INTRODUCTION Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
CFIUS The scope of the Committee on Foreign Invest - ment in the US’s (CFIUS) jurisdiction expanded significantly with the enactment of the Foreign Investment Risk Review Modernization Act (FIR - RMA) in August 2018. Notably for growth com - panies, transaction parties are required to submit a mandatory CFIUS filing at least 30 days prior to closing, irrespective of deliberate transac - tion structuring to grant foreign investors solely passive economic and no other governance or contractual rights. This signifies a re-definition of the “completion date” of a transaction as the date on which any equity transfers to a foreign investor. Most mandatory CFIUS filings relate to US companies involved in advanced technolo - gies (eg, semiconductors) and/or personal data. On 18 November 2024, the US Department of the Treasury issued a final rule vesting addition - al authority in CFIUS to review “non-notified” transactions, while generally establishing higher minimum penalties for non-compliance. Recent developments reflect heightened con - cern regarding Chinese investors. Prominent examples include the required divestment and removal of improvements on land purchased by MineOne (a Chinese company) within one mile of an Air Force base and the blocking of the Nippon Steel/US Steel transaction after CFIUS referred the deal for a Presidential decision. For 2025, the US President’s “America First Investment Policy” suggests there will be enhanced focus on restricting Chinese invest - ment in “strategic” sectors (including technolo - gy, critical infrastructure, healthcare, agriculture, energy, and raw materials), an expansion in the scope of “critical technologies” that can neces - sitate a mandatory CFIUS filing, the establish - ment of a “fast-track” review process “to facili -
tate greater investment from specified allied and partner sources in US businesses involved with US advanced technology and other important areas” and an attempt to work with Congress to expand CFIUS’s jurisdiction to review “green - field” investments. With effect as of 2 January 2025, a Final Rule issued by the US Department of the Treasury requires US persons to notify certain outbound investment transactions and prohibits certain outbound investment transactions, in each case involving persons of “countries of concern” (cur - rently only China) that engage in “covered activi - ties” involving certain sensitive technologies and products in the semiconductors and microelec - tronics, quantum information technologies, and AI sectors. Foreign Trade and Payments Ordinance The past few years have also seen ever-increas - ing impediments and more exacting standards of review for non-EU investors. At the EU level, the regulatory framework for foreign direct invest - ment (FDI) control is governed by Regulation (EU) 2019/452. However, a significant variance exists among national screening mechanisms, impacting the effectiveness and efficiency of the system in addressing security and public order concerns. Notably, in Germany, there is a 10% threshold in certain cases of critical infrastruc - ture that may include less sizeable companies. If a non-EU/non-European Free Trade Associa - tion foreigner seeks to acquire at least 20% of the voting rights in a German company in one of 19 security-relevant areas of high and future technology, a reporting obligation is triggered. In 2023, seven EU member states collectively accounted for 85% of all cases submitted, underscoring a concentration of screening activ - ities. Given that 80% of FDIs within the EU were
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