Perils of FDI Reviews in Unexpected Places

January 11, 2023 | BY

Susan Mok

Nathan Bush, Nicholas Klein, Catherine Pawluch, and Alexandra Kamerling of DLA Piper survey the risks under the Foreign Direct Investment regimes of key jurisdictions, starting with the U.S., Canada, and the U.K. in this two-part series

Summary

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  • Authorities are increasingly willing and able to intervene in offshore transactions based on indirect or limited domestic effects.
  • The national security review process administered by the Committee on Foreign Investment in the United States (CFIUS) is among the most prominent targeted FDI review mechanisms.
  • Canada is also shifting towards a stricter standard for screening FDI on national security grounds.

…many countries' FDI review mechanisms now reach offshore deals affecting the upstream ownership and ultimate control of domestic entities, or are tangentially impacting domestic markets

Chinese investors face intensifying political and regulatory scrutiny under Foreign Direct Investment (FDI) regimes worldwide. FDI reviews are not strictly confined to onshore transactions modifying the immediate foreign ownership of extant domestic entities; many countries' FDI review mechanisms now reach offshore deals affecting the upstream ownership and ultimate control of domestic entities, or are tangentially impacting domestic markets. As geostrategic tensions and industrial policy rivalries sharpen, such reviews of foreign indirect investment pose a growing hazard for Chinese investors abroad.

Globalization Recedes, FDI Screening Advances

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