DealLawyers.com Blog

We’ve previously blogged about President Biden’s executive order requiring the Treasury & Commerce Departments to implement an outbound investment screening regime.  This excerpt from Dechert’s recent report, “The Evolving Global Foreign Direct Investment and National Security Review Landscape”, says that the US action may prompt other countries to implement similar regulatory regimes:

The United States in particular is moving ahead with establishing an outbound investment review mechanism, even if in its initial form it will apply only to certain sectors of the economy and only to certain destination countries. As currently envisioned, the U.S. outbound review mechanism will review and potentially prohibit certain outbound investments by U.S. investors to protect U.S. national security and safeguard U.S. supply chains from certain countries such as Russia and China. Although China, Taiwan and South Korea have forms of outbound investment review mechanisms, once established in the United States, the U.S. outbound investment review mechanism will be the first of its kind to be adopted by a major Western economy and could have potential ripple effects with other governments considering similar mechanisms (such as the EU).

The report says that these and other foreign direct investment screening developments may meaningfully impact dealmakers’ ability to deploy capital and close deals, and that it is more important than ever to evaluate FDI screening risks early in the deal process and to deploy strategies to manage potential risks.

– John Jenkins