Foreign Direct Investment Regimes 2020...Foreign Direct Investment Regimes 2020 First Edition Contributing Editor: Matthew Levitt Baker Botts L.L.P. Disclaimer This publication is

International Comparative Legal Guides

ICLG.com

Foreign Direct Investment Regimes 2020

First Edition

A practical cross-border insight into FDI screening regimes

Featuring contributions from:

Advokatfirmaet Thommessen AS AKD ALRUD Law Firm Anderson, Mōri & Tomotsune Baker Botts L.L.P. Beiten Burkhardt Boga & Associates Bredin Prat

Carey Chiomenti Flor & Hurtado Gowling WLG (UK) LLP Ipek | Akın | Schwimann Iwata Godo Lehman, Lee & Xu Niederer Kraft Frey Ltd

Pinheiro Neto Advogados PRA Law Offices Schoenherr Tunde & Adisa LP Uría Menéndez Waselius & Wist


First Edition

Contributing Editor:

Matthew Levitt Baker Botts L.L.P.

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

Group Publisher Rory Smith

Publisher Bianca Carter

Senior Editors Caroline Collingwood Rachel Williams

Editor Sam Friend

Creative Director Fraser Allan

Printed by Stephens and George Print Group

Cover Image www.istockphoto.com

glg global legal group

59 Tanner Street London SE1 3PL United Kingdom +44 207 367 0720 www.iclg.com

©2019 Global Legal Group Limited. All rights reserved. Unauthorised reproduction by any means, digital or analogue, in whole or in part, is strictly forbidden.

Published by

Strategic Partners

ISBN 978-1-83918-010-1 ISSN 2633-3724

Table of Contents

Expert Chapters1 Foreign Direct Investment Screening at a Time of Increasing Economic Uncertainty and Trade Protectionism

Matthew Levitt & David Gabathuler, Baker Botts L.L.P.

8 European Union Matthew Levitt, Sofia Doudountsaki & David Gabathuler, Baker Botts L.L.P.

14 Recent FDI Trends in the APEC Region Akira Matsuda & Shin Setoyama, Iwata Godo

Q&A Chapters18 Albania

Boga & Associates: Genc Boga & Alketa Uruci

23 Austria Schoenherr: Volker Weiss & Sascha Schulz

27 Brazil Pinheiro Neto Advogados: Fernando Alves Meira & Gustavo Paiva Cercilli Credo

31 Chile Carey: Diego Peralta & Vesna Camelio

35 China Lehman, Lee & Xu: Jacob Blacklock & Shi Lei

41 Ecuador Flor & Hurtado: Mario Flor, Jose Cisneros & Daisy Ramirez

46 Finland Waselius & Wist: Lotta Pohjanpalo & Matti Siiteri

51 France Bredin Prat: Pierre Honoré, Olivier Billard & Arthur Helfer

57 Germany Beiten Burkhardt: Philipp Cotta & Dr Christian von Wistinghausen

62 Hungary Schoenherr-Hetényi Attorneys-at-Law: Kinga Hetényi & Adrián Menczelesz

67 India PRA Law Offices: Apoorva Agrawal & Sanjeev Jain

74 Italy Chiomenti: Filippo Modulo, Giulio Napolitano & Andrea Sacco Ginevri

80 Japan Anderson, Mōri & Tomotsune: Hiroaki Takahashi & Koji Kawamura

86 Kosovo Boga & Associates: Sokol Elmazaj & Delvina Nallbani

104 Norway Advokatfirmaet Thommessen AS: Eivind J. Vesterkjær & Magnus Hauge Greaker

109 Russia ALRUD Law Firm: Alla Azmukhanova & Alexander Artemenko

115 Spain Uría Menéndez: Edurne Navarro Varona, Manuel Vélez Fraga & Xavier Codina García-Andrade

120 Switzerland Niederer Kraft Frey Ltd: Philipp Candreia & Philippe A. Weber

125 Turkey Ipek ǀ Akın ǀ Schwimann: Tansu Akin & Ceyda Akbal Schwimann

131 United Kingdom Gowling WLG (UK) LLP: Bernardine Adkins & Samuel Beighton

138 USA Baker Botts L.L.P.: Matthew T. West, Paul Luther & Jason Wilcox

91 Netherlands AKD: Carlos Pita Cao & David Molenaar

97 Nigeria Tunde & Adisa LP: Ayobami Tunde, Gbemisola Mosuro & Ifeoluwa Gbarada

XX 27Chapter 6

Brazil

Gustavo Paiva Cercilli Credo

Fernando Alves Meira

Pinheiro Neto Advogados

Brazil

ICLG.comForeign Direct Investment Regimes 2020

aviation business unit from the defence and private jet business units. The Boeing Company will hold 80% of the new company that will own and operate the commercial aviation business unit, while Embraer will own the remaining 20%. The veto right is justified on national security grounds, as Embraer is an important supplier and partner of the Brazilian Air Force.

1.3 Are there any current proposals to change the foreign investment review policy or the current laws?

As mentioned above, the Brazilian Government has been gradually removing the remaining restrictions on foreign investments, including on cable television (2011), healthcare (2015), fintechs and aviation (2018). In 2019, the requirement of a Presidential Decree for increasing foreign investment in financial institutions was also removed (although foreign investment in financial institutions still requires approval from the Brazilian Central Bank).

The incumbent Government has a positive approach towards foreign investments. There are ongoing proposals under discussion in the Brazilian Congress which could result in a softening of the restrictions on foreign ownership of rural properties by non-sovereign and non-NGO investors. 2 Law and Scope of Application

2.1 What laws apply to the control of foreign investments (including transactions) on grounds of national security?

Brazil does not have a foreign investment review on national security grounds. However, foreign investment in a few sectors is restricted on national security grounds (as described above).

Moreover, foreign investment in a few other specific sectors may require approval by specific regulators (for instance, the increase of foreign ownership in financial institutions requires approval from the Brazilian Central Bank). In these cases, the review is conducted by the applicable regulatory agency on a technical basis and not concerned with national security.

Foreign investments (in both equity and debt instruments) generally need to be registered with the Brazilian Central Bank elec-tronic system, which has a declaratory nature and does not require any kind of approval by any governmental authority.

Also, transactions that involve an act of concentration may be subject to pre-closing approval by the Brazilian antitrust authority (Conselho Administrativo de Defesa Econômica) if the underlying trans-action meets certain requirements (basically, the test is whether one party has recorded revenues higher than BRL 750 million in Brazil in the last fiscal year, and, cumulatively, any other party has recorded at least BRL 75 million). If the investor has no previous revenue in Brazil (directly or through its affiliates), no antitrust approval is

1 Foreign Investment Policy

1.1 What is the national policy with regard to the review of foreign investments (including transactions) on national security grounds?

There is no Brazilian equivalent to the Committee on Foreign Investment in the United States or similar control body for reviewing foreign investments on national security grounds. The Brazilian Constitution of 1988 generally forbids any form of discrimination between national and foreign investors, with a few exceptions expressly provided by law. In fact, the Brazilian Government has been gradually removing such restrictions as the Brazilian economy is heavily dependent on foreign investment to fuel its growth and infrastructure opportunities, and currently several strategic sectors (such as energy, telecom and oil & gas) have significant levels of foreign investment.

A few sectors remain restricted, mainly: ■ Nuclear energy, aerospace and the post office: no foreign invest-

ment allowed. ■ Journalism and broadcasting (open TV): foreign participation is

limited to 30% of the voting and equity capital of the operating entity.

■ Ownership of rural properties and operations in border properties (particularly mining): foreign investors cannot have corporate control of the operating entity.

Foreign investments (in both equity and debt instruments) generally need to be registered with the Brazilian Central Bank elec-tronic system, which is simply a declaratory registry. There are no restrictions for repatriation, and foreign companies are currently subject to capital gain taxes at a lower rate than Brazilian companies (15–22.5% for foreign companies, as opposed to 34% for Brazilian companies). Dividends are paid on a tax-free basis.

1.2 Are there any particular strategic considerations that apply during foreign investment reviews?

As described above, Brazil does not have a foreign investment review on national security grounds.

However, it is important to comment that the Brazilian Government holds a golden share in very few companies that were privatised in the past and, in accordance with the rights of such golden shares, the Brazilian Government may hold a veto right on the relevant company’s change of control. This was exactly the case of Embraer, the iconic Brazilian airplane manufacturer. In late 2015, The Boeing Company manifested its interest in acquiring control of Embraer. The Brazilian Government did not agree with such trans-action and eventually approved the carve-out of the commercial

© Published and reproduced with kind permission by Global Legal Group Ltd, London

Brazil

ICLG.com

28


2.7 In cases where local presence is required to trigger the review, are indirect acquisitions of local subsidiaries and/or other assets also caught?

The restrictions will apply to any direct or indirect foreign invest-ment, including by means of a local subsidiary. 3 Jurisdiction and Procedure

3.1 What conditions must be met for the law to apply? Are there any monetary thresholds?

The foreign investment restrictions depend on the sectors in which the target company operates. There are no thresholds.

3.2 Is the filing voluntary or mandatory? Are there any filing fees?

With respect to the restricted sectors, there is no possibility to request an approval and therefore no filing.

3.3 In the case of transactions, who is responsible for obtaining the necessary approval?

With respect to the aforementioned restricted sectors, there are no committees or agencies which can provide permits or authorisations for foreign investments. There are certain governmental authorities that are responsible for overseeing and attesting that the relevant legal requirements/thresholds were complied with.

3.4 Can foreign investors engage in advance consultations with the authorities and ask for formal or informal guidance on the application of the approval procedure?

This is not applicable in Brazil.

3.5 What type of information do investors have to provide as part of their filing?


3.6 Are there sanctions for not filing (fines, criminal liability, unwinding of the transaction, etc.) and what is the current practice of the authorities?

In the event one carries out a foreign investment in violation of the existing restrictions, the transaction shall be considered null and void. In addition, the parties involved will be generally liable for losses and damages incurred by third parties.

3.7 What is the timeframe of review in order to obtain approval? Are there any provisions expediting the clearance?


required. In any event, CADE carries out its review on a technical basis with no discrimination between national or foreign players.

2.2 What kinds of foreign investments, foreign investors and transactions are caught? Is the acquisition of minority interests caught?

The main restricted sectors are the following: ■ Nuclear energy, aerospace and the post office: no foreign invest-

ment is allowed at all. ■ Journalism and broadcasting (open TV): foreign participation is

limited to 30% of the voting and equity capital of the operating entity.

■ Ownership of rural properties, and operations in border properties (particularly mining): foreign investors cannot have corporate control of the operating entity.

Such restrictions are contemplated by law and there are no committees or agencies which can provide permits or authorisations for foreign investments in such restricted sectors.

2.3 What are the sectors and activities that are particularly under scrutiny? Are there any sector-specific review mechanisms in place?

In the very few privatised companies in which the Government of Brazil still holds golden shares and which operate in the defence industry, like Embraer, the Government may exercise its special voting rights in order to approve any change of control.

Also, the acquisition and operation of rural properties in border zones by foreign investors also require special approvals that may be affected by national security concerns.

Moreover, foreign investment in a few specific sectors may require approval by specific regulators (for instance, the increase of foreign ownership in financial institutions). In these cases, the review is conducted by the applicable regulatory agency on a technical basis and not oriented by national security concerns.

2.4 How are terms such as ‘foreign investor’ and ‘foreign investment’ specifically addressed in the law?

A foreign investor is generally considered as an individual or legal entity resident, domiciled or headquartered abroad.

2.5 Are there specific rules for certain foreign investors such as state-owned enterprises (SOEs)?

So far, no, but there is a bill pending approval at the National Congress that, if converted into law, would generally allow foreign investment in the purchase of rural properties, except in case of investors that are related to foreign governments or non-govern-mental organisations.

2.6 Is there a local nexus requirement for an acquisition or investment to fall under the scope of the national security review? If so, what is the nature of such requirement (existence of subsidiaries, assets, etc.)?

There are specific restrictions on the acquisition and operation of real estate properties located in border zones. Otherwise, there are no local nexus requirements.


XX 29

ICLG.com

Pinheiro Neto Advogados


4.2 What is the applicable test and who bears the burden of proof?


4.3 What are the main evaluation criteria and are there any guidelines available?


4.4 In their assessment, do the authorities also take into account activities of foreign (non-local) subsidiaries in their jurisdiction?


4.5 How much discretion and what powers do the authorities have to approve or reject transactions on national security grounds?


4.6 Can a decision be challenged or appealed, including by third parties? Is the relevant procedure administrative or judicial in character?


4.7 Is it possible to address the authorities’ objections to a transaction by providing remedies, such as undertaking or other arrangements?


4.8 Are there any other relevant considerations? What is the recent enforcement practice of the authorities?


3.8 Does the review need to be obtained prior to or after closing? In the former case, does the review have a suspensory effect on the closing of the transaction? Are there any penalties if the parties implement the transaction before approval is obtained?


3.9 Can third parties be involved in the review process? If so, what are the requirements, and do they have any particular rights during the procedure?


3.10 What publicity is given to the process and the final decision and how is commercial information, including business secrets, protected from disclosure?


3.11 Are there any other administrative approvals required (cross-sector or sector-specific) for foreign investments?

Yes. Typically, a change of control or ownership of companies that operate in regulated sectors (such as financial institutions, telecom, energy) may require the prior approval of the respective regulator or governmental agency, irrespective of whether the buyer is domestic or foreign. 4 Substantive Assessment

4.1 Which authorities are responsible for conducting the review?



Brazil30

Fernando Alves Meira has been a partner in the corporate practice of Pinheiro Neto Advogados’ São Paulo office since 2000. He has a diverse practice, advising clients on mergers and acquisitions, private equity and corporate law. Mr Meira holds an LL.B. from the University of São Paulo (USP) (1991). Between 1995 and 1997 he was a foreign associate at Cravath, Swaine & Moore, in New York. He is fluent in Portuguese and English.

Pinheiro Neto Advogados Rua Hungria 1.100, Jardim Europa São Paulo/SP, 01455-906 Brazil

Tel: +55 11 3247 8619 Email: [email protected] URL: www.pinheironeto.com.br

Pinheiro Neto Advogados is a Brazilian, independent, full-service firm founded in 1942, and was one of the first Brazilian law firms to serve foreign clients and to specialise in corporate matters. The firm currently has 100 partners and 450 attorneys, distributed over three offices in Brazil (São Paulo, Rio de Janeiro and Brasília) and one office in Palo Alto, California. With over 5,000 clients in almost 60 countries, the firm has grown organically, and developed a distinctive, tight-knit culture, with a low associate-to-partner ratio. The firm has been recognised by the Brazilian government as the largest exporter of legal services and is widely hailed as an institution of the Brazilian legal market. Pinheiro Neto Advogados and its partners are constantly ranked among the top law practitioners in virtually all areas of law by all specialised rankings such as Chambers and Partners, The Legal 500, IFLR, Who’s Who Legal, Latin Lawyer and Latin Finance.

www.pinheironeto.com.br

Gustavo Paiva Cercilli Credo joined the firm as a trainee in 2006 and is currently a senior attorney at the firm. He focuses his practice on mergers and acquisitions, governance and corporate law. Mr Credo holds an LL.B. from the University of São Paulo (USP) (2010) and an LL.M. from the University of California – Berkeley (2017). Between 2017 and 2018, he was a foreign associate at Cravath, Swaine & Moore, in New York. He is fluent in Portuguese and English.

Pinheiro Neto Advogados Rua Hungria 1.100, Jardim Europa São Paulo/SP, 01455-906 Brazil

Tel: +55 11 3247 6282 Email: [email protected] URL: www.pinheironeto.com.br

ICLG.com Foreign Direct Investment Regimes 2020© Published and reproduced with kind permission by Global Legal Group Ltd, London

Alternative Investment Funds Anti-Money Laundering Aviation Law Business Crime Cartels & Leniency Class and Group Actions Competition Litigation Construction & Engineering Law Copyright Corporate Governance Corporate Immigration Corporate Investigations Corporate Recovery & Insolvency Corporate Tax Cybersecurity Data Protection Employment & Labour Law

Enforcement of Foreign Judgments Environment & Climate Change Law Family Law Financial Services Disputes Fintech Foreign Direct Investments Franchise Gambling Insurance & Reinsurance International Arbitration Investor-State Arbitration Lending & Secured Finance Litigation & Dispute Resolution Merger Control Mergers & Acquisitions Mining Law Oil & Gas Regulation

Outsourcing Patents Pharmaceutical Advertising Private Client Private Equity Product Liability Project Finance Public Investment Funds Public Procurement Real Estate Sanctions Securitisation Shipping Law Telecoms, Media and Internet Laws Trade Marks Vertical Agreements and Dominant Firms

Current titles in the ICLG series

ICLG.com

glg global legal groupThe International Comparative Legal Guides are published by@ICLG_GLG

Documents

Foreign Direct Investment Regimes 2020...Foreign Direct Investment Regimes 2020 First Edition Contributing Editor: Matthew Levitt Baker Botts L.L.P. Disclaimer This publication is