General concept and objectives
National Security Review is a process of assessing foreign investments by government authorities for potential threats to national security. In the modern world, many developed countries have significantly strengthened control over foreign capital investments, with particular attention to investments from Russia and China.
The main objective of such reviews is to ensure protection of strategic economic sectors and critical infrastructure from undesirable foreign influence. These mechanisms are designed to prevent acquisition of important assets by foreigners in cases where this may create national security risks.
Key aspects of the review process
- identification of UBOs and funding sources, including verification of links to sanctioned persons
- assessment of potential access to critical technologies, intellectual property and data (including establishing the location of data processing and persons having access to it — especially programmers);
- analysis of the possibility of using acquired assets for military or intelligence purposes
- verification of the transaction's impact on market concentration and economic security of the country
- assessment of foreign state involvement in management of the investor company
Historically, these mechanisms were significantly strengthened after 2014 due to geopolitical changes, and then received additional development after 2022. The result of a review may be full approval of the transaction, partial approval with certain conditions, blocking, or forced divestment of already acquired assets.
USA: Committee on Foreign Investment (CFIUS)
In the USA, the key body for reviewing foreign investments is the Committee on Foreign Investment (CFIUS), which blocks transactions potentially threatening national security. CFIUS has broad powers to review and potentially block transactions, especially in the technology sector.
Types of transactions subject to review
- acquisition of control in US business by a foreign person
- investments in critical infrastructure
- investments in companies working with sensitive personal data
- acquisition of real estate near military facilities and sensitive infrastructure
- investments in critical technologies
Mandatory notification is required in cases of
"Countries of special concern" in the CFIUS context include states whose investments are subject to heightened scrutiny. Officially, these include Russia, China, and other countries against which sanctions have been imposed. Investments from these countries automatically fall under stricter control and require mandatory notification in a larger number of cases.
Notification procedure
- Parties may file either a short-form declaration (5-page declaration) or a full notification (detailed description of the transaction)
- Review period for short-form declaration - 30 days
- Review period for full notification - 45 days with possible extension for 15 days
Practice shows that CFIUS can not only block transactions at the stage of their conclusion, but also require divestment of already acquired assets if they are subsequently deemed to threaten national security.
United Kingdom: National Security and Investment Act
In the United Kingdom, the key law for reviewing foreign investments is the National Security and Investment Act, adopted in 2021, which significantly expanded the British government's powers to review and block foreign investments.
Types of transactions subject to review
- acquisition of control in British companies by foreign investors
- investments in 17 key economic sectors (including defense, energy, AI, quantum technologies)
- acquisition of significant influence or control over assets in sensitive areas
Mandatory notification is required in cases of
- Acquisition of more than 25% of voting rights or shares in a company operating in one of the 17 specified sectors (including communications)
- Obtaining the ability to block or make management decisions in such a company (for example, when increasing the stake to 50% or 75%).
- Acquisition of substantial control or influence over assets related to critical infrastructure or other sensitive areas.
Transactions subject to mandatory notification cannot be completed without prior clearance: transactions completed without permission are considered legally void and may result in serious fines and criminal liability for participants.
The state also has the right to retrospectively initiate a transaction review within 6 months from the moment it became aware of the transaction, but no later than 5 years from the date of its completion.
Notification procedure
- Submission of notification through a special online portal
- Review period - 30 working days with possible extension for 45 days
Canada: Investment Review Division
Canada operates under the Investment Canada Act, which regulates the review of foreign investments. The key body is the Investment Review Division (IRD).
Types of transactions subject to review
- acquisition of control in Canadian business
- investments in critical sectors (technology, resources)
- transactions involving state-owned foreign investors
National security reviews may be initiated for any transactions within 45 days after notification.
European Union: Regulation 2019/452
The European Union operates a pan-European foreign investment control system established by Regulation (EU) 2019/452 and subsequent amendments.
Types of transactions subject to review
- acquisition of control in EU companies by foreign investors
- investments in critical sectors (semiconductors, AI, quantum technologies, etc.)
- direct and indirect acquisitions of control, including greenfield investments
Key elements of the system
- Two-tier structure: national control taking into account pan-European standards
- Coordination mechanism: information exchange between member states
- Veto power: final decision remains with national authorities
Review procedure
- Submission of notification through national or pan-European procedures
- Maximum review period - up to 75 days
- Possibility of appeal in national courts and through the European Commission
Switzerland: Investment Screening Act
Switzerland has traditionally maintained the principle of economic openness, but from 2025 is implementing a new law (Investment Screening Act) introducing mandatory control in sensitive sectors.
Types of transactions subject to review
- acquisition of control in Swiss companies, especially in critical sectors
- investments by state-owned foreign investors
Critical sectors
- Defense industry, dual-use goods
- Energy, water supply
- Healthcare, transport and telecommunications infrastructure
Review procedure
- Two-phase scheme: preliminary application to SECO, then official application
- Federal Council makes decisions on politically sensitive transactions
- Administrative fines up to 10% of transaction value (maximum up to 10 million Swiss francs)
- Possibility of declaring the transaction legally invalid
- Requirement for divestment (forced sale of acquired assets)
- In case of intentional violation - criminal liability for company executives
Risk minimization strategies
Various strategies are used to minimize risks of investment blocking:
Voluntary notification is rarely an optimal strategy, considering substantial costs for GR support and lobbying (from $50,000 to $100,000 minimum). This is advisable only in cases where the transaction is public and regulatory attention is obviously predictable.