Law Firm: Updated Europe FDI Screening Rules Means More Investor Scrutiny
Companies should expect “increased scrutiny, broader sector coverage, and potentially longer review timelines” for investments in Europe due to new and changing foreign direct investment screening regulations, Morgan Lewis said last week in a client alert.
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The law firm pointed to the European Parliament’s May approval of a new FDI regulation that will add more sectors to the scope of restrictions and allow the European Commission to intervene in member state disagreements (see 2505090020). It also noted that Greece, Cyprus, Bulgaria and Hungary all either introduced FDI screening regimes this year or expanded existing restrictions. In addition, the U.K. announced in July plans to exclude certain “low-risk transactions” from its investment screening regime and launched a consultation to update the sectors that trigger a mandatory notification, the firm said.
New FDI laws or changes to existing ones will “inevitably create more [uncertainty] for transactions,” Morgan Lewis said. Investors should scrutinize deal structures, including ownership, and “should expect a more intrusive due diligence process to assess FDI requirements for" mergers and acquisitions.