![Global rules on foreign direct investment](https://www.nortonrosefulbright.com/-/media/images/nrf/nrfweb/knowledge/publications/us_24355_legal-update--fdi-alert.jpeg?w=265&revision=a5124a65-abf9-40e4-8e96-9df39ffdb212&revision=5250068427347387904&hash=96B456347C3246E5649838DF281C5F5D)
Publication
Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Authors:
Global | Publication | June 2022
Exactly one year after the European Commission (Commission) proposed the Anti-Subsidy Regulation (the Regulation) on May 5, 2022, EU legislators launched their “trilogue” negotiations to reach an agreement on the final text.
The Regulation is a global first. It combines elements of traditional merger control, EU State aid review and trade law. The Regulation gives the Commission sweeping new powers to investigate and combat distortions of competition caused by subsidies granted by non-EU countries, for example to State-owned enterprises (SOEs), who may use those subsidies to compete against EU companies that are subject to EU State aid rules.
Importantly, the Regulation creates mandatory new notification requirements for M&A transactions, the formation of joint ventures and public tenders. These requirements are based on a combination of the target’s EU revenues and the parties’ “financial contributions,” a new global, group-wide metric. “Financial contributions” are defined broadly, including, for example, contracts with governments or entities whose actions are attributable to governments and calculated over a rolling three-year period .
The Regulation distinguishes between three related concepts: “financial contributions,” “foreign subsidies”, and “distortions on the internal market.” Importantly, the new mandatory reporting regimes for acquisitions, joint ventures and public tenders are triggered by receipt of financial contributions, not foreign subsidies
The Regulation will create a new, mandatory ex-ante notification system for mergers, acquisitions and joint ventures that will sit alongside the EU Merger Regulation (EUMR), as well as foreign direct investment screening regimes. Preparatory documents published by the Commission highlighted concerns over non-EU companies using subsidies to overbid for EU businesses, crowding out potential EU buyers in competitive acquisitions. The burden of the new monitoring and compliance procedures required to identify and quantify financial contributions from 2020 will vary from firm to firm. However, such procedures will need to be carefully designed in cooperation with EU and local counsel familiar with the different arrangements prevalent in global markets and how these arrangements will be viewed from an EU law perspective. In many cases, designing and implementing new procedures will take many months. Perhaps ironically, the new Regulation’s burden will fall most heavily on EU-based multinationals who are most likely to meet the notification thresholds.
The Turkish Competition Board has raised the threshold for mergers and acquisition which need its approval and eased restrictions on M&A transactions in the technology sector. M&A transactions only need approval if:
The Turkish Competition Board announced the change in an Amended Communique, which also states that technology firms active in Turkey or with R&D activities in the Turkish market are not subject to the TL 250m turnover threshold. Technology firms are defined as companies with digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies are not subject to the TL 250m turnover threshold. In addition, methods used to calculate turnover has been revised for financial institutions along with the template notification form.
Rules governing commercial advertisements have changed after the 2015 Commercial Advertisement and Unfair Commercial Practices Regulation (29232) was amended and came into force on March 1, 2022. The changes are as follows:
Authorized dealers of goods from a major household appliance manufacturer active in white goods and small household appliances can continue to sell its products online after the Turkish Competition Board rejected the manufacturer’s attempt to prevent this activity. The decision is important since it reflects the Turkish Competition Board’s position on prohibiting online sales. The Turkish Competition Board found that restricting online sales violates Article 4 of the Act on the Protection of Competition and the manufacturer did not meet all of the requirements required for an individual exemption.
The Competition Board did not accept arguments raised by the household appliance manufacturer about online sales jeopardizing its brand image, and opening the risk of imitation products and non-authorized dealers, consumer relations, delivery and service problems. It decided that online marketplace restrictions proposed by the manufacturer are not proportionate, and that online sales do not damage its brand and online platforms, and that they provide a consumer benefit, which a restriction would remove. Its decision was numbered 21-61/859-423 and dated 16 December 2021.
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Publication
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.
Publication
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.
Subscribe and stay up to date with the latest legal news, information and events . . .
© Norton Rose Fulbright LLP 2023