciated by the government or legislature of any province likely to be signifi

101、cantly affected by the investment.9 In Germany,the assessment of a likely effect on public order or security can also consider whether(a)the acquirer is directly or indirectly controlled by the government,including other state agencies or armed forces of a third country;(b)the acquirer has already b

102、een involved in activities which have had undesirable effects on the public order or security of Germany or of another member State of the European Union,or(c)there is a significant risk that the acquirer or the persons acting on his behalf have been or are involved in activities which,in Germany,wo

103、uld amount to a certain crime or administrative offence under national legislation.10 In Japan,in the assessment,the authorities will take into consideration,among other factors,the capital structure of the foreign investor,its beneficial ownership and business relationships,the foreign investors pl

104、an and their track record relating to the investment(including the degree of potential direct or indirect influence by foreign governments and other related parties on the foreign investor).Furthermore,the Government will assess the possibility of technologies or information leakage or the probabili

105、ty of use of these technologies or information against the objectives of protection of national security,maintenance of public order,or safeguard of public safety.Track record of the foreign investors compliance with the Foreign Exchange and Foreign Trade Act and equivalent or similar legislation of

106、 other jurisdictions is also considered.11 In Slovenia,in determining whether a foreign direct investment is likely to affect security or public policy,the Government authority shall take into account,in particular:whether the foreign investor is directly or indirectly controlled by the government o

107、f a third country,including state bodies or armed forces,including through ownership structure or significant funding;whether the foreign investor has already been involved in activities affecting the security or public order of a Member State;whether there is a serious risk that the foreign investo

108、r engages in illegal or criminal activities.12 Source:UNCTAD,based on the cited documents.8 Section 3 of Austrian Investment Control Act/ICA:unofficial translation(europa.eu)9 Section 20 of Investment Canada Act(justice.gc.ca)10 Section 55A of Foreign Trade and Payments Ordinance(Auenwirtschaftsvero

109、rdnung-AWV)(gesetze-im-internet.de)11 Factors to be considered in authorities screening of foreign direct investment:Ministry of Finance(mof.go.jp)12 Article 72 of Act determining the intervention measures to mitigate and remedy the consequences of the Covid-19 epidemic(europa.eu)11 ISSUE 25 FEBRUAR

110、Y 2023 IPM Often,the potential direct or indirect influence by foreign governments and records of investors past behaviors relating to the investment are the first factors considered in national assessments.Awareness of the role played by new technologies in national security brought to existence ne

111、w assessment factors,such as potential technology or information leakages or their potential use against the State.However,some assessment provisions are deliberately left open to interpretation,for example,the compatibility of the investment with national industrial,economic and cultural policies,w

112、hich can add to the uncertainty associated with FDI screening regimes.Standard-setting regarding the assessment factors in investment screening is also evolving at a regional level,which could lead to a certain degree of harmonization.In this regard,the EU Regulation 2019/452 provides recommendation

113、s for EU Member States in the form of a list of factors that should be taken into consideration when determining whether an FDI project is likely to affect national security or public order.Governance of investment screening In over half of the countries reviewed(15),the screening is conducted at mi

114、nisterial level by the authorities in charge of investment matters(e.g.,the Ministries of Investment,Industry,Economy,Energy or Trade).In several cases,however,a separate,ad hoc body was created(or is currently envisaged)to perform the screening and all procedures associated with the mechanism(8 cou

115、ntries).Only 6 countries rely on a national regulatory authority to take on screening duties.Finally,across 22 countries,the authority responsible for investment screening seeks advice from other government agencies or related bodies on the proposed investments,when their expertise is deemed necessa

116、ry for the decision.Investors affected by screening can be subject to different administrative requirements,as summarized in Figure 3.The large majority of countries(24)introduced obligatory filing schemes,including 7 countries that adopted several schemes either for different types of investors or

117、for different sectors of activities.In addition to the obligatory filing or as a separate procedure,17 countries have adopted a notification procedure.Finally,at least 9 countries use a pre-authorization(pre-formal screening)procedure.Each of the above-mentioned procedures is considered briefly belo

118、w.Figure 3.Administrative requirements in investment screening for national security(number of countries)Source:UNCTAD 12 ISSUE 25 FEBRUARY 2023 IPM Under the obligatory filing scheme,investors must submit certain categories of transactions for review.Such categories may vary significantly from one

119、country to another.Transactions subject to review may include those exceeding a certain value or a certain foreign ownership percentage threshold(21 countries),those taking place in specific sectors(1),or a combination of both(6 countries).In addition to those,or as a separate issue,some countries i

120、ntroduced a“control test”to examine specific transactions.These include those which may lead to the acquisition of a number of voting rights that would allow an investor to pass or block resolutions governing the affairs of the entity,to gain access to information,systems or technologies that are im

121、portant for national security,or to transactions that would give an investor a significant influence over the management of the company in any other way.Filing obligations can be“light”,i.e.,requiring the investor to provide a general description regarding ownership of the acquiring entity and an ov

122、erview of the proposed investment project(16 countries),or more extensive,i.e.,requiring not only to report on ownership information but also to provide a draft of the potential merger or acquisition,as well as a detailed business plan for the economic activities of the acquiring entity(9 countries)

123、.These provisions are without prejudice to the authoritys power to request additional information or to conduct its own enquiry as to the provenance of the proposed investment.On the other hand,the notification regime is characterized primarily by its voluntary nature and by a simplified procedure,w

124、hich may lead the investor to notify the future investment plans to the screening authority,to wait for a“no objection order”,or to notify the investment post factum(Box 5).Typically,investors choose to undergo the notification procedure to obtain legal certainty,in situations where the applicabilit

125、y of the filing scheme is not clear or when there is a risk that the transaction might be“called in”at a later stage.However,in some cases,the line between the notification and the filing regime is blurred(e.g.,in situations where the declaration should be sent to the reviewing authority to report t

126、he beneficial ownership change of a shareholder of a company operating in a strategic sector).Failure to comply with this rule may result in a sanctioning decision to alienate shares or stocks of the equity capital of the said shareholder.A pre-authorization(pre-formal screening)procedure is used to

127、 assist investors in cases when it is unclear whether the transaction in question falls under the official screening regulation.This procedure can help foreign investors to navigate the complicated screening rules,it may also reduce the workload of reviewing authority and allow them to focus on more

128、 critical transactions.In some cases,the pre-authorization procedure is obligatory for specific sectors(for example,nationwide radio or television,broadcasting,or a publisher of a periodic press),in which the State reserves the right to a certain degree of control,without subjecting these transactio

129、ns to obligatory filing procedure.BoxBox 5 5 Approaches to the governance of investment screening for national security In Australia,the FDI screening mechanism includes:(a)Mandatory notification of proposed investments in certain assets and in national security business as defined in the regulation

130、.In such cases,the investor should seek approval before taking action and is subject to penalties for failure to notify;(b)Voluntary notification of reviewable national security actions in such cases where there is no direct obligation to notify the reviewable actions.Guidance is provided for invest

131、ors in investment areas where voluntary notification is encouraged.However,investors may choose to notify the investment in order to extinguish the call-in power;(c)The investments that do not require mandatory notification may be called-in for review on national security grounds by the authorities

132、when the action is proposed or up to ten years after the action has been taken;and(d)Under exceptional circumstances,the authorities can require modification and even divestment of any approved investment where national security risks emerge(power of last resort).China introduced a three-level FDI s

133、creening system.When a foreign investment is made in any of the sectors specified in the regulation,it should be declared to the relevant authority.Before filing a formal 13 ISSUE 25 FEBRUARY 2023 IPM declaration for security review,a party may request a consultation with the relevant authority.Upon

134、 receipt of the declaration,the authority shall decide whether there is a need to conduct a security review of a declared investment and notify the party.Before the formal decision is received,a foreign investor cannot proceed with an investment.Further review may be conducted in the form of an ordi

135、nary review or a special review.During the special review,the investor may be requested to complete relevant documentation or provide additional details.In Germany,investment screening for national security is administered through:(a)mandatory filing of proposed acquisitions in German businesses abo

136、ve the established thresholds and in any of the listed sectors considered by the German Government as sensitive or strategic.The authority authorizes the acquisition if it does not raise any concerns regarding public order or national security;(b)voluntary notification of acquisitions of German busi

137、nesses when the transaction entails ownership of over 25 per cent,in any other sector.Foreign investors may apply for a clearance certificate(“certificate of non-objection”)to obtain legal certainty on whether an acquisition is subject to review and/or whether it may be prohibited;(c)an authority ma

138、y initiate a review on its own initiative(ex officio)when it has knowledge of the acquisition up to five years after acquisition took place.In Japan,a foreign investor carrying out an inward direct investment as defined in the law will be required to file either:(a)a prior notification,when a foreig

139、n investor intends to engage in businesses that are likely to cause a situation that impairs national security;or(b)a post facto report,when the investment does not fall under the previous category.Failure to file a prior notification or post facto report can result in criminal and administrative pe

140、nalties.In the Russian Federation,FDI screening for national security is conducted through:(a)mandatory filing of the proposed investments in strategic sectors for which a prior consent should be obtained in order to proceed with the investment;(b)post facto notification when,due to the change in vo

141、ting rights distribution,the foreign investor gains control over the enterprise in the sectors of concern;(c)pre-authorization procedure for cases when the establishment of a foreign investor control is not clear.In this situation,the investor may request the relevant authorities to clarify whether

142、the mandatory filing is necessary.In the United States,the FDI screening mechanism consists of:a)a voluntary filing process in which investors submit declarations or notices of transactions to the CFIUS.These notices are subject to review within 45 days,and CFIUS may initiate further investigation.I

143、nvestors might fast-track the screening procedures through a lighter procedure by submitting a declaration on covered transaction in order to receive a potential“safe harbor”letter,which prevents CFIUS from subsequently initiating a review of a transaction,except in certain limited circumstances;b)a

144、 mandatory filing process for certain transactions that require authorization under FIRRMA;c)an ex officio procedure,in which the authority might review pending or completed transactions if it has reason to believe that the transaction is subject to CFIUS jurisdiction and may raise national security

145、 concerns.Source:UNCTAD Duration,transparency and other procedural elements in investment screening The timeframe for the investment review is clearly indicated in the legal instruments of all countries,but only in half of the reviewed regimes,the investor has a right to judicial appeal against a de

146、cision blocking the proposed investment.In addition,only 7 countries include a provision establishing a tacit approval of the investment project upon expiration of a predefined period(Austria,Finland,Italy,Latvia,Lithuania,the Netherlands and Portugal).Investment screening regimes tend to operate ou

147、tside public scrutiny and provide limited levels of transparency to those involved in the screening process(OECD,2021).While only 12 countries have a legal obligation to publish decisions on investment screening,no direct provisions related to prior notification of 14 ISSUE 25 FEBRUARY 2023 IPM stak

148、eholders about the planned changes in screening regulation were identified.Only two countries included legal provisions on prior consultation with relevant stakeholders or interested parties(UK,Japan).While a small number of countries have started reporting official data on FDI screening(Australia,C

149、anada,France,Germany,Italy,New Zealand,Russian Federation,United States)(UNCTAD,2021),the type of information,reporting periods and metrics used vary from country to country.At the European Union level,attempts are ongoing to introduce reporting obligations on the application of the screening mechan

150、isms on an annual basis,including on decisions allowing,prohibiting or subjecting foreign direct investments to conditions or mitigating measures.Once the review process of an investment project on national security grounds is completed,the decision may lead to different consequences:-To authorize t

151、he investment project,subject to certain conditions(25 countries);-To order divestment measures(9 countries);-To prohibit investments that are considered a threat to national security(25 countries).Screening regulations provide for a broad range of sanctions for non-compliance with the relevant proc

152、edures.Injunctions can be issued:to modify the investment in order to exclude the possible risks for national security 3 countries;to restore the status quo which existed before the investment 4 countries;or any of the above-9 countries.Failure to comply with the obligatory filing requirements or ot

153、her obligations under the screening regime may result in administrative fines(21 countries)or even criminal charges,including imprisonment(9 countries).In some cases,the court may order civil pecuniary penalties or interest to be paid(New Zealand);or register the non-compliance in a negative credit

154、record(China);or to prohibit the representation of the company and the management of its record-keeping(Latvia).Furthermore,a range of sanctions are envisaged to prevent investors from posing any harm to the protected interests of the country,in such cases where implementation of the injunction can

155、be delayed.These include conservatory measures,such as a restriction to disclose company-related information to the acquirer,the appointment of a trustee or external manager(4 countries),or the imposition of vote rights restrictions(13 countries).As a legal conservatory measure,in 12 countries,the u

156、nauthorized investment transaction is considered void or nullified from the date on which it took place.Conclusion In the past decade,the number of countries introducing new screening regimes and amending the existing regulations has been steadily growing.At the moment,dedicated screening regimes ar

157、e enacted predominantly by developed countries,but as the trend continues,it is likely to expand also among developing countries.As investment screening regimes become more widespread and comprehensive,the complexity of applicable rules,the wide margin of regulatory discretion and the lack of predic

158、tability inherent in several regimes may become significant barriers to investment and represent an increasing administrative burden for host country authorities.Finding the proper balance between preserving the appropriate level of regulatory discretion to address constantly evolving challenges in

159、the areas of national security and technological progress and ensuring an acceptable level of legal certainty and predictability to foreign investors is a challenge.15 ISSUE 25 FEBRUARY 2023 IPM The policy practices put forward in this report,however,indicate that there is ample scope to improve the

160、 transparency,predictability and administrative efficiency of investment screening mechanisms,and introduce effective appeal.In particular:(i)Pr Predictability:the complexity of investment screening mechanisms both in terms of the applicable rules and possible substantive outcomes creates uncertaint

161、ies about how these rules will be applied in practice.Introducing regularly updated guidelines on applied procedures or special notes on different aspects of screening,including illustrative examples and cases,can enhance predictability.(ii)Transparency:information about the FDI screening procedures

162、 should be made available on dedicated websites or platforms.This may include relevant legal documents with a link to their official text and all relevant official information.Where possible,this should be available in languages commonly used by investors in the country.In addition,the publication o

163、f available statistics on screened and rejected FDI transactions may help potential investors to manage their expectations regarding the planned investments and expected FDI screening timeframes.(iii)Administrative efficiency:the expansion of strategic sectors and transactions that fall under the sc

164、rutiny of the FDI screening mechanism can create significant administrative burden for the implementing authorities.Introducing information and communication channels and widening the scope of application of pre-authorization procedures allows to deal with less complex applications outside the lengt

165、hy and formal screening process and decrease the overall number of applications going through the filing procedures.16 ISSUE 25 FEBRUARY 2023 IPM References Baker McKenzie(2017).“Rising Scrutiny:Assessing the global foreign investment landscape”.A Baker McKenzie Report.November.C.S.Goldman(Ed.)(2017

166、).“The Foreign Investment Regulation Review(Fifth Edition)”.The Law Reviews,September.Clifford Chance(2022).“The Evolving Concept of National Security”.February.Dechert LLP(2022).“The Evolving Global Foreign Direct Investment and National Security Review Landscape”.May.European Commission(2021).“Fir

167、st Annual report on the screening of foreign direct investment into the Union”.Report from the Commission to the European Parliament and the Council.COM(2021)714 final.Brussels.Jones Day(2018).“Foreign Investment Control Heats Up:A Global Survey of Existing Regimes and Potential Significant Changes

168、in the Horizon”.January.OECD(2009).Recommendation of the Council on Guidelines for Recipient Country Investment Policies relating to National Security,OECD/LEGAL/0372.Paris:OECD.OECD(2021).Transparency,Predictability and Accountability for investment screening mechanisms.Research note by the OECD Se

169、cretariat.Paris:OECD.UNCTAD(2019).Investment Policy Monitor.National Security-Related Screening Mechanisms for Foreign Investment:An Analysis of Recent Policy Developments.Special Issue,December.New York and Geneva:United Nations.UNCTAD(2021).World Investment Report 2021:Investing in sustainable rec

170、overy.New York and Geneva:United Nations.United Nations publication.17 ISSUE 25 FEBRUARY 2023 IPM For the latest investment trends and policy developments,please visit the website of the UNCTAD Investment and Enterprise Division unctad.org/diae investmentpolicy.unctad.org unctadwif For further information,please contact Mr.James X.Zhan Director Investment and Enterprise Division UNCTAD diaeinfounctad.org+41 22 917 57 60