USA – CALIFORNIA Trends and Developments Contributed by: Derek Liu, Aarthi Belani and Lawrence Lee, Baker McKenzie
The EU’s FDI Regulation prompted member states to enact or strengthen their national regimes, with new laws introduced and entering into force in Belgium, Bulgaria, Estonia, Ireland, the Netherlands, Slovakia and Sweden between 2023 and 2024. Countries out- side Europe also took similar measures. For example, India amended its FDI policy in April 2020, issuing Press Note 3, which requires government approval for investments from countries sharing a land border with India. With respect to recent foreign investment trends in the United States, CFIUS’s 2024 Annual Report to Congress reflects a modest decline in overall CFIUS filings compared to 2023, consistent with the global M&A transactions in 2024. However, enforcement actions and penalties increased significantly, which aligns with CFIUS’s broadened enforcement powers in 2024. For example, effective 26 December 2024, the maximum civil monetary penalty for material misstate- ments, omissions, failure to file mandatory notices, or violations of mitigation agreements increased from USD250,000 to USD5 million per violation. CFIUS fil- ings from allied nations increased, with record-high declaration clearances, whereas filings from higher- risk jurisdictions and sensitive sectors declined, including semiconductor manufacturing and scientific research and development services. Taken together, these trends reflect a CFIUS process increasingly driven by geopolitical considerations, reinforcing the distinction between allied partners and higher-risk jurisdictions.
Beyond foreign investment, scrutiny has also expand- ed to cover outbound investment, supply chain regu- lation and export controls as a result of geopolitical tensions among major economies. Earlier this year, the United States implemented its outbound invest- ment regime, effective 2 January 2025, which pro- hibits or imposes notification requirements on certain transactions with parties from “countries of concern” (ie, China, Hong Kong and Macao) that involve semi- conductors and microelectronics, quantum informa- tion technologies and AI. Moreover, the United States has begun implementing its Information and Com- munications Technology and Services (ICTS) Sup- ply Chain Regulations, restricting the sale or use in the United States of specific Chinese products and services. Additionally, the United States and the EU have introduced measures targeting semiconductor manufacturing equipment, quantum computing and advanced AI between 2022 and 2025. Further, sus- tained trade imbalances have prompted developed countries to increasingly resort to trade remedies, and President Trump’s protectionist tariffs and other coun- tries’ responses have created unprecedented uncer- tainty for businesses engaged in international trade. Overall, these developments highlight an increasingly complex global regulatory context for cross-border investments, requiring businesses to manage height- ened scrutiny and adapt to evolving compliance requirements amidst geopolitical uncertainty. At the same time, this environment offers opportunities for businesses to differentiate themselves by establish- ing robust compliance programmes and adopting agile supply chain strategies to leverage change for competitive advantage in a fast-moving global mar- ketplace.
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