Author: Paul, Weiss
Published: December 28th, 2020
Original Article Link
This memorandum is not intended to provide legal
advice, and no legal or business decision should be based on its content.
Introduction
The National Development and Reform
Commission (“NDRC”) and the Ministry of Commerce (“MOFCOM”) of the People’s
Republic of China issued the Measures on Security Review of Foreign
Investments (the “Measures”) on December 19, 2020. The Measures will
take effect on January 18, 2021.
This is not the first time that
China has issued regulatory guidance on national security matters. The first
was the Notice on the Establishment of a Security Review System for
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the
“Notice”) in 2011, accompanied by the Stipulations of the Ministry of
Commerce on the Implementation of the System of Security Review for Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors. These were
followed by the Trial Measures on the Security Review in Free Trade
Zones issued in 2015 (the “Free Trade Zone Trial Measures”).
Without introducing radical changes
to the previous regulatory guidance, the Measures expand the list of
industries’ foreign investments that will be subject to security review. The
Measures also give the regulatory authorities more discretion in determining
the type of transactions that may fall within their ambit. Helpfully, the
Measures set out a clear declaration and clearance process, including statutory
timetables within which applications are to be processed. However, whether the
actual processing time will adhere to the statutory timetables will need to be
tested in practice.
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