FDI Regulators Bare Their Teeth – Scrutiny and Firm Intervention in Response to Russia’s War on Ukraine


Russia’s continued invasion of Ukraine is having a significant impact on foreign direct investment (“FDI”) screening. A series of governments have announced that they will apply scrutiny to investments from Russia and its allies in general, and not just to investors subject to sanctions or other restrictive measures. The European Commission (“Commission”) has issued guidance on the screening of investments from Russia and Belarus.

The German government has already intervened by appointing a trustee for a critical gas infrastructure operator. Canada released a policy statement targeting Russian investors and Italy permanently expanded its FDI regime. Our blog provides a summary of these developments below.

Commission communication calls for systematic assessment of Russian and Belarusian investments

On April 6, 2022, the Commission published a Communication (“Communication”) containing guidance on the screening of FDI from Russia and Belarus. The communication insists on greater vigilance with regard to Russian and Belarusian investments in the EU and underlines that the screening of FDI goes beyond investments by persons or entities subject to sanctions. While the Communication is a direct response to Russia’s military aggression against Ukraine, it also elaborates on more general principles for screening FDI in the EU.

The Commission calls on Member States to systematically assess and prevent threats related to Russian and Belarusian investments. In particular, the Commission encourages Member States to ensure close cooperation both at national and EU level with regard to FDI screening activities, as well as in the implementation of EU sanctions. . The EU FDI Regulation already provides for such cooperation and facilitates the exchange of information between Member States and the Commission. In particular, Member States can become aware of a transaction through the Cooperation Mechanism and assess FDI reporting requirements in their own jurisdiction. As discussed in our blog post regarding “One year of the EU FDI Regulation”Member States considered the cooperation mechanism to be “a very useful instrument” and that it had fostered useful discussions regarding the screening of transactions and critical sectors.

But a number of member states do not have FDI screening regimes in place, including Belgium, Estonia, Greece, Ireland, Luxembourg, the Netherlands, Portugal and Sweden. . Where FDI regimes are not yet in place or do not allow for pre-investment screening, the Commission calls for a comprehensive FDI screening mechanism to be put in place as a matter of urgency and, in the meantime, to use other appropriate legal instruments to deal with security or public order risks. For those Member States which are in the process of setting up a screening mechanism, the Commission invites them to speed up the adoption and prepare the implementation, including by supporting it with appropriate resources.

The communication notes the potential filtering of FDI after a transaction is completed. While FDI screening is usually carried out before a transaction is closed, the EU FDI Screening Regulation also allows for FDI screening after closing. If a Member State initiates the formal review of an FDI, it is subject to the EU cooperation mechanism, regardless of its planned or achieved status. In addition, the cooperation mechanism can be launched within 15 months of the making of the investment when an investment is not subject to review at the national level. This may occur when the Member State does not have a screening mechanism or when the Member State maintains a screening mechanism but the specific FDI transaction has not been submitted by the parties for ex-screening. ante.

The Commission reports that, based on 2020 data, Russian persons or entities control around 17,000 EU companies and potentially hold majority stakes in another 7,000 companies and minority stakes in another 4,000 companies. The Commission strongly encourages Member States to apply FDI screening to intra-EU investments that are ultimately controlled by Russian or Belarusian persons or entities. In this context, the Communication describes the conditions under which Member States may be authorized to impose restrictions on the free movement of capital and the freedom of establishment.

Germany intervenes firmly to protect gas supply

Germany’s FDI regulator, the Federal Ministry for Economic Affairs and Climate Action (“BMWK”), has intervened strongly to protect Germany’s gas supply. Using its respective enforcement powers for the first time, the BMWK temporarily appointed the Federal Network Agency (“FNA”) as trustee of Gazprom Germania GmbH (“Gazprom Germania”).

Gazprom Germania served as the holding company of the Russian Gazprom Group for activities in Germany and other European countries, including in particular the operation of critical infrastructure (such as energy trading, gas transportation and l operation of gas storage facilities). BMWK’s order to appoint FNA as trustee to operate the company’s business was passed as part of changes to Gazprom Germania’s ownership structure. BMWK reports that Gazprom Germania was indirectly acquired by two Russian entities, JSC Palmary and Gazprom export business services LLC. The BMWK claims that this acquisition of Gazprom Germania was implemented in violation of a mandatory obligation to notify the acquisition and seek authorization under German FDI laws.

Federal Minister Robert Habeck said that “[t]The fiduciary management order serves to protect public safety and order and to maintain security of supply”. The fiduciary management of Gazprom Germania by the FNA was ordered until September 30, 2022. Among other things, the measures prohibit the exercise of all voting rights deriving from Gazprom Germania shares. As a result, the company is under the control of the FNA and the latter is authorized to dismiss the members of the management and to appoint new ones. In addition, the FNA can give instructions to the management. The right to manage and dispose of the assets of Gazprom Germania GmbH is limited to the period of fiduciary management and is subject to approval by the authority. The BMWKs Press release quotes Federal Minister Habeck that “The Federal Government does what is necessary to maintain security of supply in Germany. This also includes not exposing the energy infrastructure in Germany to arbitrary decisions by the Kremlin.


On March 8, 2022, Canada’s Minister of Innovation issued a policy statement under the Investment Canada Act (“ICA”). According to the statement, Canadian authorities will apply scrutiny to Russian investments in Canada. Investors found to be controlled or influenced by the Russian state will face security issues. For planning investment filings, all non-Canadian investors are encouraged to proactively identify any potential ties to Russian investors and entities. Investments involving Russian investors are likely to face extended review periods. These developments have the potential to have a significant impact on transactions involving a Canadian company and it is therefore recommended that the parties to the transaction consider the role of Russian entities and individuals as part of their transaction planning well in advance. advance.


In March 2022 and in response to the Ukraine crisis and ongoing global tensions over the ownership of advanced technologies, Italian regulators extended the scope of “Golden Power” laws to companies operating in 5G and cloud technologies. As part of these measures, Italy has also granted the Italian FDI regulator permanent powers to review (i) majority shareholding acquisitions by European Economic Area (“EEA”) investors (including Italians ) in active targets in the fields of communications, energy, transport, agri-food, health, finance, and (ii) minority investments made by investors outside the EEA, in all “strategic” sectors. Similar FDI screening powers that were introduced on an emergency basis amid the Covid-19 crisis were due to expire by the end of 2022.


FDI laws continue to have a significant impact on the conclusion of transactions and the planning of transactions. This is even more the case in light of recent geopolitical factions involving Russia’s invasion of Ukraine. FDI regulators around the world will thoroughly assess investments from Russia and its allies, whether an investor is subject to sanctions or other restrictive measures. While the number of interventions remains generally low, regulators are showing their willingness to intervene against transactions associated with the Russian state or government. Beyond this, all parties to the transaction should consider shareholding and ownership structures well in advance and consider the potential impact of further FDI review and lengthy planning procedures. transactions.

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