On March 25, the European Commission issued guidance on the screening of foreign direct investment in the context of the COVID-19 pandemic. The Commission calls Member States to make use of existing FDI regimes to protect critical health infrastructure, supply of critical inputs, and other critical sectors. Further details can be found in our memorandum, accessible here.

As the final CFIUS regulations implementing FIRRMA take effect in the U.S. (and the Trump Administration issues its own cautionary statements regarding review of foreign investments during the crisis), and France announces a revised foreign investment regime of its own, we would like to remind our clients and friends that national security reviews of foreign investment are rapidly growing in scope and importance for cross-border transactions. The United Kingdom has recently confirmed its intention to introduce a new national security regime, joining the pre-existing but expanding regimes in France, Germany, Italy, and elsewhere. The European Union’s emerging effort to coordinate foreign investment review, described in a previous blog post, highlights the trend toward increasing coordination and consultation among national authorities as FDI regimes expand.

Cleary Gottlieb’s Foreign Investment Review group has been at the forefront of these developments, with over two decades of experience in its renowned CFIUS practice and lawyers closely involved in the evolution of each of the national regimes above. We also have experience and strong relationships with local firms in other important regimes such as those of Canada and Australia (which has just announced a broadening of its regime to temporarily eliminate the size of transaction threshold during the crisis). The Foreign Investment Review group coordinates closely with our market-leading Antitrust & Competition and M&A practices to provide the seamless advice guiding global transactions to completion for which Cleary has been known since its inception.

To stay abreast of these developments, please contact any member of our Foreign Investment Review group or your regular contacts at the firm.

Update: Treasury has clarified that comments on the Proposed Rule are due April 3, 2020, instead of the previously provided deadline.

On March 9, 2020, the U.S. Department of the Treasury published a proposed rule implementing the filing fee provisions of the Foreign Investment Risk Review Modernization Act. The Proposed Rule would assess tiered filing fees for all voluntary notifications to the Committee on Foreign Investment in the United States and is open for public comment until April 8, 2020.  No proposed effective date is included in the Proposed Rule, and so presumably filing fees will not apply to any filing accepted prior to an effective date to be specified in a future rule.

Under the Proposed Rule, CFIUS would:

  • assess fees for full notifications based on the value of the transaction, ranging from no fees for transactions valued at less than $500,000 to a fee of $300,000 for transactions valued at greater than $750 million;
  • base the fee on the value of the U.S. business rather than the total transaction value in the case of mergers or joint ventures (but not other transactions);
  • cap the fee at $750 where the value of the U.S. business is less than $5 million; and
  • expand the required content of voluntary notices to include a certification as to the transaction value and an explanation of the valuation methodology.

CFIUS has not imposed (and lacks statutory authority to impose) filing fees for short-form declarations.

Please click here to read the full alert memorandum.

With a draft bill to amend the Foreign Trade and Payments Act (AußenwirtschaftsgesetzAWG) issued on January 30, 2020, the German Federal Ministry of Economics and Energy (Bundesministerium für Wirtschaft und EnergieBMWi) has started a legislative process to change the German foreign direct investment control regime (FDI Regime). This will be the third amendment to the FDI Regime since 2017. While the German Government continues to emphasize that Germany maintains an investment-friendly environment, these changes will further strengthen the Government’s ability to scrutinize foreign direct investments in Germany. As with earlier amendments to the FDI Regime, which all aimed to protect German and European security interests, these new changes will have a significant impact on M&A transactions in Germany. Continue Reading Upcoming Changes to the German Foreign Direct Investment Control Regime

On December 31, 2019 the French Government adopted a Decree and a Ministerial Order, which implement the reform of the French foreign investment control regime initiated by the Law n°2019-486 of May 22, 2019.   Since many years, foreign direct investment in certain sensitive sectors for French national interests has been subject to prior clearance by the Minister for the Economy.

The Decree notably aims to expand the scope of sectors subject to prior foreign investment control and to clarify and simplify the authorization procedure. Together with the Ministerial Order, it constitutes the new framework applicable to foreign investments in France. The Decree also includes measures aimed at implementing in France the cooperation mechanism provided for under EU Regulation 2019/452 of March 19, 2019 establishing a framework for the screening of foreign direct investments in the European Union (the “EU Regulation 2019/452”). Continue Reading French Foreign Investment Control – New Rules Applicable as From April 1st, 2020

In June of 2019, OFAC amended its Reporting, Procedures and Penalties Regulations (RPPR), apparently effecting a radical expansion of the obligation of non-financial institutions in the U.S. to report “rejected” transactions involving U.S.-sanctioned persons.  OFAC has long required financial institutions to report rejected financial transactions involving sanctioned persons.  (“Rejected” transactions involve persons who are not Specially Designated Nationals (SDNs) or other persons whose property within U.S. jurisdiction is blocked, but with whom transactions are nevertheless prohibited, such as private individuals and companies resident in Iran and not explicitly designated for sanctions.  U.S. persons may not execute these transactions but are not required to block and report any related assets that come within their control; to take the historical example of funds transfers, the payment is returned to the sender rather than being frozen in a blocked account.)  The amended reporting guidelines expanded that obligation from financial institutions to all U.S. persons and persons within the United States, defined the relevant transactions to include “transactions related to wire transfers, trade finance, securities, checks, foreign exchange, and goods or services,” and (as before) did not define “reject” at all.  If any person subject to U.S. jurisdiction does reject a transaction for goods or services (financial or otherwise) for sanctions reasons, it is now legally required to report that rejection within ten days. Continue Reading New FAQs Provide Little Clarity on Expanded OFAC Reporting Obligations for Non-Financial Institutions

This Trade Summary provides an overview of WTO dispute settlement decisions and panel activities, and EU decisions and measures on commercial policy, customs policy and external relations, for the fourth quarter of 2019.

If you have any questions regarding the above, do not hesitate to contact fclaprevote@cgsh.com or tmuelleribold@cgsh.com.

On February 11, 2020, Judge Stanton of the U.S. District Court for the Southern District of New York denied Dresser-Rand Company’s (Dresser Rand) motion for summary judgment in a suit to collect on a promissory note issued by Petróleos de Venezuela, S.A. (PdVSA).  The Court’s decision turned on a finding that payment by PdVSA was legally impossible under U.S. sanctions.  That finding was based on incomplete briefing by the parties and appears seriously flawed given the licenses and guidance provided by the Department of Treasury’s Office of Foreign Assets Control (OFAC).  We discuss the decision and the U.S. sanctions regime as applied to the promissory note below.

Continue Reading District Court Decision Incorrectly Holds that OFAC Sanctions Bar PdVSA from Making Payment on Pre-Sanctions Debts

Brexit has happened.  The UK is no longer an EU Member State.  What does that mean for competition law in the UK?

Has Anything Changed?

In the short term, nothing will change.  Until the end of the transition period set out in the UK Withdrawal Agreement, the rights and obligations of EU law continue to apply just as they did before.  That transition period is due to end on 31 December 2020, unless both sides agree to an extension.  So far, the UK Government has refused to consider a possible extension and has even sought to legislate against one. Continue Reading UK Competition Law After Brexit – Plus Ça Change…

Brexit has happened.  The United Kingdom is no longer part of the European Union or the European Economic Area.  But in the short term, nothing really changes.  The UK has entered a transition period during which it remains bound by EU rules and trade policy.

Until the end of the transition period, which is set out in the UK Withdrawal Agreement, the rights and obligations of EU law continue to apply in the UK largely as they did before, although the UK will be outside the EU’s decision making institutions.  The transition period is due to end on 31 December 2020, unless both sides agree to an extension.  So far, the UK Government has refused to consider a possible extension and the UK Parliament has even legislated to prohibit the Government from agreeing one. Parliament can of course undo the prohibition but, at this point, an extension looks unlikely. Under the Withdrawal Agreement any extension must be agreed with the EU by June 2020. Continue Reading Brexit: No Change Until end-2020; Uncertainty Thereafter

On January 13, 2020, the U.S. Department of the Treasury (“Treasury”) released final regulations (the “Final Regulations”) implementing the updates to the foreign investment review process of the Committee on Foreign Investment in the United States (“CFIUS”) contained in the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”).  The Final Regulations, effective February 13, 2020, largely track the September 2019 proposed regulations (the “Proposed Regulations”) to implement FIRRMA’s expansion of CFIUS’s jurisdiction.  FIRRMA in turn codified existing CFIUS practice as it has evolved in recent years, particularly with respect to a focus on U.S. businesses involving critical technologies, critical infrastructure, and sensitive personal data, and added a limited mandatory filing regime.  The Final Regulations continue this incremental path by incorporating revisions to address issues arising from public comments on the Proposed Regulations and the sunset of the CFIUS pilot program rules (the “Pilot Program”).

The Final Regulations apply to all transactions entered into (binding agreement signed, public offer launched, proxies solicited, or options exercised) after February 13, 2020.  An interim rule defining an entity’s “principal place of business” is concurrently effective and open for comment until February 18, 2020.  Treasury further delayed implementation of the filing fees called for by FIRRMA, which will be separately addressed in a future rulemaking.  Treasury also indicated that future rules will narrow the scope of the critical technologies filing requirements.

Please click here to read the full alert memorandum.