The EU Foreign Direct Investment Regulation came into force this week. It establishes a European framework for the screening of foreign investments into the European Union. In this memorandum we provide an overview of the legislation, and its expected practical impact on foreign investment review in the EU.
Please click here to read the full alert memorandum.
Yesterday afternoon, the U.S. Department of State issued the first of two mandatory reports under the Hong Kong Autonomy Act (HKAA), identifying 10 Hong Kong and mainland China officials as materially contributing to the erosion of Hong Kong’s autonomy (the “Section 5(a) Report”).[1] Because the same individuals were already designated on the List of Specially Designated and Blocked Persons (“SDN List”) maintained by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) on August 7, 2020,[2] the practical effect of the report is limited to setting a deadline of 30 to 60 days for the U.S. administration to issue the second required report under the HKAA identifying foreign financial institutions that knowingly conduct a “significant” transaction with the 10 individuals listed in yesterday’s Section 5(a) Report (the “Section 5(b) Report”).[3] We discussed the reports required under the HKAA and the potential impact of those reports in our earlier blog post.[4] Continue Reading State Department Releases Hong Kong Autonomy Act Persons Report, Starts the Clock for Foreign Financial Institutions Report
Between July 28, 2020 and September 1, 2020, the National Venture Capital Association (NVCA) released updates to its model legal documents for use in venture capital financing transactions. This memorandum will explain the changes to these model forms and some of the reasons for, and implications of, such changes.
As background, the NVCA is an organization based in the U.S. whose members include venture capital firms, investors and professionals involved in investing private capital in early-stage companies. In an effort to promote consistent, transparent investment terms and efficient transaction processes, the NVCA has created model legal documents for venture financing transactions, and these models have been widely used in the U.S.
This update to the model forms has been driven by developments in: (i) CFIUS rules and other applicable laws, (ii) market practice in venture capital financing and (iii) “best practices” in the industry.
Please click here to read the full alert memorandum.
Yesterday, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published a final rule (the Final Rule) imposing export controls on additional emerging technologies pursuant to the Export Control Reform Act of 2018 (ECRA).[1] We previously wrote about the process to identify and impose export controls on emerging and foundational technologies under the ECRA, as well as the steps taken in furtherance of that process to date, here. Continue Reading BIS Imposes Export Controls on Additional Emerging Technologies; Further Defines Scope of CFIUS Mandatory Notification Requirement
In the wake of one of the largest reported medical ransomware attacks in U.S. history,[1] the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) issued last week a pair of advisories to assist in efforts to combat the increasing threat of ransomware attacks and related sanctions and anti-money laundering (AML) compliance issues.[2] Like our blog post last month on the same topic, the advisories highlight the importance of considering the legal risks relating to ransomware payments and confirm that OFAC may pursue enforcement actions against ransomware payments that violate U.S. sanctions.[3] Continue Reading OFAC and FinCEN Issue Advisories on Cyber Ransom Payments
On September 18, 2020, the U.S. Department of Commerce (Commerce) released for public inspection substantively identical notices[1] specifying the transactions relating to mobile applications TikTok and WeChat to be prohibited pursuant to the executive orders related to both entities issued by President Trump on August 6, 2020 (the TikTok Notice and the WeChat Notice, respectively, and together, the Notices).[2] Commerce withdrew both Notices before formal publication on September 22, presumably to address uncertainty regarding the effective dates in light of developments in both matters; the TikTok Notice has already been re-issued with revised timing, but negotiations over a possible partial sale of TikTok continue.[3] The WeChat Notice has yet to be re-issued, possibly as a result of timing uncertainty regarding the preliminary injunction discussed below.[4] Continue Reading Commerce Provides Clarity on the Potential Scope of the TikTok and WeChat Bans; All Else Remains Murky
On September 15, 2020, the U.S. Department of the Treasury published a final rule (the “Final Rule”) significantly changing the scope of the Committee on Foreign Investment in the United States (“CFIUS”) mandatory notification requirements for foreign investments in U.S. critical technology businesses and expanding it to investments in all industries. The Final Rule, which is basically the same as (but does resolve some ambiguities in) the May 2020 proposed rule, eliminates the current limitation of mandatory critical technology notifications to targets active in specified industries and instead focuses on whether the target develops, tests, or manufactures technologies that would require a license for export—whether or not the technologies are in fact exported or sold to third parties (e.g., proprietary manufacturing technologies)—to the jurisdiction of the investor and any entity in its chain of ownership, effectively creating different mandatory notification requirements for different countries. The Final Rule also clarifies the ownership rules used to determine when an investor linked to a foreign government is required to file with CFIUS for an investment in a sensitive U.S. technology, infrastructure, or data business. The Final Rule applies to all transactions entered into (i.e., binding agreement signed, public offer launched, proxies solicited, or options exercised) after October 15, 2020.
Please click here to read the full alert memorandum.
On 5 September 2020, the UK Government accepted undertakings from Gardner Aerospace not to proceed with its proposed acquisition of Impcross, a UK-based manufacturer of components for the aerospace industry (including for military aircraft). Gardner is owned by Shenzhen-listed Ligeance Aerospace Technology. This is a rare case of the UK Government effectively prohibiting a transaction on national security grounds. The decision is consistent with a more interventionist approach that has been signalled by the UK Government over the last three years.
Please click here to read the full alert memorandum.
Last month, reports surfaced that fitness technology company Garmin may have made a multimillion dollar payment in response to a ransomware attack with reported links to Evil Corp, a Russian hacking group subject to U.S. sanctions. This incident and other recent reports of ransomware attacks against large companies highlights that companies should consider potential civil and criminal liability under U.S. sanctions laws when responding to ransomware attacks. Continue Reading Ransomware and Sanctions Compliance: Considerations for Responses to Attacks
The Court of Appeal confirmed[1] that a borrower under a Tier 2 facility agreement was excused from making payments because of the risk of U.S. secondary sanctions.
The court made it explicitly clear that whether or not non-performance may be excused will depend on the specific words of the affected contract and the wider context. However, whilst fact sensitive, the decision also makes clear that the English court is likely to consider U.S. secondary sanctions as “mandatory” provisions of law. Continue Reading UK Court of Appeal Says Risk of U.S. Secondary Sanctions is a “Mandatory Provision of Law” Excusing Non-Payment
