FDI Screening And National Security In Cross- Border M&A: Balancing Openness With Sovereignty
Alvira Mallik, Bihar Institute of Law, Patliputra University
Synopsis
This study examines the growing role of FDI screening in cross-border mergers and acquisitions and its connection with national security. It analyses global regulatory developments, challenges in defining national security, and major case studies to understand how states balance foreign investment openness with the protection of sovereignty and strategic interests.
Introduction
Foreign Direct Investment (FDI) through cross-border mergers and acquisitions (M&A) plays a major role in today’s global economy, helping ideas, money, and technology move around the world. Many countries have various policies to exercise their sovereign rights to regulate the entry or establishment of foreign investment in their region, which also includes business registration, approval requirements and full or partial restrictions on foreign investment in certain sectors of the economy. However, while FDI brings many economic benefits, it also raises concerns about national security.
Since 2019, national security authorities have become more cautious about allowing foreigners to buy companies in domestic strategic industries and critical infrastructure, including telecommunications, energy, artificial intelligence, robotics, biotechnology, satellites/aerospace, and critical data systems. To address these concerns, many countries have put in place or strengthened rules to review foreign investments that might affect their national interests.
Recently, security-related screening procedures have also been introduced or are under consideration to limit the access of foreign investors to sensitive data of domestic citizens. This ongoing push and pull between welcoming global investment and protecting national sovereignty is at the centre of the debate over cross-border M&A.
