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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | March 2022
In the light of the ongoing Russian invasion of Ukraine, the European Union (EU) Member States adopted a series of new sanctions against Russia. Both the scope, complexity and the expedited pace of adoption of the new restrictive measures is unprecedented, which can make it challenging for financial and non-financial institutions to keep a track of. The following note seeks to provide a short overview of the current European financial services sanctions against Russia, mindful that these may soon be subject to further changes:
According to the updated European sanctions regime, it is prohibited to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with certain transferable securities and money-market instruments issued by:
It is also prohibited to directly or indirectly, purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments issued after 12 April 2022 by:
Similar investment services restrictions also apply to dealings with Russian legal persons, entities or bodies established in Russia engaged in the conception, production, sales or export of military equipment or services, as well as certain state-owned entities (Almaz-Antey; Kamaz; Novorossiysk Commercial Sea Port; Rostec (Russian Technologies State Corporation); Russian Railways; JSC PO Sevmash; Sovcomflot; and United Shipbuilding Corporation).
For completeness, for the purpose of the European sanctions regime, the notion of “transferable securities” involves classes of securities which are negotiable on the capital market, with the exception of instruments of payment and including: (i) shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares, (ii) bonds or other forms of securitised debt, including depositary receipts in respect of such securities, (iii) any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities. Importantly, the European Commission recently clarified that the scope of “transferable securities” also extends to crypto-assets.
This note does not constitute sanctions legal advice. Given the potential serious consequences for firms and their senior managers of any sanctions related issues, in case of any doubt about obligations, firms should consider seeking advice from relevant internal functions or external advisors where appropriate.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The private credit market and direct lending have grown and diversified immensely in the past decade, offering alternative sources and terms of debt compared to those historically provided by the syndicated leveraged loan and public issuance markets. Consequently, they are fast becoming pivotal components in the capital ecosystem, so much so that the Bank of England consider that the private credit market is currently responsible for approximately $1.8 trillion of debt issuance, which is four times its size in 2015. This growth has been particularly pronounced in Europe and the US but there has also been significant activity in Asia.
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