International M&A and Joint Ventures - International Legal Developments Year in Review: 2023

This article summarizes important developments during 2023 in international mergers and acquisitions (M&A) and joint ventures in France, Japan, Russia, Singapore, Spain, Britain, and the United States.

I. France

A. Introduction

For the fourth consecutive year, France has been ranked as the most attractive country in Europe for foreign direct investments (FDI). As of the publication of this article, the numbers for 2023 were not yet available, but the latest data show that more than 1,259 FDI projects were announced in France in 2022.

With regard to the private equity sector, although there has been a net decrease in comparison with previous record years, the size and number of funds raising capital during the first semester of 2023 are close to those in 2016 and 2020. As in many other jurisdictions, the timeline of the deals has been overly expanded.

The legal and regulatory reforms of the past few years have thus impacted capital markets and made France a leading country for foreign investment. The year 2023 has also been quite generous in producing reforms and new legislative bouquets from both a national and European point of view. Below are some of the many adopted in 2023:

B. Law 2023-171 of March 9, 2023 — “DDADUE 3”

DDADUE 3, whose provisions came into force on March 11, 2023, contains various provisions to adapt French law to European Law by either directly amending the French Monetary and Financial Code, the Commercial Code, or empowering the French Government to do so.

This law is quite enriching as it contains the following:

1. Adaptation to Regulation (EU) 2022/858 of the European Parliament and of the May 30, 2022 Council on a pilot regime for market infrastructures based on distributed ledger technology and amending Regulation (EU) No 600/2014 and (EU) No 909/2014 and Directive 2014/65/EU. Article 7 of DDADUE 3 introduces various amendments to the French Monetary and Financial Code to enable application of the pilot regime for market infrastructures based on distributed ledger technology. A decree should also be issued to complete the system.

2. Government empowerment to transpose Directive 2022/2464 (CSRD Directive) of the European Parliament and of the Council of December 14, 2022, and harmonize corporate sustainability reporting measures. Parliament has empowered the Government to transpose this directive before December 9, 2023, specifically to:

(i) transpose the CSRD Directive and its requirement of publication of a sustainability report which will replace the current extra-financial performance declaration;

(ii) adapt the provisions relating to the engagement of statutory auditors including the services to be provided as well as those relating to the organization and powers of the competent authorities in terms of accreditation and supervision of persons authorized to assess the compliance of published sustainability information; and

(iii) draw consequences from the changes made on the various systems of obligations relating to the social, environmental, and corporate governance issues of commercial companies.

In application of this new text, the French Government will need to adapt the French Commercial Code by (i) taking into account different sizes of companies and groups by reference to thresholds, drawing inspiration from those in EU law; (ii) harmonizing the methods of calculating these thresholds; (iii) applying these definitions to the different systems with similar thresholds; (iv) extending these systems to certain types of companies; and (v) unifying the injunction procedures.

3. French Government empowerment to transpose Directive (EU) 2019/2121 of the European Parliament and of the Council of November 27, 2019, amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions, was finally adopted by Ordinance No. 2023-393 of May 24, 2023, reforming the rules governing mergers, demergers, partial contributions of assets and cross-border transactions by commercial companies. The Ordinance has introduced a major reform that will apply to transactions for which the draft is filed with the Clerk of the Commercial Court on or after July 1, 2023. The decree was published on June 3, 2023. This widely expected decree specifies in particular:

(i) the elements required for commercial companies to implement mergers, demergers, partial contributions of assets, partial demergers and the same operations carried out in a cross-border context between member states of the European Union;

(ii) the content of the draft terms of these transactions, the notice sent to stakeholders and its management report, as well as the deadlines and procedures for publication of these documents.

C. Bill No. 2023-1107 of November 29, 2023, for Employee for Profit Sharing or Employee Equity Program - loi n° 2023-1107 du 29 novembre 2023 portant transposition de l’accord national interprofessionnel relatif au partage de la valeur au sein de l’entreprise

On November 16, 2023, the French Senate adopted a Proposed Bill for the Profit Sharing or Employee Equity Program and the law was published on November 29, 2023. The measures are various and adaptable.

With regards to free share allocations for instance, the law has modified the dispositions of Article L. 225-197-1 of the French Commercial Code regarding the ceiling for free share allocations to employees and certain corporate officers, and raises to:

1. Fifteen percent of the share capital (instead of ten percent) in the case of large and medium-sized companies;

2. Twenty percent of the share capital in the case of small and medium-sized companies (instead of fifteen percent); and

3. Forty percent of the share capital in the case of allocations to all employees.

This law has also modified Article L. 225-197-1, Titles I and II, of the French Commercial Code by creating a new intermediate ceiling of thirty percent of share capital, on the twofold condition that employee beneficiaries represent more than twenty-five percent of total payroll and more than fifty percent of the workforce.

In conclusion, like other countries, France will probably be impacted by the evolving socio-economic environment. However, the dynamism it has shown in past years, together with the various legislative reforms put in place, will enhance its attractiveness. The Strategic Plan of the French Government within a 2030 horizon is to invest more than fifty-four billion Euros in innovation and ecological transition. This has been working out quite well since France accounts for twenty-nine unicorn companies and intends to champion decarbonization.

II. Japan

A. Takeover Guidelines

On August 31, 2023, the Ministry of Economy, Trade, and Industry of Japan (METI) published the “Guidelines for Corporate Takeovers” (the Takeover Guidelines), which concern the conduct of listed companies’ directors in Japan, as well as their acquirers, in the context of takeovers of such listed companies. The Takeover Guidelines are “soft” law and are not legally binding. However, they will have a material impact on unsolicited takeover practices in Japan.

Traditionally, in Japan, cross-shareholdings and loyal shareholders, coupled with a lack of qualified outside directors in listed companies, resulted in less stock market discipline and ineffective dialogue with minority shareholders. In addition, cross-shareholdings have been criticized as having lower capital efficiency. In Japan, there are more listed companies with a Price Book-Value Ratio (PBR) of less than 1x as compared to other countries, and it is expected that M&A transactions will be used as a corporate strategy to address increasingly complex management issues. In light of these trends, METI formulated the Takeover Guidelines. The aim of the Takeover Guidelines is to stimulate acquisitions that increase corporate value and secure shareholders’ interests, with a focus on how the parties involved should behave in cases where the evaluation of an acquisition proposal is divided between an acquirer and a target company.

The Takeover Guidelines list three principles, which are set out below:

1.) “Whether or not an acquisition is desirable should be determined on the basis of whether it will secure or enhance corporate value and the shareholders’ common interests.” According to this principle, if a listed company’s management, while receiving an acquisition proposal with a higher acquisition price, intends to accept another acquisition proposal with a lower acquisition price that its board of directors determines will improve value, management is required to use its reasonable efforts to ensure shareholders’ common interests or the best available transaction terms for shareholders is achieved, and the board of directors has sufficient accountability.

2.) “The rational intent of shareholders should be relied upon in matters involving the corporate control of the company.”

3.) “Information useful for shareholders’ decision making should be provided appropriately and proactively by the acquiring party and the target company. To this end, the acquiring party and the target company should ensure transparency regarding the acquisition through compliance of acquisition-related laws and regulations.” According to these principles, regarding matters related to the management control rights of a company, the company should rely on the rational intention of the shareholders, to whom the company's interests are attributed. Normally, shareholders’ wishes are respected in acquisitions by obtaining shareholders’ decisions through tendering their shares in tender offers. However, in exceptional and limited cases where normal procedures do not provide the necessary information (including opinions expressed by the target company) or sufficient time for shareholders to decide, some listed companies have introduced policies that implement countermeasures against acquisitions that utilize the free allotment of share acquisition rights with discriminatory content (countermeasures) and implement such countermeasures based on that policy. In these cases, generally, the rational intention of the shareholders regarding whether to introduce and implement countermeasures should be confirmed at the shareholders' meeting. In addition, countermeasures should be taken only in necessary and reasonable manners, considering the principle of shareholder equality, the protection of property rights, and the prevention of abuse for the sake of management's own protection. In short, the Takeover Guidelines expect that countermeasures should be taken in these sorts of “exceptional and limited” cases, only in a necessary and reasonable manner.

In fact, by referring to the Takeover Guidelines, Nidec Corporation (Nidec), a company listed on the prime market of the Tokyo Stock Exchange (TSE), made an unsolicited takeover proposal to Takisawa Machine Tool Co., Ltd. (Takisawa), a company listed on the standard market of TSE. After two months of discussion of this proposal, Takisawa's management agreed. This tender offer was successfully completed in November 2023. As this example shows, there is a possibility that the number of similar successful unsolicited takeover proposals will increase in the future by referring to the Takeover Guidelines, resulting in more frequent sound takeovers in the Japanese market.

B. Amendment to FDI Regulations

Additionally, under the Foreign Exchange and Foreign Trade Act (FEFTA), which regulates inward foreign direct investments, a foreign investor must make a prior notification to the Ministry of Finance and other relevant Ministries before acquiring shares of a Japanese company engaged in a certain designated industry (Designated Industry) and is prohibited from acquiring such shares until it obtains clearance from the relevant Ministries. The 2023 amendment to the public notice related to the FEFTA (which applies to inward foreign direct investments made on or after May 24, 2023) expanded the definition of Designated Industry to include the following: permanent magnets, semiconductors, machine tools, industrial robots, storage batteries, natural gas, metal products, mineral products, and metal 3D printers, etc.

III. Russia

It has been eight years since the institution of representations of circumstances (hereinafter “representations”) was incorporated into Russian legislation. But even now, it is not always clear or predictable how representations given under transaction documents, when structuring M&A and joint ventures under Russian law, will be interpreted and how liability limitations will work and be enforceable in case of a dispute, as well as to what extent the court may recreate the initial parties’ intentions to consider representation claims as lawful. In 2023, two important clarifications were made by Russian courts.

In March, the Russian Supreme Court ruled in favor of the existence of implied representations by interpreting the actual buyer’s intention during negotiation of the list of representations. The higher court in this instance held that representations may cover by default not only the existence or absence of certain circumstances or facts expressly referred to in a contract, but also the absence of grounds (causes) that could make such circumstances or facts untrue. It transpires from the judgement that such grounds themselves may be included in the scope of representations impliedly (i.e., even if not set forth in the contract). The court emphasized that in order for the representation to be deemed breached, these grounds must exist at the time of providing the representation, even if they are not known to the sellers and emerge in the future.

In the case, a share sale and purchase agreement, the sellers gave a representation that the target company (holding the license of a forex dealer) would not receive any claims from governmental authorities and would comply with the license requirements of a forex dealer until the moment shares transferred to the buyer. Upon transfer, governmental authorities revoked the license of the forex dealer, and the grounds for it were violations on the part of the target company before the date when the representations were given. The lower courts held that the representations were not breached by the sellers, given the fact that as of the date of the representations, the company retained the license and no claims had been received by it. At the same time, there was no express representation (set forth in the agreement or otherwise) that the target company was free from any violations of law as of the date of representations. Nonetheless, the Russian Supreme Court deemed such representations related to the absence of violations were included by implication, and thus breached by the sellers. Therefore, it is important to be cautious regarding the existence of implied representations deriving from the contractually designated ones and to put limitations in the list of representations under Russian law by making it exhaustive if necessary.

Another significant clarification made by the Russian Supreme Court in that decision was that there is no obligation on the part of the buyer (being a recipient of the representations) to contest the revocation of the license to enjoy the benefit from the representation being breached. In practical terms, this means that despite the general bona fide principle established in Russian law, one should nonetheless expressly oblige the recipient of representations to take the necessary actions if one wants to ensure all such actions aimed at mitigating or excluding losses are taken.

The concept of representation is closely connected with the buyer’s knowledge that limits the seller’s liability and prevents the claims from being brought. In that respect, the judgement of 10th Arbitration (Commercial) Appeal Court related to due diligence to be exercised by a party receiving representations before concluding a deal is worth mentioning. Russian courts have repeatedly required such a party to be cautious by at least searching the public registers and not to blithely rely on the representations it receives. But in the present case, the court found that a party receiving representations, which turned out to be untrue, was not obliged to be cautious (to make a representations claim to be enforceable), because such a requirement would have disavowed and diminished the very essence of the concept of representations under Russian law. Although it is too early to declare the new approach in that respect developed, the decision is nonetheless remarkable.

IV. Singapore

A. Family Offices in Singapore: Update in 2023

In recent years, Singapore has emerged as a prominent hub for wealth management and family offices (FOs). FOs, serving as private wealth management entities, oversee high-net-worth individuals or families' financial and investment needs, and engage in non-investment activities such as philanthropy and legal matters. As of the end of 2022, Singapore boasted approximately 1,100 single-family offices.

The attractiveness of Singapore as a destination for establishing FOs is attributed to its stable political environment, rigorous regulatory framework, favorable taxation rates, and convenient access to Asian opportunities within a globally diversified investment portfolio. The presence of well-developed capital markets, along with a vibrant private equity and venture capital ecosystem, add to its allure.

FOs are renowned for diversifying their investments across various asset classes, including real estate, private equity, venture capital, hedge funds, and more. On average, FOs allocate approximately 18 percent and 6 percent of their total wealth to private equity and venture capital investments, respectively. These asset classes are pivotal for FOs, offering access to a spectrum of opportunities, ranging from emerging tech start-ups to substantial corporate transactions backed by private equity funds. Notably, companies are increasingly turning to FOs as a source of funding, with FOs contributing 15 percent of the capital for investment managers, according to the latest research by the Global Impact Investing Network.

B. Structure of FOs in Singapore

In Singapore, FOs can take the form of either multi-family offices (MFOs), overseeing third-party assets from two or more families, or single-family offices (SFOs), dedicated to managing assets exclusive to a single family, while being entirely owned or controlled by members of that family. The structures of SFOs are typically crafted to obtain exemptions from licensing requirements for offering fund management and financial advisory services. This exemption can be pursued through two distinct pathways:

1. Exemption for “Related corporations” under the Singapore Financial Advisers Regulations: This exemption is granted to a corporation managing funds or providing financial advisory services to its related corporations. To achieve this, some families establish a common holding company that wholly owns both the SFO and the investment fund vehicle holding the family's assets. In this arrangement, the SFO manages or advises the investment fund as its related corporation.
2. Case-by-case Exemption for SFOs: In cases where an SFO does not neatly fit within the parameters of existing class licensing exemptions, it may seek a licensing exemption from the Monetary Authority of Singapore (MAS) under section 99(1)(h) of the Securities and Futures Act 2001.

C. Modification of the Fund Tax Incentive Schemes for Family Offices

To foster the growth of Singapore's wealth management sector and create a favorable tax setting for SFOs to augment their assets, Fund Tax Incentive Schemes have been established in sections 13O and 13U of the Income Tax Act 1947 (ITA), and are overseen by the MAS.

On July 5, 2023, the MAS announced modifications to the eligibility requirements for SFO fund vehicles seeking tax exemptions under sections 13O and 13U of the ITA. These revisions apply to all new applications under sections 13O and 13U that submit preliminary documents to MAS as of July 5, 2023. The adjustments specifically address criteria related to minimum Assets Under Management, the investment professionals, minimum spending in local enterprises, and the capital deployment requirement.

Regarding the capital deployment requirement, funds under the 13O and 13U Schemes were obligated to invest a minimum of ten percent of their Assets Under Management or $10 million (around $7,457,122), whichever was lower, into certain local investments. In the recent modification, the MAS has expanded the range of eligible local investments. In addition to (1) Equities listed on Singapore-licensed exchanges; (2) Qualifying debt securities; (3) Non-listed funds distributed by Singapore-licensed or registered financial institutions; and (4) Investments into non-listed Singapore-incorporated companies with operating business(es) and substantive presence in Singapore, MAS has now acknowledged (5) Climate-related investments; and (6) Blended finance structures with significant involvement of Singapore-licensed or registered financial institutions.

Furthermore, MAS has implemented multipliers for specific investments. Certain categories of eligible investments will receive a multiplier, whereby the invested amount in those categories will be scaled up by a multiplier when computing the capital deployment requirement. As an illustration, a 2x multiplier will be employed for the investment in deeply concessional capital within blended finance structures that involve substantial involvement from financial institutions in Singapore.

The latest changes are designed to encourage SFOs to invest in blended finance structures and deploy funds towards climate-related projects, not only in Singapore but also globally.

V. Spain

The year 2023 in Spain opened the door to important regulatory developments that have significantly affected Mergers and Acquisitions and Joint Ventures.

The so-called ‘Mobility Directive’ has been incorporated into the Spanish legal system through the New Law on Structural Changes in Corporations. For the first-time, it has regulated changes in registered offices abroad (called “cross-border transformations”), cross-border spin-offs (when they imply the incorporation of new companies), and has modified the rules for cross-border mergers. The New Law on Structural Changes in Corporations has replaced former Law 3/2009 with a new regulation that integrates both internal and cross-border structural amendments (transformations, mergers, spin-offs, and global transfers of assets and liabilities), both intra- and extra-European ones (within and outside the European Economic Area). This means that it includes extra-European mergers and cross-border spin-offs that were not previously regulated in Law 3/2009.

Regarding financial markets, Law 6/2023 has replaced the former Securities Market Law. In particular, Law 6/2023 regulates for the first time in Spain a specific regime for Special Purpose Acquisition Companies (SPAC), not only by including a new chapter on this subject in the Spanish Corporate Enterprises Act, but also through other provisions which, for instance, exempt the obligation of launching a mandatory takeover bid if, as a result of the acquisition or the application of the chosen redemption mechanism, a shareholder obtains, directly or indirectly, a controlling interest in the resulting company (thirty percent or more of the voting rights). Likewise, Law 6/2023 provides that, once the European regulations are approved, the Spanish Securities Market Commission (CNMV) will already have the necessary supervisory duties to protect investors and guarantee financial stability around crypto assets and distributed ledger technologies, and also amends the Spanish Corporate Enterprises Act to include, for the first time in Spanish corporations regulations, the possibility of representing shares through systems based on distributed ledger technologies. Moreover, Law 6/2023 takes advantage of the opportunity to introduce new developments in the area of takeover bids, extending, for example, the scope of application to companies listed in a multilateral trading system (MTF) and domiciled in Spain, whose provisions will only be applicable when the corresponding regulatory development comes into force, or introducing the new case of waiver of the delisting takeover bid when the securities continue to be listed in another trading center, which could facilitate transnational merger operations. In line with European regulations, the law permits that a trading security that has been admitted to trading on a regulated market in another Member State may subsequently be admitted to trading on a Spanish regulated market, even without the consent of the issuer, and the regulated market must inform the issuer of this circumstance. In the area of investment services companies, Law 6/2023 tries to improve the competitiveness of the collective investment entities such as private equity funds and investment funds.

Finally, Royal Decree 571/2023, which implements Law 19/2003 and has replaced Royal Decree 664/1999, aims to regulate the declaration of investments to reduce the administrative burdens and to develop the suspension of the liberalization regime of certain foreign investments, including those implying tax havens, to guarantee a legal framework that protects the attraction of foreign investments to Spain. By virtue of this new regulation, investments from Spanish residents into foreign entities or vice versa must, as a general rule, be subsequently declared (when they represent a participation equal to or greater than ten percent of the capital stock of the target or of its voting rights) to the Investment Registry of the Ministry of Industry, Commerce, and Tourism of Spain. An exception applies when the investment has its origin or destination in a non-cooperative jurisdiction and when its target concerns critical infrastructure, companies with sensitive information, media and specific technologies and some foreign investors, which are subject to a prior authorization from the Spanish Directorate General for International Trade and Investment. In addition, Royal Decree 571/2023 permits a voluntary consultation to be filed to determine whether a specific investment requires prior authorization, except in the defense sector where a prior authorization will always be compulsory. In addition, above certain thresholds, the submission of an annual report on the evolution of the investment will be required.

VI. United Kingdom

In Decision Inc Holdings Proprietary Ltd & Anor v. Garbett & Anor, the High Court found that the Defendant sellers breached the first warranty in the sale and purchase agreement and awarded damages of £1.31m to the Claimants buyers. The buyers of a company brought a claim against the sellers about the poor performance of that company since the acquisition. The dispute also concerned the sale and purchase of shares in a company owned by the Defendants.

First, the share purchase agreement contained the following warranties: Warranty 19.1.2: “Since the Accounts Date . . . there has been no material adverse change in the turnover, financial position or prospects of the Company;” Warranty 20: “All financial and other records of the company [(“Records”)] . . . do not contain any material inaccuracies or discrepancies.”

The claims were based on alleged breaches of two contractual warranties: (1) “as to material adverse change since the accounts date” at the time the contract became effective, and (2) “material inaccuracies or discrepancies in the company’s records.” The Defendants argued for a countervailing claim in damages for breach of that warranty which should be set off against any award based on “deficiencies in the notice of claim which the Claimants were required to give under clause 11.4.”

The Court has opined on the meaning of “material,” holding that “material is an ordinary English word, and its application to a set of primary facts is itself a question of fact. The High Court considered the following:

“[O]ne way of testing whether a change is material is to ask whether it is so significant that the other party, had they known of the change, would not have entered into the transaction at all, or would have entered into it on significantly different terms . . . . The test is an objective test—evidence of the actual states of mind of the parties is not—and should not be—admissible in this regard. The question is as to whether a reasonable person who had entered the transaction with the aims and objectives of the buyer would have sought to withdraw from or renegotiate the transaction had he known of the change. That is the true test of materiality.”

The judge pointed out that “there is a dearth of English authority on material adverse change” and noted his:

“approval [of] the decision of the Delaware Court of Chancery in IPB Inc v Tyson Foods Inc (2001) as to the construction of a “material adverse effect” event in a corporate sale and purchase agreement to the effect that such clauses “are best read as a backstop protecting the acquiror from the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally significant manner.”

On the evidence, the Deputy Judge of the High Court found that when it entered the SPA, the Claimants did not have actual knowledge of any change in the prospects of the company at the Effective Date. The Court therefore found that the notice given satisfied the requirements of the Agreement.

In reaching his decision, the Court ruled in the Claimants’ favor in respect of their claim for breach of the No MAC Warranty on the basis there had been a material adverse change in the Company’s prospects (though not its turnover) but found no breach of the Records Warranty. The Court also held that the Defendants had failed to establish any of the contractual defenses on which they sought to rely to avoid liability for breach of warranty, and therefore awarded damages in the sum of £1.31 million.

VII. United States

Several important developments relating to U.S. regulation of international mergers and acquisitions occurred in 2023.

A. CFIUS’ Increased Scrutiny of Foreign Direct Investment in the United States

In accordance with the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), in July 2023, the Committee on Foreign Investment in the United States (CFIUS) published its annual report to Congress covering calendar year 2022 (Report). The Report revealed that CFIUS’ caseload remains high, with a record number of filings in 2022. Importantly, the number of national security agreements also increased in 2022, as CFIUS imposed more mitigation requirements than ever before.

In 2022, 154 declarations relating to covered transactions were submitted to CFIUS. Following a thirty-day assessment of these declarations, CFIUS concluded all action for only ninety declarations, or about fifty-eight percent of all declarations filed. This marks a significant decrease from 2021, when CFIUS cleared more than seventy percent of declarations. There were 286 full written notices of transactions filed with CFIUS in 2022. CFIUS conducted a subsequent “investigation” for 162 of those 286 notices, meaning that approximately fifty-seven percent of notices proceeded to the investigation phase. Finally, in 2022, CFIUS adopted mitigation measures and conditions in fifty-two instances, accounting for approximately eighteen percent of the total number of 2022 notices. More specifically, CFIUS imposed a national security agreement in forty-one instances, which represents a significant increase from 2021, when CFIUS imposed national security agreements for only twenty-six notices.

The Report also noted that CFIUS has turned its increased resources toward the monitoring of recent foreign investments as CFIUS works to detect non-notified transactions and to assess national security risks posed by recent foreign investment.

B. Outbound Investment Executive Order

On August 9, 2023, President Biden issued Executive Order (EO) 14,105 titled, “Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.” The EO declares a national emergency to deal with the threat of advancement in military, intelligence, surveillance and cyber-enabled technologies and products of China and other countries of concern and aims to curb investments from the United States in those sectors and in those countries. The EO directs the U.S. Department of the Treasury (Treasury) to begin a rulemaking process that will designate specific types of investments by U.S. persons in China or in certain Chinese-affiliated entities as either prohibited or notifiable transactions.

The forthcoming regulations must cover transactions with “covered foreign persons” of “countries of concern” who engage in activities involving national security technologies or products. This also includes entities owned fifty percent or more by the above parties (which could include, e.g., U.S. subsidiaries of a Chinese parent company). China, along with the Special Administrative Regions of Hong Kong and Macau, is currently the only nation listed as a “country of concern,” but that list is subject to change. Covered national security technologies and products are those technologies and products that are critical for the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern, limited to three sectors:

1. Semiconductors and microelectronics;

2. Quantum information technologies; and

3. Artificial intelligence.

In accordance with the EO, Treasury on the same day published an advance notice of proposed rulemaking regarding the forthcoming regulations. The advance notice proposed several key definitions and invited public comment on over eighty specific issues relating to the implementation of the EO. The advance notice did not itself implement the EO and is not a draft regulatory text. It will be followed by draft regulations at a later stage in the process.

It is not proposed that the program provide for retroactive application of the provisions related to the prohibition of certain transactions and the notification of others. Thus, no transactions will be prohibited or notifiable until the final regulations are issued and in effect.

C. New DOJ Safe Harbor Policy

On October 4, 2023, Deputy Attorney General Lisa Monaco announced a new U.S. Department of Justice (DOJ) Safe Harbor Policy for voluntary self-disclosures made in connection with mergers and acquisitions (M&A). Under the new Safe Harbor Policy, acquiring companies that voluntarily disclose criminal misconduct discovered at the acquired entity within the Safe Harbor period will receive a presumption of a declination of prosecution. Self-disclosing entities must also cooperate with the ensuing investigation, and engage in requisite, timely and appropriate remediation, restitution, and disgorgement to receive the presumption of a declination. To qualify for this safe harbor, companies must disclose the discovered misconduct within six months from the date of closing. After disclosure, companies will have one year from the date of closing to fully remediate the misconduct.

This new Safe Harbor Policy only applies to criminal conduct discovered in bona fide, arms-length M&A transactions. This policy does not impact civil merger enforcement.

Committee Editor — Anton Dzhuplin. France — Gacia Kazandjian and Geoffrey Burrows. Japan — Masanori Bito and Junya Horiki. Russia — Anton Dzhuplin, Kristina Akalovich and Fedor Trofimov. Singapore — Kelly Ian I Lei. Spain — Felipe Cavero and Clara Álvarez is a Lawyer. United Kingdom — Priscilla Tshibemba Petit is a Legal Counsel at Bredin Prat. United States — Geoffrey M. Goodale is a Partner, and Lauren E. Wyszomierski is an Associate, at Duane Morris.