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Ukraine’s reconstruction efforts present myriad opportunities for foreign businesses particularly in the energy, construction and tech sectors. At the same time, it is imperative for foreign businesses to approach these opportunities with a well-informed strategy. Understanding and navigating the complex regulatory and legal risks is key to maximizing opportunities and maximizing contributions to the reconstruction process.

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On August 9, 2023, President Biden issued an Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern. The new Executive Order (EO) is the culmination of more than a year of deliberation by the Biden Administration regarding outbound investment provisions and kicks off a 45-day comment process to develop a new regulatory mechanism for reviewing outbound investments in foreign countries of concern. This regulatory process and the criteria under consideration are described in the Department of the Treasury’s Advance Notice of Proposed Rulemaking (ANPRM), the key aspects of which are summarized below.

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The new EU Foreign Subsidies Regulation (FSR) has now finally taken effect. Under the FSR the European Commission (EC) will have new powers to intervene against distortions to competition in the EU internal market caused by companies active in the EU that benefit from foreign financial contributions (FFC) and conduct investigations into potentially distorting FFCs. The FSR also introduces a new notification regime for certain M&A transactions and public tenders to mitigate against the risk of distortive subsidies granted by third countries.

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After more than a year of deliberations, the U.S. government appears close to implementing an outbound investment review mechanism that would regulate certain U.S.-origin investments in countries of concern, notably China. These efforts are part of a wider effort by the U.S. government to restrict access to certain sectors of the Chinese market in the name of national security. In “All Eyes on China: Upcoming Restrictions on Outbound Investment,” colleagues Nancy Fischer, Matthew Rabinowitz, Zachary Rozen, Samantha Franks, Ata Akiner, Laura Killalea, Amaris Trozzo and Jack Ko examine these potential restrictions and the pending legislation by which they would likely be informed.

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Overview of the Proposed “Reverse CFIUS” Process via the National Critical Capabilities Defense Act of 2022

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The EU’s new Joint Communication on a European Economic Security Strategy proposes a methodology for an EU economic security risk assessment and identifies measures to mitigate these risks. The Strategy is noteworthy because it offers a comprehensive view of the EU’s overarching strategy for multiple existing or proposed new EU legislative and policy tools including export controls, FDI screening and domestic investment in critical technology through the EU’s own proposed Chips Act, and how these tools would work together to reduce EU economic security risks. It also signals the EU’s intention to align more closely with the U.S. regarding China, including with respect to reducing supply chain dependencies and new tools like outbound investment controls.

(This is the second post of a three-part series on U.S., UK and EU alignment on economic security strategy.)

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On June 8, 2023, the United States and the United Kingdom announced the Atlantic Declaration for a Twenty-First Century U.S.-UK Economic Partnership (“Declaration”). The Declaration reaffirms the need to adapt and reimagine the unique alliance between the two countries. From critical and emerging technologies to digital transformation, clean energy, and defense collaboration, businesses can leverage the partnership to exploit new trans-Atlantic opportunities.

(This is the first post of a three-part series on U.S., UK and EU alignment on economic security strategy.)

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The EU Foreign Subsidies Regulation (FSR) entered into force on January 12, 2023 and will start to apply from July 12, 2023. Under the FSR, the European Commission will have powers to intervene against distortions to competition in the EU internal market caused by companies active in the EU that benefit from foreign subsidies. A new notification regime will be introduced for certain M&A transactions and public tenders that is independent from current EU/national merger control and foreign direct investment notification requirements, and the Commission will have powers to conduct investigations into potentially distorting foreign subsidies.

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The European Union has adopted the new EU Deforestation Regulation, whereby applicable companies must implement a rigorous due diligence process to ensure that certain products and commodities sold in or out of the EU are not the result of, or have led to, deforestation or forest degradation. The commodities subject to the Regulation are cattle, cocoa, coffee, palm-oil, soya and wood, as well as any products that contain, have been fed with or made using these commodities (e.g., leather, chocolate and beef). Once it enters into force, large companies will have 18 months to comply, while small and medium-sized companies will have 24 months. Failure to do so may result in a fine of at least 4% of total annual EU-wide turnover or the seizing revenue made from the sale of the commodities or products.

Companies should review whether (and how) they are caught by the new law and review existing processes, governance frameworks and supply chain risks to ensure that new obligations (e.g., with respect to due diligence) are adhered to.

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In a recent enforcement action against GM, the Department of Justice (DOJ) Civil Rights Division emphasized that employers subject to export control obligations must still comply with federal laws against discrimination on the basis of immigration status, national origin or citizenship. Guidance accompanying the enforcement action indicates that the DOJ has expectations of companies in their hiring processes that may create challenges for efforts to comply with export control regulations that protect sensitive goods, software and technology.

In “Where Employment and Trade Compliance Intersect—Protecting Your Company in a World of Dueling Enforcement Risks for Export Controls and Anti-Discrimination,” colleagues Aaron R. Hutman, Julia E. Judish and Toochi L. Ngwangwa explore this recent action, the new guidance and the competing compliance obligations that companies will need to navigate as a result.

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In response to recent concerns regarding national security, law enforcement and foreign ownership of telecommunications services, the FCC has released an Order and Notice of Proposed Rulemaking (NPRM) relating to international Section 214 authorizations. (International Section 214 authorizations are issued to telecommunications providers that seek to offer international services originating or terminating in the United States.) In “FCC Adopts International Section 214 Authorization Order and NPRM to Address National Security Concerns Posed by Foreign Ownership,” colleagues Glenn S. Richards, Adam J. Sandler and Lee G. Petro examine the order and NPRM more closely.