Multi-jurisdiction guide for screening foreign investments

Asia Pacific

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1. Country: Australia

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

On the basis of the most current publicly available information the biggest investors in Australia are:

US (25.6%)
UK (17.8%)
Belgium (9.1%)
Japan (6.3%)
Hong Kong (SAR of China) (3.7%)

Further FDI data is due for release in May 2023.

3. Legal Framework in Force

Australia’s foreign investment policy framework comprises the Foreign Acquisitions and Takeovers Act 1975 (FATA), its related regulations, and Australia’s Foreign Investment Policy.

Australia's Foreign Investment Policy provides guidance on what factors are typically considered in assessing whether an investment proposal is contrary to the national interest. The concept of national interest includes factors such as national security, competition, the impact on the economy, the community, and the character of the investor. Where a proposal involves a foreign government or a related entity, the government also considers the commerciality of the investment by a foreign entity in Australia may require the formal submission of a proposal. This is subject to approval by the Australian Foreign Investment Review Board (FIRB).

4. Last revision of the Legal Framework

Significant amendments to the FIRB approval regime came into force from 1 January 2021.

5. Contextualization of the Legal Framework (Historical or other)

Since 29 March 2020, national security measures triggered by the COVID-19 pandemic require a AUD0 monetary screening threshold to be applied to all acquisitions subject to the FIRB regime.

From 1 January 2021, the pre-29 March 2020, monetary thresholds for “notifiable actions” and “significant actions” were reinstated and significant changes were made to the FIRB regime.

A new federal government was elected in May 2022. While this immediately impacted penalties and the fees payable for assessing an application to FIRB, it is unclear whether the new government will implement any further reforms.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

The FIRB examines proposals and advises the Australian government on whether those proposals are suitable for approval under the government's policy. Whether a proposal is required to be submitted to FIRB by the investor depends on the monetary value, the nature of the investment, and type of investor.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The applicable legislation provides that certain foreign investment proposals can be subject to compulsory or voluntary notification.

A compulsory notification is required where the proposal constitutes both a notifiable action and significant action, or a notifiable national security action.

A voluntary notification applies where the proposal constitutes a significant action or a reviewable national security action. Generally, a minimum 20% interest in a target is needed before FIRB approval is mandatory. Voluntary notification will typically apply in the case of the acquisition by a foreign person of a 10% interest or more in a target’s securities or in the assets of a business. Asset value thresholds also apply and depend on the nature of the asset and the acquirer.

8. Scope - sectors covered

Special thresholds apply if the target of the acquisition operates a national security business or is an agribusiness. In those cases any direct interest in a target that meets the applicable monetary threshold will require FIRB approval. The monetary threshold is nil if the acquirer is a foreign government investor or where the target operates a national security business.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

As noted above, investment by a foreign entity in Australia may require the formal submission of a proposal to FIRB who will assess whether a proposed transaction is consistent with the national interest. Whether notification is mandatory or voluntary will depend on the size of the interest and value of the asset. In certain circumstances (such as where the target operates a national security business), notification is compulsory irrespective of the value of the target.

10. Design – reciprocity?

Applicable monetary thresholds are generally more favorable to acquirers from one of the free trade agreement counties or regions; namely Canada, Chile, China, Hong Kong, Japan, Mexico, New Zealand, Peru, Singapore, South Korea, the US and Vietnam.

11. Design – Procedures and Deadlines

The Treasurer has 30 calendar days to make a decision in respect of a FIRB approval application and 10 furhter calendar days to notify the applicant. In practice, this timeframe is often extended.

The timeframe for making a decision will not start until the correct application fee has been paid in full. If the Treasurer requests further information from the investor, the review period will be on hold until the request has been satisfied. It should also be noted that the holiday period usually affects these timeframes.

12. Design – Transparency and Information requirements (Filing Forms?)

The government may share documents lodged as part of an application with Commonwealth, state and territory government departments and agencies for consultation purposes. The government respects “commercial-in-confidence” information it receives and ensures that appropriate security is provided. The government will not provide applications to third parties outside of the government unless it has permission or it is ordered to do so by a court of competent jurisdiction. The government will defend this policy through the judicial system if needed.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Compulsory notification

Where notification is compulsory, the proposed acquirer is legally obliged to notify FIRB of the proposed transaction, and failure to do so is a criminal offence. The acquirer cannot complete the proposed transaction unless and until it obtains FIRB approval. The treasurer can choose to approve the proposed transaction (i.e. grant FIRB approval) if it considers the transaction would not be contrary to the national interest. Approval can be given on an unconditional basis or subject to binding conditions. If the treasurer considers the transaction would be contrary to the national interest, it can make an order prohibiting the proposed transaction. If the transaction has already occurred, the treasurer has the power to make an order requiring disposal.

Voluntary notification

Where voluntary notification applies and prior FIRB approval is not obtained, the acquirer is subject to the risk that the treasurer may, at any time within ten years after the transaction completes, exercise the call-in power to review the transaction on national security grounds. The treasurer can also make orders (such as a disposal order) if the it is not satisfied that the transaction is contrary to national security.

14. Interaction with other legal frameworks (ex: merger control)

FIRB consults broadly with Commonwealth, state and territory government departments and agencies when assessing FIRB applications. In particular, FIRB consults with the Australian Competition and Consumer Commission (ACCC) the Australian Taxation Office (ATO) and, where critical infrastructure assets (such as telecommunications, gas, electricity, water and ports) are involved, the Critical Infrastructure Centre. The ATO conducts a "tax risk assessment" of each FIRB application. FIRB is entitled to adopt its own position on competition concerns, even if the ACCC clears a transaction, but engages with the ACCC on competition matters. The Critical Infrastructure Centre undertakes a national security risk assessment of a proposal where the target is a critical infrastructure asset.

15. Design – Grounds for blocking, if applicable (such as “public security”, “vital interests”). Please indicate whether those grounds are based on WTO definitions or not. Also, please indicate what is the degree of discretion of the authority to apply the legal criteria in question.

An investment proposal will be blocked if it is assessed to be contrary to the national interest. The concept of national interest includes factors such as national security, competition, the impact on the economy, the community, and the character of the investor. Where a proposal involves a foreign government or a related entity, the government also considers the commerciality of the investment.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

Applicants have no right of administrative or judicial review of foreign investment decisions made under the FATA or the policy. The Administrative Decisions (Judicial Review) Act 1977 specifically exempts decisions made under the FATA from judicial review.

17. Publication in Official Gazette or other

N/A

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

N/A

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

N/A

21. Other relevant information

N/A

Contact: John Fogarty and Shane Bilardi

Last updated June 2023

1. Country: China

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

According to the Statistical Report of Foreign Direct Investment (FDI) in China issued by the Ministry of Commerce (MOFCOM), the top five sources of foreign direct investment in China as of 4 January 2023 were:

Hong Kong (SAR of China) (72.8%)
Singapore (5.7%)
British Virgin Islands (2.9%)
South Korea (2.2%)
Japan (2.2%)

Investors from other jurisdictions often channel investments into China through entities organized in Hong Kong, Singapore, and BVI.

3. Legal Framework in Force

Article 35 of the Foreign Investment Law of the People’s Republic of China (FIL), promulgated by China’s National People’s Congress on 15 March 2019, explicitly provides for the establishment of a security review mechanism for foreign investment. Under the mechanism, a security review shall be conducted for any foreign investment that affects or may affect national security.¹
The Measures for Security Review of Foreign Investment (MSRFI) were jointly promulgated by the National Development and Reform Commission (NDRC) and MOFCOM on 19 December 2020 pursuant to the FIL and other relevant laws.²
The MSRFI replace and expand existing procedures for a central government inter-ministerial working group to assess the national security implications of direct and indirect foreign investments in China and to remedy national security risks by blocking, modifying, or unwinding transactions.

¹Zhonghua Renmin Gongheguo Waishang Touzi Fa (《中华人民共和国外商投资法》) [Foreign Investment Law of the People’s Republic of China] (promulgated by the National People’s Congress, 15 March 2019, effective 1 January 2020), (Ch.).
²Waishang Touzi Anquan Shencha Banfa (《外商投资安全审查办法》) [Foreign Investment Security Review Measures] (promulgated by the National Development and Reform Commission and the Ministry of Commerce, 19 December 2020, effective 18 January 2021), (Ch.).

4. Last revision of the Legal Framework

The MSRFI have not been revised since taking effect on 18 January 2021.

5. Contextualization of the Legal Framework (Historical or other)

The enactment of the MSRFI reflects the confluence of (1) a global trend in which many jurisdictions have adopted or expanded formal mechanisms for reviewing FDI on national security, public interest, and other policy grounds and (2) domestic policy pressures to compensate for the recent liberalisation of the general FDI regime by strengthening national security review procedures.
Throughout most of the “reform and opening up” period, China’s general foreign investment regime categorized sectors into “positive lists” of industries where foreign investment was “encouraged,” “permitted,” and “restricted.” All investments by foreign parties were subject to examination, approval, and licensing requirements. These general foreign investment regulations had the effect of blocking or deterring potentially problematic transactions at the provincial or local level.
Measures enacted in 2006 and 2011 provided for an interdepartmental review of foreign investments with potential national security implications at the central government level.³ However, these measures remained largely dormant as informal consultations with officials or initial applications at the provincial or local level tended to identify and resolve national security concerns or other political challenges.
The Chinese government substantially streamlined the foreign investment regime, initially with the establishment of pilot free trade zones and subsequently on a nationwide basis under the FIL. When the FIL took effect on 1 January 2020, it established a new nationwide system in which foreign investors enjoy the same rights as domestic investors in most circumstances in most sectors. There is an exception fot industries specified on “negative lists.”⁴ The FIL also abolished many requirements for advance examination and approval of foreign investments, eliminating opportunities for lower and regional level bureaucracy to anticipate and address potential national security concerns.
Soon after the FIL was promulgated, the inter-departmental review mechanism became more active, initiating reviews and intervening in some proposed investments.
The MSRFI effectively overhauled the existing interdepartmental mechanism.
In the new Five Year Plan, released in March 2021, the liberalisation of the general FDI regime was explicitly linked to the strengthening of other control mechanisms, declaring the need to “[b]uild a supervision and risk prevention and control system that matches China’s higher-level opening-up pattern,” including efforts to “improve the early warning system for industrial damage, enrich policy tools such as trade adjustment assistance and trade remedies, and properly respond to economic and trade frictions” and to “improve foreign investment national security review and anti-monopoly review, and the administration of the national technological security list, unreliable entity list and other systems.”

³Shangwubu Shishi Waiguo Touzizhe Binggou Jingnei Qiye Anquan Shencha Zhidu De Guiding (《商务部实施外国投资者并购境内企业安全审查制度的规定》) [Provisions of the Ministry of Commerce on the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors] (promulgated by the Ministry of Commerce, 25 August 2011, effective 1 September 2011), (Ch.).
⁴FIL, Art. 4 (Ch.).

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

The MSRFI provides that any “foreign investment” that “has or possibly has” an “impact on national security shall be subject to security review, regardless of the origin of FDI.
According to Article 2 of the National Security Law of the People’s Republic of China, national security is defined as a relative status of the nation not being endangered and not being threatened internally and externally with regard to government, sovereignty, unity and territorial integrity, people’s welfare, sustainable development of economy and society, and other major national interest as well as the capability to secure the status of sustained security.
In practice, Chinese authorities may construe national security extremely broadly.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The MSRFI broadly defines “foreign investment” to include “any investment activity carried out directly or indirectly by a foreign investor within the territory of the PRC” in which a foreign investor “(i) solely or jointly with any other investor, invests in the construction of a new project or the establishment of an enterprise in China;” (ii) “by means of merger and acquisition, acquires the equity or assets of any enterprise in China;” or (iii) “makes an investment in China by other means.”
This language broadens the scope of national security review to encompass minority investments and greenfield projects, and in theory, also the offshore transactions between foreign parties resulting in a change in the ultimate foreign control of existing foreign investment in China.

8. Scope - sectors covered

The MSRFI establishes two categories of transactions subject to mandatory review:

defence-related investments; and
control investments in “important” sectors, which include:
1. important agricultural product;
2. important energy and resources;
3. major equipment manufacturing;
4. important infrastructure;
5. important transportation services;
6. important cultural products and services;
7. important information technologies and internet products and services;
8. important financial services, key technologies and other important fields that concern national security.

These categories may be construed to encompass a wide range of products, services, and sectors.

For any foreign investment in these categories, the MSRFI provide that “a foreign investor or a party concerned in China . . .shall take the initiative” to submit a declaration to the working mechanism office before making the investment.⁵

⁵MSRFI, Art. 4 (Ch.).

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

As mentioned above, two categories of transactions under the MSRFI are subject to mandatory review.
The MSRFI applies both to acquisitions of sole or joint control in the important sectors, and to non-controlling minority investments in defence-related sectors.
The MSRFI establish an ex-ante review mechanism. A transaction subject to mandatory notification must be reported before closing. Upon receiving the relevant notification materials, the working mechanism office which is led by the NDRC and MOFCOM will determine whether general national security shall be conducted. If the working mechanism office does not initiate a general review, then the transaction parties may proceed with the transaction. If a security review is initiated, then the transaction must be suspended until the security review is completed.

10. Design – reciprocity?

N/A

11. Design – Procedures and Deadlines

The MSRFI establishes a review process consisting of successive preliminary, general, and special review phases.

Preliminary Review: Within 15 working days of receipt of a complete declaration package, the working mechanism office shall make a threshold determination of whether or not to initiate a general security review of the declared investment, and shall notify the parties of its decision in writing. If the working mechanism office does not initiate a general review, then the parties may proceed with the transaction. If a security review is initiated, then the parties must suspend the investment, and may not proceed with the transaction until the review is completed.⁶

General Review: General reviews are to be completed within 30 business days of initiation. If the working mechanism office determines that the reported investment will not impact national security, it shall approve the transaction and notify the parties in writing. If the working mechanism office determines that the reported transaction impacts or may impact national security, it shall initiate a special review and notify the parties in writing.⁷

Special Review: Special reviews are to be completed within 60 working days of initiation, except in “exceptional” circumstances (not defined by the MSRFI). If the working mechanism office determines that the reported investment will not impact national security, it shall approve the proposed investment and notify the parties in writing. If the working mechanism office determines that the reported transaction will or may impact national security, then it may either prohibit the investment or conditionally approve the transaction subject to the parties’ agreement to remedial commitments.⁸

It is worth noticing that the review deadlines are tolled while information requests are outstanding. Changes in investment plans will lead to the rest of the review deadlines.

⁶MSRFI, Art. 7 (Ch.).
⁷MSRFI, Art. 8 (Ch.).
⁸MSRFI, Art. 9 (Ch.).

12. Design – Transparency and Information requirements (Filing Forms?)

Declarations may be submitted by a foreign investor or its counterpart in China.⁹ Declarations must include basic information regarding the proposed investment, and a statement on whether the investment may affect national security.¹⁰ The working mechanism office may also require submission of other materials. The MSRFI allow parties to consult with the working mechanism office regarding the applicability of national security review or filing requirements.¹¹

⁹Id.
¹⁰MSRFI, Art. 6 (Ch.).
¹¹MSRFI, Art. 5 (Ch.)

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

The working mechanism office may unconditionally clear a transaction, prohibit a transaction, or conditionally approve a transaction subject to remedial commitments.

The MSRFI does not define the potential remedies that might be imposed to address national security concerns. The relevant provisions would appear to allow commitments to divest (or carve out) certain assets or business lines, to adopt specific commercial or security policies, to cooperate with government supervision of certain functions, or other remedies common to other countries’ foreign investment review regimes. The parties’ compliance with the remedial commitments may be verified through periodic reporting requirements, on-site verification, or other means.

14. Interaction with other legal frameworks (ex: merger control)

Other government authorities, enterprises, social organizations, or members of the general public may report to the working mechanism office any foreign investment that might impact national security. They may also “make a suggestion” to the working mechanism office for a national security review. In addition, the working mechanism office may be made aware of a transaction that is subject to other regulatory approvals, such as a merger review by the State Administration for Market Regulation or securities registration with the Securities and Exchange Commission.

Offshore transactions may come to the authorities’ attention through antitrust reviews by SAMR or by routine corporate compliance filings disclosing changes in the ultimate controlling shareholders of Chinese entities.

A transaction may be blocked or subject to remedial commitments if it affects Chinese national security, which may be broadly defined.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

The FIL specifies that the national security decision made by the relevant authority is final, and therefore not subject to judicial review.

17. Publication in Official Gazette or other

The security review process and the outcome thereof under the MSRFI are usually confidential.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

N/A

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

N/A

21. Other relevant information

N/A

Contacts: Nathan Bush and Leah Li

Last updated June 2023

1. Country: Japan

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

According to the statistics provided by the Japan External Trade Organization (JETRO) (JETRO Invest Japan Report 2022), the five biggest FDI countries of origin were:

US (approx. 22.8%)
UK (approx. 14.0%)
Netherlands (approx. 9.7)
Singapore (approx. 9.2%)
France (approx. 7.8%)

3. Legal Framework in Force

In Japan, the Foreign Exchange and Foreign Trade Act (FEFTA) regulates FDI. The FEFTA applies to FDI conducted by foreign investors in the form of, among others:

the acquisition of 1% or more of shares of listed companies;
the acquisition of shares of unlisted companies;
the transfer of shares from a non-resident individual to a foreign investor (where a non-resident acquired such shares while a resident);
a substantial change in the business purpose of a domestic company (if the company is a listed company);
the establishment of a branch, factory or other business office (excluding a representative office) in Japan, or substantially changing the type or business objectives of such a branch, factory or other business office, excluding those with the business objectives of:
- banking;
- foreign insurance;
- gas;
- electricity;
- certain types of securities;
- investment management;
- foreign trust; and
- fund transfer
loans over one year to Japanese corporations exceeding a certain threshold; and
a business succession caused by a business transfer, an absorption-type split or mergers by resident companies (excluding the cases of (1) and (2)).

In general, the only requirement for foreign investors making investments in Japan is to submit an ex post facto report to the Minister of Finance and the relevant ministries through the Bank of Japan.

The purpose of imposing a reporting requirement is to make a statistical record resulting in no ex post facto review or investigation conducted by the government. However, the FEFTA requires prior notification for certain limited investments involving particular areas of businesses and particular geographic areas or countries. Please refer to point 6 below for the details of the prior notification.

4. Last revision of the Legal Framework

The latest revision of the FEFTA was made on 29 December 2022.

5. Contextualization of the Legal Framework (Historical or other)

The FEFTA was enacted in 1949. The original FEFTA reflected the environment surrounding Japan’s economy at the time, and therefore foreign transactions were basically prohibited under the original FEFTA.

In 1980, the FEFTA was amended, and foreign transactions became available as a rule. In 1998, the FEFTA was further amended, and the prior-permission system and prior-notification system were basically abolished for the purpose of making both domestic and foreign transactions move freely and quickly. Through these amendments, FDI into Japan by foreign investors was free from legal barriers in principle, and remained this way for more than a decade since.

In 2017, a system was established with the power to force foreign investors who have made FDI regarding security-related investments without notification to sell shares, etc., by government orders. In addition, under the amended FEFTA, foreign investors are able to acquire unlisted shares from other foreign investors subject to a regulation of notification with prior screening. Through these amendments, the FEFTA has more strict restrictions toward FDI in favor of national security.

In 2020, the FEFTA was once again amended to further tighten the regulations on “inward direct investment” by a foreign investor (2020 Amendments), aiming to ensure that Japan's foreign investment regime cannot be exploited by foreign investors that may endanger national security. Under the 2020 amendments, the definition of “inward direct investment“ was further expanded by reducing the prior notification requirement threshold concerning the acquisition of shares or voting rights of listed companies in Japan from 10% of all outstanding shares or voting rights to 1%.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

The Japanese government has placed relatively few restrictions on FDI. As mentioned above in point 3, the FEFTA requires prior filing for certain limited investments involving particular areas of business or particular geographic areas or countries only. The business-related restrictions are imposed on, among others, investments on business related to:

national security (e.g., weapons, airplanes, nuclear power or space development);
public infrastructure (e.g., electricity, gas, water, telecommunications or railways);
public safety (e.g., vaccine manufacturing or private security services); and
domestic industry protection (e.g., agriculture).

The geographic area-related restrictions are imposed on, among others, investments concerning countries with which Japan has not executed a treaty on FDI (e.g., Iran) and certain activities involving those governments, entities, individuals or groups.

If the investment falls into any of the above mentioned sensitive categories (Exceptional Category), the investor who intends to make such an investment is required to submit a prior notification of the intended investment to the Ministry of Finance and relevant ministries through the Bank of Japan within six months from the expected date of FDI. Note that if the investor is not a resident of Japan, such prior notification shall be submitted by an agent who is a resident of Japan. The Ministry of Finance and relevant ministries will then review the report within 30 days from filing in principle. After reviewing, the relevant ministries may order a suspension or amendment of the filed FDI if they find the investment is likely to:

impair national security;
impede public order;
hamper the protection of public safety; or
have a significant adverse effect on the smooth management of the Japanese economy.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

Under the FEFTA, as stated previously, acquisitions of minority interests, except for acquisitions of less than 1% of the shares of listed companies, are generally regulated by the FEFTA. Please note, however, certain exemptions exist for filing requirements triggered by the 1 % or more acquisition rule.

8. Scope - sectors covered

Please refer to point 6 above.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

When foreign investors invest in Japan, they are required to submit an ex post facto report in general. In addition, as aforementioned, if such an investor falls under the Exceptional Category, the investor shall make a prior notification.

These ex post facto reports and prior notifications are mandatory for every investment that falls within the scope of the regulation. Both individuals and legal entities may be subjected to a wide range of sanctions (both are subject to fines, and individuals may also face imprisonment) for failing to file the ex post facto report and the prior notification.

10. Design – reciprocity?

N/A

11. Design – Procedures and Deadlines

Under the FEFTA, if an investment falls into an Exceptional Category that requires the filing of prior notifications, the investor who intends to make such an investment is required to submit a prior notification of the intended investment to relevant ministries.

After filing the prior notification, the investor may not make an investment for a period of 30 days from the date that the Ministry of Finance and relevant ministries accept the application (i.e., waiting period). However, this waiting period is normally shortened to two weeks in accordance with the relevant ordinance. According to the Ministry of Finance, more than 95% of all applications have been so shortened.

Moreover, with an aim to facilitate more FDI in Japan, the Ministry of Finance and other relevant ministries have implemented expedited fast-track options for Greenfield investment (i.e., certain investments involving a wholly-owned Japanese subsidiary), rollover investments (i.e., the same type of investment by the same investor which has been filed within the previous six months by the same investor) and passive investments (i.e., the investor does not proactively participate in the management or take control of the company). If the fast-track option applies, the waiting period will be further reduced to five business days.

Once the investor submits the report, relevant ministries will then review the filed report within 30 days from filing in principle, subject to the abovementioned exceptions. After reviewing, the Minister of Finance and relevant ministries may recommend a suspension or amendment of the filed investment if they find the investment is likely to:

impair national security;
impede public order;
hamper the protection of public safety; or
have a significant adverse effect on the smooth management of the Japanese economy.

When the Minister of Finance and relevant ministries recommend suspension or amendment of the filed investment, the investor has to answer whether it will (i) comply with the recommendation or (ii) refuse the recommendation. If the investor does not answer the recommendation or refuses the recommendation, the Minister of Finance and the relevant ministries may order a suspension or amendment of the filed investment.

However, if the authority finds that there needs to be a review procedure on whether the investment is likely to impair national security, impede public order or compromise public safety, the waiting period can be extended to up to five months.

Note that it is extremely rare for ministries to issue such an order. In fact, there has been only one case where the ministries have actually issued an order for the suspension of investments under the current FEFTA.

If the FDI does not fall under an Exceptional Category that is required to file prior notifications, the investor who intends to make such an investment is generally required to submit an ex post facto report to the Minister of Finance and relevant ministries through the Bank of Japan by the 15th day of the following month in which the investor conducts the FDI.

12. Design – Transparency and Information requirements (Filing Forms?)

When an investor is required to file prior notification, the investor needs to prepare the notification by using the prescribed notification forms. Such forms are available on government websites.¹

There are several types of forms. The forms vary in accordance with the types of FDI the investor will conduct. The investor shall file such notification to the Minister of Finance and the competent minister through the Bank of Japan.

When an investor is required to submit an ex post facto report, the investor needs to prepare the report by also using the prescribed report forms²and submit such report to the Minister of Finance and the competent minister through the Bank of Japan.

¹The forms of the notifications are available here. (Japanese)
²The forms of the reports are available on the same websites as the notifications in footnote 1.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

When the Minister of Finance and the competent minister for the business find, through examination, the filed FDI falls under the FDI pertaining to national security, etc., they may recommend an investor who has given notification of the FDI, etc. to amend the content of the FDI or discontinue the FDI after hearing opinions of the Council on Customs, Tariff, Foreign Exchange and other Transactions.
When an investor who has received a recommendation, fails to give a reply notice pursuant to the provisions of the paragraph or has given a notice of refusal of the recommendation, the Minister of Finance and the competent minister for the business may order the investor to amend the content pertaining FDI, or to discontinue the FDI.

Also please refer to point 11.

14. Interaction with other legal frameworks (ex: merger control)

As mentioned in point 3 above, the followings are subject to the regulation of the FEFTA:

the acquisition of 1% or more shares in listed companies; and
the acquisition of shares of unlisted companies from a domestic investor.

Please refer to point 6 above for the grounds for blocking.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

A negative decision can be appealed. A party can appeal to the relevant ministry challenging the orders rendered by the authority to sustain or amend the content of the investment.

The ministry receiving a motion of appeal is required to hold a public hearing after giving a reasonably lengthy advance notice.

The party who is dissatisfied with the decision by the relevant ministry in the appeal procedure may opt to bring an action to court.

17. Publication in Official Gazette or other

N/A

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

As stipulated above, the relevant ministries may order a suspension or amendment of the filed FDI in certain situations. Before issuing an order to suspend or amend the content of an investment, the relevant ministers are required to hear opinions from the Council on Customs, Tariff, Foreign Exchange and other Transactions.

The Council shall be comprised of academic experts nominated by the Minister of Finance. Competitors or customers may not be involved in the review process. Note that there are no procedures allowing complainants to participate.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

Whether future legislation will take place to adapt with the new EU regulation is not certain.

21. Other relevant information

N/A

Contact: Tony Andriotis

Last updated June 2023

1. Country: New Zealand (NZ)

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

On the basis of the most currently publicly available information:

Australia (50.4%)
Hong Kong, Special Administrative Region of China (8.49%)
United States of America (6.55%)
Japan (4.97%)
United Kingdom (4.72%)

3. Legal Framework in Force

The regime is comprised of the Overseas Investment Act 2005 (Act) and associated regulations. Under the Act, overseas persons are required to obtain consent before investing in certain assets in NZ. The Act provides broad discretion for the relevant Ministers or the Overseas Investment Office (OIO) (where delegated by the relevant Minister) to grant consent, grant consent with conditions, or refuse an application entirely. Consent is required for acquisitions of significant business assets and sensitive land. A national interest assessment is applied to consent applications for investments by non-NZ governments and acquisitions of strategically important businesses. There is also a 'call-in' regime for investments in strategically important businesses that do not otherwise require consent.

4. Last revision of the Legal Framework

The regime has been subject to a comprehensive overhaul over the last few years which is aimed at strengthening the regime for high-risk investments, while streamlining the process for low risk investors. In 2020 the Act was amended to introduce the national interest test, which covers investments by non-NZ government investors and investments in 'strategically important businesses' such as utilities and media companies. In 2021, the process was streamlined for overseas persons who wish to acquire sensitive land by requiring the investor to do a status quo 'before and after' analysis of the benefits likely to arise from the acquisition as opposed to a counterfactual ‘before and after’ analysis of the benefits and the thresholds for acquiring farm land have been strengthened. In 2022, there was reform to tighten the rules in relation to the conversion of farmland to production forestry.

5. Contextualization of the Legal Framework (Historical or other)

National security measures were triggered by the COVID-19 pandemic which came into effect in June 2020. The effect of these measures was to require all overseas investments in significant business assets and sensitive land where a more than 25% interest was being acquired regardless of the value. From 7 June 2021 these measures were replaced by a permanent national security and a public order 'call-in' regime applies to investments in strategically important businesses that would not otherwise require consent.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

Consent must be obtained where the proposed investment exceeds the thresholds set out in the Act for significant business assets or sensitive land (see below). Where a transaction that requires consent triggers the national interest test, the relevant Ministers must decide whether the investment is contrary to NZ's national interest, in which case they can either impose conditions on the consent to manage any risks associated with the investment or decline consent. For transactions that do not require consent but are subject to notification under the call-in regime, the Minister must issue a direction order either permitting the transaction, permitting the transaction with conditions or prohibiting the transaction. Any transaction that is subject to the call-in regime that is not notified can still be called in by the Ministers if the Ministers consider that the transaction could be contrary to NZ’s national interest, even if it has already been given effect to.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

Consent is required for the acquisition of a more than 25% ownership or control interest in a company (or an increase in an existing more than 25% interest) where the consideration paid, or the assets of the company, exceeds NZ$100 million. Higher value thresholds apply to some countries that have trade agreements with NZ. Consent is also required to purchase or lease (for a term of 10 years or more) sensitive land that is residential land or non urban land including farmland greater than five hectares, land adjoining the sea, a lake or various types of reserves, and land containing or adjoining conservation/heritage land, or to acquire a more than 25% ownership or control interest (or increase an existing more than 25% interest) in an entity that owns or controls an interest in sensitive land. The Act restricts the ability for an overseas person to acquire an interest in a fishing quota or to invest in a business that, directly or indirectly, owns or controls a fishing quota without consent.

8. Scope - sectors covered

The focus is on investments in "sensitive land", and those that exceed a certain monetary thresholds. A national interest test applies to non-NZ government investors and strategically important businesses such as utilities and media businesses. Special consent pathways apply for development of new housing and existing forestry. As above, the investment pathway relating to overseas investment in forestry particularly in respect of the conversion of farm land to production forestry has been tightened in 2022 and it is now more difficult to obtain consent to convert farm land to production forestry as applicants are required to apply for consent under the benefits to NZ test rather than the special forestry pathway.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

If a transaction requires consent under the Act, an application for consent must be submitted to the OIO for approval by it or the relevant Ministers before the transaction is given effect. Any such transaction must therefore be conditional upon OIO consent being obtained. The national interest test will be applied to any transactions that trigger it during the course of the consent application. Transactions that do not otherwise require consent may be subject to notification under the 'call-in' regime. Notification is mandatory where a business involves military or dual-use technology or a 'critical direct supplier'. Otherwise, notification is voluntary but transactions may still be called-in by the relevant Ministers and thereby risk being blocked even if they have already been given effect to. We also note that where an investor wishes to acquire farmland in New Zealand, they cannot enter into a sale agreement to purchase the farmland until the land has been publicly advertised to New Zealanders in accordance with specific requirements under the Act.

10. Design – reciprocity?

Higher thresholds apply for certain countries with which New Zealand holds free trade agreements such as Korea, Japan, China, Hong Kong, Australia, Singapore and other countries that are party to the CPTPP. Investors from Australia and Singapore are also generally exempted from the requirement to obtain consent to acquire residential land that is not otherwise sensitive.

11. Design – Procedures and Deadlines

There are statutory timeframes which vary in time depending on the consent pathway. Generally, these timeframes range from approximately 10 working days to 200 working days. However, we note that there are no ramifications for the OIO if these timeframes are not met and so they serve as a guideline only and are often exceeded.

12. Design – Transparency and Information requirements (Filing Forms?)

Applications must be made using the OIO's online forms. The OIO will consult on aspects of an application with relevant Government departments and agencies such as the Department of Conservation and Heritage New Zealand. All applications are subject to disclosure under the Official Information Act 1982, although applicants can request confidentiality under certain grounds.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Where consent is required, this must be obtained in advance of giving effect to any transaction and the transaction must be conditional on obtaining consent. Consent can be given subject to conditions with which the overseas person must comply. Non-compliance can result in consent being withdrawn and divestment of any acquired property. Where a transaction is subject to the call-in regime, the Ministers must give a direction order either approving the transaction which may be subject to conditions to manage any risks associated with the transaction or blocking the transaction if it is contrary to national security or public order. Transactions to which the notification regime applies that are given effect to without being notified may still be called-in by the Ministers where the Ministers consider that the transaction could be contrary to NZ’s national interest with the attendant risk of being unwound.

14. Interaction with other legal frameworks (ex: merger control)

For transactions involving sensitive land the OIO will consult with other relevant government agencies such as the Department of Conservation, Heritage New Zealand and the Walking Access Commission. Where competition issues arise, the OIO may consult with the Commerce Commission which regulates restrictive trade practices and merger control. For transactions involving strategically important businesses, consultation is undertaken with a range of government agencies including the relevant regulatory agency such as the Telecommunications Commission and the Electricity Commission.

Consent will only be granted where the transaction meets the thresholds set out in the Act. For sensitive land this is generally whether the proposed investment would result in a substantial and identifiable benefit to New Zealand. Consent will not be granted for transactions that are contrary to the national interest. Transactions that are subject to the call-in regime may be blocked if they are contrary to national security or public order. The OIO and relevant Ministers have a wide discretion to make such decisions. All applications for consent must satisfy the investor test. The investor test encompasses 12 factors which focus on serious and proven matters going to the character and capability of the relevant overseas person(s) and individual(s) with control. To the extent that any of the factors apply, the investor will need to set out in their application why the factor does not make the investor unsuitable to own and control the asset.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

Decisions of the Ministers and the OIO may be challenged through the judicial review process in the New Zealand High Court. Applications for judicial review are time-consuming and expensive, and will only consider the fairness of the decision-making process rather than the merits of the decision.

17. Publication in Official Gazette or other

The OIO publicly releases summaries of consent decisions whether granted or declined. Summaries of direction orders are only released where the transaction is approved, with or without conditions. Requests can be made for access to information about applications under the Official Information Act 1982, which has a number of grounds for withholding information such as commercial sensitivity.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

Decision summaries are published on the OIO's website: www.oio.govt.nz

19. Stakeholders views on the Legal Framework

N/A

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

N/A

21. Other relevant information

N/A

Contacts: Martin Thomson, Pavanie Edirisuriya

Last updated June 2023

1. Country: Thailand

2. Indicate five biggest FDI countries of origin (indicate percentage if available)

For 2021¹, the top five countries that invested in Thailand (by amount of capital) are as follows:

Hong Kong (52%)
Japan (28%)
Singapore (8%)
South Korea (2%)
The People's Republic of China (1%)

¹Report available here.

3. Legal Framework in Force

The Foreign Business Act B.E. 2542 (1999), as amended (the FBA), is the key legislation prescribing legal requirements respecting foreign direct investment in Thailand. The FBA restricts Foreigners² from operating certain business activities unless granted a foreign business license (FBL) or foreign business certificate (FBC).

There are three lists attached to the FBA, which elaborate types of restricted activities categorised by level of prohibition. List 1 indicates strictly prohibited business activities that the Foreigner is not permitted to conduct or apply for the FBL or the FBC. List 2 indicates types of businesses related to national safety or security, or having impacts on arts, culture, traditions, customs and folklore handicrafts or natural resources and environment. List 3 includes business activities in which Thai nationals are not ready to compete with Foreigners. Unless exempted by relevant regulations, the operation of business activities under List 2 and List 3 by Foreigners requires an FBL or FBC to legally operate the business in Thailand.

Thai Land Code and regulations issued by the Ministry of the Interior generally govern an ownership, possession and usage of land in Thailand. Foreigners defined under the Land Code are prohibited from owning land unless exempted by relevant regulations, such as being granted with the Board of Investment promotion certificate (BOI Certificate) or operating business within the Industrial Estate Authority of Thailand, etc.

In addition to the FBA and Thai Land Code, legal limitation or restriction on foreign direct investment (which may include nationality of directors or the control over management of such business) may also be prescribed in specific legislation, such as laws governing insurance, financial institutions and credit bureau businesses, etc.

²A foreigner is defined in the FBA as:

1) a natural person who does not have Thai nationality;
2) a juristic person that is not registered in Thailand;
3) a juristic person that is registered in Thailand and possesses the following characteristics:
a) a juristic person with 50% or more of its capital held or invested by persons under 1) or 2), or
b) a limited partnership or a registered ordinary partnership whose managing partner or manager is a person under 1); or
4) a juristic person registered in Thailand with 50% or more of its capital held or invested by persons under 1), 2) or 3).

4. Last revision of the Legal Framework

Latest amendments to the FBA and Thai Land Code:

the Lists attached to the FBA were made in 2013
the Thai Land Code was made in 2019

5. Contextualization of the Legal Framework (Historical or other)

The relevant ministerial regulations and subordinated laws under the FBA and Thai Land Code were updated periodically. For example, the ministerial regulations prescribing, (i) minimum capital requirements to be brought into Thailand, and (ii) the service business being exempted from approval, were updated in 2019.

6. Scope - Screening Mechanism – origin of FDI

(review of intra- or extra-EU FDI)

Are there any loopholes?

Under the FBA, if the Foreigner, (i) is qualified under treaties or international trade agreements to which Thailand is a party, or (ii) receives a BOI Certificate, it shall apply for an FBC as opposed to an FBL. In brief, there are 5 treaties and international trade agreements (to which Thailand is party) entitling certain qualified Foreigners to apply for an FBC: (i) AFAS, (ii) ACIA, (iii) JTEPA, (iv) TAFTA, and (v) U.S.-Thai Treaty of Amity.

7. Scope - screening thresholds

Please indicate notably whether it covers solely controlling investments or also portfolio investments.

The requirements and qualifications required to apply for an FBC using the route of treaties or international trade agreements are slightly different based on the relevant treaties or international trade agreements. Generally, the usual requirements and qualifications relate to shareholding ratio and nationality of shareholders and/or (authorised) directors. In certain cases, an application for an FBC will not be permitted where the business activities to be requested for approval fall under the reserved lists.

8. Scope - sectors covered

Please refer to questions 3 and 7 above.

9. Design of FDI Screening Mechanism

Please indicate notably the following:

(a) pre-authorisation vs. ex-post screening of FDI? Other?

(b) Covers solely controlling investments or also portfolio investments?

(c) Mandatory or voluntary nature?

If the Foreigner is subject to notifications or approval requirements under the FBA, the Foreigner must notify or obtain the relevant approvals (e.g., FBL or FBC and BOI Certificate) in order to legally operate the restricted business in Thailand. Failure to comply with legal requirements under the FBA may result in criminal penalties.

10. Design – reciprocity?

Please refer to question 6 above.

11. Design – Procedures and Deadlines

To apply for an FBL, an applicant must submit the application form and required supporting documents to the Foreign Business Division of the Ministry of Commerce of Thailand (MOC). Once all documents and information are satisfactory as per the officer's sole discretion, the applicant shall pay the application fee of THB 2,000. Within 60 days of the application fee payment, the MOC will notified to the applicant of the result. Please note that the timeframe could be prolonged due to many factors, such as a request for additional documents or internal consideration and process, etc.

For an FBC, the procedures and timelines could be different according to the applicable option (e.g., treaties, international trade agreements or BOI Certificate). In general, if the applicant applies for an FBC under the treaties or international trade agreements, one of the key documents required is a letter certifying the nationality of the applicant issued by the relevant embassy.

12. Design – Transparency and Information requirements (Filing Forms?)

Please refer to question 11 above.

13. Design – Range of decisional outcomes (such as blocking, unwinding, notably), so as to distinguish between the purely screening from the mechanisms aimed at interfering with FDI.

Under the FBA, the competent authority may decide to grant the FBL or FBC, reject the application, or extend the timeframe for consideration of the application. If the application is rejected, the applicant is entitled to appeal the order according to the requirements under the FBA.

In case of non-compliance with legal requirements under the FBA, the competent authority may order the applicant to rectify such non-compliance according to a specified timeframe. Failure to rectify non-compliance may lead to, (i) temporary suspension of the FBL or FBC or of the business operation, or (ii) revocation of the FBL or FBC.

14. Interaction with other legal frameworks (ex: merger control)

The main competition legislation in Thailand is the Trade Competition Act B.E. 2560 (2017), as amended (the TCA), supervised by the Trade Competition Commission of Thailand. There are also specific laws and regulations, which govern competition matters in particular industries, such as the Energy Business Act B.E. 2550 (2007) (as amended), the Broadcasting and Television Business Act B.E. 2551 (2008) (as amended) and the Telecommunication Business Act B.E. 2544 (2001) (as amended). In such cases, the TCA will apply to the business sectors, where the laws concerning anti-trust are already in place.

According to the TCA, the consolidation of business is subject to pre-merger approval or post-merger notification.
If a transaction meets the prescribed thresholds (e.g., market share, turnover, etc.), it will be subject to the requirement of pre-merger approval or post-merger notification, as applicable.

According to the Thai Civil and Commercial Code, as amended (the CCC), which is the primary and general legislation respecting individuals and private entities. The CCC incorporates the concept of public order or good morals of Thai people, which is used as a test for determining whether an action is void. Simply put, if an action is considered expressly prohibited by law or impossible, or contrary to law concerning public order or good morals, such action will be void and have no legal effect.

16. Judicial Review

Please specify timeline, competent courts and standard of judicial review.

Under the FBA, if there is an offence and the matter is brought to litigation, the Thai court would determine the case and issue an order according to the relevant offence. For example, where there is a use of nominee arrangement, the court is empowered to order a cessation of such business operations or termination of shareholding status, etc.

Thai court systems can be divided into four main systems: (i) Courts of Justice; (ii) Constitutional Court; (iii) Administrative Court; and (iv) Military Court. The Courts of Justice are the most common courts and deal with extensive types of matters including those pertaining to carrying out business in Thailand. The Courts of Justice has a three-tier court system, in order of seniority, (i) the Court of First Instance, (ii) the Court of Appeal (including a Court of Appeal for Specialized Cases), and (iii) the Supreme Court.

17. Publication in Official Gazette or other

Generally, a bill or draft legislation is enacted when it is published in the Royal Thai Government Gazette.

18. Relevant Examples of application

If applicable and publicly available, please indicate the number of vetoes in the overall number of reviews and also the number of successful appeals for the last 5 years.

N/A

19. Stakeholders views on the Legal Framework

There has been a view that the restricted business activities under the FBA should be removed in order to promote foreign direct investment in Thailand which would ultimately be advantageous for Thailand in terms of economic growth, employment and transfer of technology. The MOC has periodically considered this concern, which led to the amendment to the lists attached to the FBA in 2013.

20. Interplay with the future EU Regulation

Please indicate notably whether the existing national legislation will have to be amended so as to comply with the EU one.

N/A

21. Other relevant information

N/A

Contacts: Samata Masagee, Mrs. Kanokkorn Viriyasutum and Miss Sudthapa Thanathanya

Last updated June 2023