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GLOBALOUTLOOK FDISCREENING


falls within the traditional remit of national security, lawfirm Paul Hastings says it was expected to be cleared because the buyer was from a close French ally.


Fromsecurity to sovereignty The blurring of boundaries between national security and strategic sec- tors is causing concern among econ- omists and advisors. Matthew Slaughter, dean of the Tuck School of Business, notes that attempts to bolster post-crisis economies through policies that limit cross- border investment are misguided. “The vast amount of empirical evi- dence shows that FDI generates a lot of net economic benefits,” he says. “You are just costing your country when you have the uncertainty and whimsicality of howthese FDI deci- sions get made.” Mr Broadman stresses that inves-


tors are, by and large, trying to unlock businesses’ unrealised potential. “Not just for the benefit of the asset holders,” he says. “But also in the jobs it creates and other ways it engenders growth.” Reflecting on Couche-Tard’s offer for Carrefour, he says that, all things being equal, “it’s hard to say why a particular bid in a sector that is not truly national security is not in the French writ-large interest”. Drawn-out review processes can


deter both buyers and sellers.“We have been there,” says David López Velázquez, a counsel at lawfirm Uría Menéndez in Madrid. “Some parties have threatened to abort as they were very worried that the delays would render the economics of the deal invalid. If you don’t receive the funds on a given date, it can be criti- cal for your financial position.”


Softpower, soft approach Another feature of today’s FDI regimes causing alarmis the unfet- tered discretion given to politicians to block deals. In France, the econ- omy minister has the final say, and is not bound by the outcome of the official review. “The decision on FDI is nowentirely political,” observes Nicolas Bouvier, a partner at advi- sory firm Brunswick. The rejection of Carrefour’s takeover on food secu-


April/May 2021 www.fDiIntelligence.com


YOUNEED TOGOTHROUGHTHE REGULATORY PROCESS, BUT YOU MUSTALSOCONSIDER THE POLITICALCOMPONENT


rity grounds reveals the danger of this. “I don’t thinkmany lawyers would follow the minister’s legal rea- soning—I don’t think there was legal reasoning. It was a political statement,” says Nicola Bonucci, a Paul Hastings partner and former OECD legal chief. The US, Australia and Italy also


empower politicians to veto deals, along with the UK’s incoming FDI regime, which is expected to com- mence this year. This two-tier approach “adds another layer of per- ception and potentially emotion” to FDI approval, warns Mr Bouvier. “You need to go through the regula- tory process, but you must also con- sider the political component.” He recommends investors try to win government support early on: “Decision-makers hate being taken by surprise. It’s all about paying respect and somehow being polite.”


FDI’snewnormal To the extent that FDI policies have been tightened in response to the pandemic, rollbacks are not expected once the crisis recedes. Mr Broadman says they “have created some new vested interests”.Mr Slaughter highlights the political implications, saying: “It is very easy for the person trying to relax those restrictions to be portrayed by politi- cal opponents as being soft on national security.” Nonetheless, some are sanguine


that today’s stricter rules do not have to spur protectionism. “The fine bal- ance that all countries have to find is howwe can develop a better screen- ing mechanism, without giving pol- icy signals that are counterproduc- tive and deter FDI,” says Mr Bonucci. It promises to be a learning curve


for everyone. As Mr Bouvier notes, the ‘new normal’ permeates our daily life. “FDI is no exception.”■


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