CHINA Law and Practice Contributed by: James Hu, Yingjie Kang, Huihui Li, Sherry Xu, Bivio Yu and Lisa Zhao, Fangda Partners
notifications and handling all communications with parties to the NSR process. Process and Timeline The review process involves three phases, as follows. • Notification and pre-acceptance phase (15 working days) – the transaction parties notify the NSR office by submitting the following materials: (c) explanation as to whether the foreign invest - ment will affect Chinese national security; and (d) other materials required by the NSR office. The NSR office shall determine within 15 working days from its satisfaction regarding receipt of com - plete notification materials as to whether NSR review is required. (a) notification form; (b) investment plan; • General review phase (30 working days) – if the NSR office determines that NSR review is required, it shall conduct a general review and determine in 30 working days whether to approve the FDI or extend to the special review phase. • Special review phase (60 working days or longer if necessary under special circumstances) – if the NSR office considers that the notified transaction may have national security concerns during the general review phase, it will launch a special review of 60 working days. The special review period may be extended if special circumstances apply. However, the NSR Measures do not specify the circumstances to trigger such extension or the time limit for the extended review period. During the review process, the NSR office may request additional information and the review period shall be suspended (ie, stop-the-clock) while awaiting materi - als from the transaction parties. 7.2 Criteria for National Security Review NSR review will consider the FDI’s impact on nation - al defence and security, including the production of national defence products and relevant equipment, national economic stability, basic social stability, the research and development of key technologies related to national security, national cultural safety and pub -
lic ethics and national network security. However, no specific criteria have been published for the substan - tive assessment. The NSR is a highly discretionary process and is sub - ject to the opinion of the NSR Working Mechanism, in particular the specific industrial and regulatory author - ities for the invested sectors. 7.3 Remedies and Commitments Foreign investors can amend the investment struc - ture or commit to restrictive conditions to address NSR concerns. However, there are no specific rules or guidance on the types of concerns the NSR office may have and the restrictive conditions that may be required to address its concerns. The NSR is a highly discretionary process subject to the NSR office’s opin - ions in case-by-case assessments. In the case of approval with conditions, the parties have a continuing obligation to perform and imple - ment the conditions imposed under the approval deci - sion. In practice, the NSR office may together with the authorities of local governments, conduct on-site inspections over the parties subject to the conditions, to verify whether the conditions are strictly implement - ed. 7.4 National Security Review Enforcement NSR – Possibility to Block FDI Where the FDI has impacted or will likely significantly impact national security and the effect could not be remedied by conditions, the NSR office may reject the investment. If the investment has already been implemented, the NSR office may unwind the relevant transaction. Only a handful of investments have been blocked, according to public information. According to the FIL, the prohibition decisions made by the NSR Office are final, which means that the parties cannot appeal the decisions through judicial review. Consequences for Investing Without Prior Notification to the Relevant Authority
140 CHAMBERS.COM
Powered by FlippingBook