Foreign investment screening

Merger control asks whether a transaction harms competition. Investment screening asks a different question entirely: whether the change of ownership creates a risk to national security, critical infrastructure, public order or technological sovereignty. A deal can clear one and be caught by the other.

Most EU member states now operate a national regime, coordinated through an EU level cooperation mechanism that lets other member states and the Commission comment while leaving the decision national. The United Kingdom has its own under the National Security and Investment Act.

Three features drive the practical consequences. The regimes are typically suspensory, so a caught transaction cannot lawfully complete before clearance and one completed without it may be void. The covered sectors differ country by country, though defence, dual use technology, critical infrastructure, semiconductors, energy, health and large holdings of personal data appear on most lists. And the trigger depends on the acquirer's ultimate ownership rather than where the buying vehicle is incorporated.

For a sponsor that last point matters more than it first appears. Foreign investment screening can catch a fund with limited partners in a sensitive jurisdiction on a deal a domestic trade buyer would complete without a filing, which affects both the timetable and the seller's view of deliverability in a competitive auction.