Countries Move To Protect Against Hostile Takeovers

Governments are protecting their national interests through introducing or strengthening their FDI screening regimes.

When Europe was at the epicenter of the Covid-19 pandemic, countries like Germany, Spain and Italy moved swiftly to strengthen foreign-investment screening regimes to prevent foreign takeovers of critical health infrastructures and other resources needed for tackling the coronavirus.

The European Commission also called on member states to either enact or make full use of their existing foreign direct investment (FDI) screening mechanisms.

“Before this health crisis, governments were responding to critics of globalization who suggested that it was time to focus more on the national interest,” says Samantha Mobley, a partner in the EU, Competition & Trade Practice at law firm Baker & McKenzie in London.

In the UK, Mobley says Theresa May’s former government planned to introduce a CFIUS-style [Committee on Foreign Investment in the United States] foreign-investment review system. “In his Queen’s speech, Boris Johnson pledged to pick up the baton and proceed with a National Security and Investment Bill,” Mobley says.

The trend for governments to protect their own national interests through introducing or strengthening their FDI screening regimes may have started in Europe, but Mobley says it is spreading, with Australia temporarily reducing the monetary screening thresholds to zero dollars for all foreign investments.

“The Covid-19 crisis has found many governments realizing that their economies lack the ability to deliver the inputs needed to tackle a health pandemic, and at the same time wanting to protect from foreign acquisition whatever coronavirus-tackling resources they have at their domestic disposal,” says Mobley.

Looking forward, she advises foreign investors to involve local FDI experts early in the planning process to strategize a pathway to securing investment. “Recognize that these are inherently political processes,” she says. “In addition to legal advisers, you will need to employ government-affairs advisers who can help you and your legal team navigate the politics.”