Restricting outbound investment in key technologies

A lot has been written (including by us) about the rise and expansion of FI regimes that regulate inbound investments by foreign companies into a country's respective domestic businesses. But we are now also seeing growing concern regarding the creation of geopolitical dependencies resulting from domestic companies investing abroad. And tech is at the heart of these concerns – particularly semiconductors, artificial intelligence, and quantum computing.

US outbound investment – what we know so far

The anticipated outbound investment regime in the US (which is often described as “reverse CFIUS” – i.e. a reversal of the US inbound foreign investment regime) has been delayed, as the United States seeks to secure buy-in from US allies, address concerns raised by the US business community, and, possibly, avoid further escalating tensions with China.

Right now, what the new regime might look like is speculative until the executive order is released. It is anticipated that it will have a narrow initial scope, focused on investments in artificial intelligence, quantum computing, and semiconductors. However, there does appear to be appetite among members of Congress for a more expansive regime - meaning that any regime created by the Biden Administration could ultimately be reshaped to capture a wider range of outbound investments through congressional legislation.

EU outbound investment – what we know so far

On 20 June, the European Commission published its Joint Communication on a European Economic Strategy. This sets out the strategy for developing a framework for the assessment and management of security risks raised by certain economic activities.

Included in this strategy is the development of an outbound investment regime. The Communication suggests that increased cooperation at EU level is required to prevent the leakage of sensitive, emerging technologies, as well as other military and dual-use technologies - such as quantum computing, advanced semiconductors, and artificial intelligence.

In terms of next steps, the EC will be setting up a dedicated group of Member States’ experts, which will conduct outreach and consultations with businesses and other stakeholders, and partner countries, as appropriate. The aim is to then propose an outbound investment initiative by the end of 2023. We will, therefore, need to wait until the end of the year to see what the EU’s approach to outbound investment will look like in practice.

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For more details, read our latest ForeignInvestmentLinks blog post: US and EU outbound investment – where are we?