Inside Belgium’s FDI Screening: Policy, Practice and Geopolitics

Episode Summary

On this episode of “Foreign Correspondent,” host Jason Hewitt is joined by Anne Bonet, who led the implementation of Belgium’s FDI regime, and Vincent Mussche, partner at Liedekerke and leader of its foreign investment screening team.Together, they explore the practical realities and policy considerations behind Belgium’s foreign direct investment review process. The discussion covers how Belgium’s unique interfederal structure shapes FDI screening, the types of transactions and sectors that attract closer scrutiny, and the evolving landscape for international investors. Listeners gain insights into the operational aspects of the regime, recent trends in deal reviews, and the factors influencing risk assessments in Belgium’s approach to foreign investment.

Voiceover (00:01):
From Skadden, you're listening to Foreign Correspondent, an FDI podcast where we discuss foreign direct investment reviews and the foreign policy, national security, and political issues that drive them. The cross-border investment screening insights you need start now.

Jason Hewitt (00:22):
Hi, and welcome to Foreign Correspondent Skadden's FDI Podcast, where we explore the complex world of foreign direct investment reviews and the national security policy behind them. Today, we are joined by Anne Bonet, who's had over 25 years at the intersection of economic policy, strategic sectors, and regulatory governance. She is now an independent advisor on FDI screening and geoeconomic risk, having led the implementation of the Belgian FDI regime and acted as its director of investment screening until earlier this year. Welcome, Anne.

Anne Bonet (00:53):
Thank you, Jason.

Jason Hewitt (00:54):
Well, also joined by Vincent Mussche, who is a partner at Liedekerke in Belgium. He leads their foreign investment screening team there and recently won the Lexology Foreign Investment Control Award for Belgium. So, congratulations and welcome, Vincent.

Vincent Mussche (01:07):
Thank you, Jason. I'm happy to be here.

Jason Hewitt (01:08):
So, I'm Jason Hewitt. I advise here in Skadden, London on global foreign investment screening of transactions. Today's episode is all about Belgium. So, we're going to be exploring the relatively recently implemented Belgian FDI regime, which now has, I think, a little bit over a year or two under its belt of transaction reviews. Perhaps, Anne, you can start us off and give us a short overview of how the Belgian FDI regime operates. I know that there are some unique federal and regional interactions as well.

Anne Bonet (01:38):
Yes, Jason. Belgium has implemented the screening mechanism almost three years ago and indeed, we have some specificities due to the federal organization of the state. So, to understand correctly that organization, you must remember that in Belgium, you have a federal government. Next to that, you have regional governments competent for mostly economic matters. And then you have also community governments who are more focused on culture and media. So, the very specificity of Belgium is that the screening commission is an Interfederal Screening Commission, which means that every government has a representative at the committee, and each member has a decision power, which without veto.

(02:26):
So, it means that each case submitted to the committee will be managed by at minimum two governments, sometimes three or four governments, not always with the same political color or attendance. Now in Belgium, we work with a proportional system, so we have a huge experience in making compromises to have a majority in the different parliaments. So, that's the situation we find back in the Interfederal Screening Commission. The administrations have a seat in the commission, but all the decisions are taken by the minister with a strong political influence and after negotiations.

(03:11):
At the end, we have one decision taken by all those government members, those ministers, those administrations based on negotiation discussion as we are used to do in Belgium. To make it sure the procedure as such is quite a common one, two phases of what we call the verification phase of phase one, starting almost immediately after the notification. And the purpose of that first phase is just to make the first check. It's 30 days, calendar days, and after those 30 calendar days, the question is whether we have found something worrying or not in the case as notified. If there is nothing in the case, then the clearance is given immediately after the 30 days.

(04:03):
If there is anything, it can be an answered question or something we would like to investigate a little bit further, then we start phase two. And phase two is in theory, 28 calendar days, but that phase two will be suspended by the European procedure. So, we have to escalate to the European Commission. Commission has 20 days to reply to make a comment. The other member states will be informed. We'll have the opportunity to make comments, and each time we have questions to the investor or the target company that the time is suspended, but at the end, in average maximum three months, it was very exceptional that the decision took more than three months.

(04:47):
So, if I look at the figures of the last two full years of exercise, '23, '24, and '24 and '25, we see an increase in the number of notifications. So, during the first year of activity, we had 68 notifications, the second year, 100 notifications, but the percentage of phase two cases remain stable between 5% and 7%, no refusal. So, it shows that the Belgian system is not there to refuse investments block investments. And with an average time for a decision between one and three months, we are quite quick in comparison with other countries to make a decision.

(05:33):
And when it's necessary, we will negotiate mitigating measures with the investors, which means that purpose is not to block or to come with the administrative administration point of view, but you're trying to find something workable and pragmatic to make sure that the risks are effectively mitigated. Communication is essential in Belgium. And I think Vincent can confirm, the administration is very open for communication, calls, emails, meetings.

Jason Hewitt (06:09):
That's really helpful. And I think it's really interesting to observe the differences in the Belgian, the interfederal aspect of the Belgian regime, which is just not a feature in lots of other FDI regimes. And it's one area where it certainly raises investors' curiosity in trying to understand how their transaction might proceed through the process and understand who the important stakeholders are in ultimately coming to a decision. It's really heartening to know those percentages of 5% or 7% or so of transactions moving to phase two, which is very consistent with what we see in the vast majority of EU jurisdictions.

(06:47):
I suppose, Vincent, you are in the privileged position of doing quite a significant number of these filings that Anne has talked about. Can you give us some of your key practical tips, particularly around communication?

Vincent Mussche (07:00):
Yeah, sure. Jason, thanks for that. As Anne said, the authority is open to dialogue. It's a very pragmatic authority. It's a very dynamic authority, but so we communicate with them, but the communication as such won't really help to win time in a first phase review. The reasons are the following. First of all, there is no such thing as an informal ruling as to whether or not a transaction will be notifiable. The drill nowadays, almost three years down the line, still is in case of doubt, please notify.

(07:31):
Secondly, as opposed to what is the fact in other jurisdictions in Belgium, there is no pre-notification and the authority has also indicated that they are not open to maybe at a later point in time startup this kind of pre-notification discussions, because they consider that as something that would basically delay the review. So, my first step to the best way to win time would be put in a notification, which is well-prepared and complete. Okay. Also, in practice, we see that in a phase one 30 calendar days period, the authority is always using the entire 30 calendar days it disposes of.

(08:12):
So, putting in a complete well-to-true notification, not raising any questions that will stop the clock during the phase one review will be the best way to win time.

Jason Hewitt (08:24):
And Vincent, do you find that there are a relatively significant number of RFIs that come through from the authority?

Vincent Mussche (08:31):
That's a good question, Jason. The number of RFIs in phase one in our experience remains limited. With that, obviously, I'm not saying that everything that you put in is always perfect, complete, but in our experience rather limited, we have seen different approach because the reality is, Jason, that in Belgium, when you look at the number of notifications, a lot of these notifications are part of a Pan-European investment. And the number of cases where you really have a truly Belgian targets, i.e. a target headquartered in Belgium, are rather limited. Why am I saying that?

(09:09):
Because we've seen in practice when we had cases where a real Belgian target was at stake, we had some more questions than in other cases where we only came in, I would say, for the Belgian bits of the Pan-European transaction.

Jason Hewitt (09:24):
And on those Pan-European deals, Vincent, do you see, I guess for private equity investors who are a large feature of that market, is there a particular focus at the limited partner and investor level or is it quite focused at the general partner level, which is what we typically see in most FDI regimes?

Vincent Mussche (09:41):
That's the case, Jason. Well, broadly speaking, the authority will have a look at the control chain above the private equity funds that is making the investment, including also the general partner. It's also very case specific. It depends on what the exact role of the LPs is. Do this qualify as UBOs? Is that the pure economic interest? Is that only a by definition passive stakeholder? So, again, on a case by case basis to be assessed, but for private equity, yeah, the authority is still clear that the entire control chain needs to be disclosed and they're going to have a look at all the funds up to the UBOs and see whether it could be any issue from that respect.

Jason Hewitt (10:19):
I guess, Anne, I'm mindful this is something that you might not be able to go into from your time at the authority, but I'd be interested to know from your perspective in your time as a regulator, were there cases where it was important to understand who the passive LP investors in funds were even if they didn't have a control stake or is your focus very much on the controllers in the form of the fund in a PE deal?

Anne Bonet (10:44):
Identifying correctly, the UBO is important, I think, for the Belgian administration because I would say we can investigate the relationship between those UBOs and other companies, state, government. I mean, you should never forget that FDI screening actually is about security, national security. So, the global purpose is to avoid a weaponization of our economy. So, even if it's at first sight not controlling acquisition, we want to make sure that the company, the target company will not be submitted to foreign influence in their business.

(11:30):
And that's why we look at the UBO, and that's why we always want to know what's the chain of control, just to understand correctly who is deciding what for at what moment and for whom. But as Vincent said, after that, we have a look at the value chain, we have a look at different aspect of the investment, the history of the investor also. Indeed, if you see that an investor is acquiring a lot of participation, not even big ones, but in the sector all over Europe, we will have to consider this differently than it's a one shot. And then sometimes indeed, the acquisition is actually just a financial mechanism without any result.

Jason Hewitt (12:20):
I think we often view these transactions when we're thinking about substantive risk on private and investor side. It's very much that triangle of acquirer risk, control risk, and target risk. You've talked a little bit there, Anne, around control risk and what rights people actually have. Vincent, maybe I can throw it over to you to offer some thoughts on how you advise people on what key risk factors there might be associated with transactions they're looking at.

Vincent Mussche (12:49):
Yeah. No, sure. So, Jason, I think when we advise clients on what is the potential risk of this transaction and the potential risk of a phase two opening, eventually maybe ending up with remedies, we would indeed consider multiple aspects. First of all, we would have a look at the investor, what is the nationality of the investor? Does the investor have any links with public government, public authorities? As we know is often the case for Chinese investors. So, we would first do our homework from an investor's perspective, i.e., nationality, links with government, any remedies imposed in previous decisions and all elements like that.

(13:29):
When it comes to the investor, then obviously the targets activities and what is the importance of the targets activities in Belgium, what is the sensitivity of these activities? And to give you a very great overview, Jason, on the three remedy cases we had so far in Belgium, then just to give you a flavor of what could really be considered as sensitive, in my understanding and based on the information in the public domain and case we were involved in ourselves, the three cases pertain to a Chinese investment in aerospace, Canadian investor in software used by public authorities in Belgians and the US investors in semiconductors.

(14:10):
So, with that, you already have a bit of a flavor of which sectors can be considered as most strategic, as most sensitive from a Belgian FDI perspective, linked to that nationality of the investor.

Jason Hewitt (14:23):
And Vincent, do you often look at on the target side, are there particular concerns or is there a particular focus on targets with say government contracts and relationships with the Belgian government?

Vincent Mussche (14:34):
Yeah, that's a good question, Jason, because in the April 2024 guidelines, it is made clear that having government customers is as such, not making the transaction automatically notifiable. This being said, the guidelines also make it clear that obviously when you do have government customers, there might be issues of access to sensitive information and also pose risk in terms of the continuity of the correct functioning of these public government customers. But I thought it was useful to remind us that at the rule, there is no automatic, let's say, link between having government customers and being notifiable.

(15:15):
This being said, if you are in a notifiability case based on the sector of activity of the target and the targets does have important contracts with public government customers, and remember the case I just mentioned, the second remedy case in Belgium, which concerned a software developer, which was delivering that software to a lot of public government customers in Belgium. Yeah, clearly you can see that when there is a public angle on the transaction when the big bulk of your customer base are public government customers, and it's an important input to make the public government customer correctly function.

(15:53):
Then from the risk assessment, you can be quite sure that you might want to start preparing a narrative or build up a very strong case why there wouldn't be any issues post-transaction. And Jason, government customers also brings us a bit to the area of defense. So, you have the defense government customers, but you also have the defense private customers. I think there, with one sentence, I can say that we can see that nowadays, given the increased pressure on Europe to rearm itself, that there is quite some nervousness around transactions that have a defense related aspect in it.

Jason Hewitt (16:31):
And what are the typical categories of mitigation you're seeing? We often see in a global context, they center around a few themes. There's information, security, there's governance, sometimes governance related ring-fencing of entities to make sure there are classified people on boards or indeed local citizens on boards that engage in sensitive business. Sometimes we see supply commitments where there must be some level of minimum ongoing supply or research and development capability. There are themes you are seeing in mitigation and where do you think those might go?

Vincent Mussche (17:04):
Yeah. Jason, excellent question again. So, maybe let's start again. What is foreseen by the law, by the corporation agreements. Corporation agreement foresees and it proposes not less than 17 remedial measures that could be negotiated/imposed by the authority to obtain clearance for a transaction. In our experience, and also based on the information made available in the authorities annual reports, the remedies have been revolving mainly around three categories. First category being an obligation to store a specific technology, source codes and know how with a designated party in Belgium.

(17:50):
Secondly, and the spirits of continuity of supply and the resilience of the supply chain and of the economy more general is the provision of certain assurances to maintain the continuity of certain processes. And what we've also seen is the appointment of compliance officers as a remedy well measure.

Anne Bonet (18:09):
If I can add something, Jason, as Vincent mentioned, Belgian law lists a lot of remedies already, and the administration will always start from that list. Now, as I said, the purpose is to find something that fits with the project of the investor and the target company, which is not the case of a out of the box list of remedies. So, the administration starts from that list and then we negotiate with the investors to find the way to implement those measures in a way that fits with the project.

Jason Hewitt (18:44):
What we see in some other jurisdictions, for example, in the US with CFIUS, there are occasionally independent monitors or third parties who have a role in monitoring compliance of entities subject to undertakings. Is that contemplated by the Belgium regime and the list of possible mitigation? Is that a tool that you think might ever be relevant for particularly sensitive target?

Anne Bonet (19:09):
Yes, definitely. The point is so far, Belgium being Belgium, the administration has not identified any external auditor, advisor able to do the job. But of course, if the administrator can identify those structures or people, it could be a solution. Again, the law is not strict. They give a list. They say that's among other mitigation measures you can discuss. We can be creative. The administration can be creative. The administration can ask third parties support. Almost everything is possible from the moment it helps to mitigate and secure the investments for Belgium. I know CFUS has that habit, but CFIUS, of course, has a very extensive experience.

(20:05):
I think CFIS activities in the US have been widely known for so many years. There is their market Belgium has not yet.

Jason Hewitt (20:14):
Certainly different in scale, I think, for some of those mitigation measures. I want to turn from some of the detail and the law that we've been talking about to some of the policy and what's going on today. We saw earlier this year in Davos, we saw Belgium Prime Minister, but the weaver make some interesting comments around Trump and the role of, I suppose, the impetus for European defense, sovereignty and autonomy.

Anne Bonet (20:40):
Maybe one day.

Jason Hewitt (20:43):
I guess from an FDI perspective, it would be really interesting to see what your take is, and this is a question for both of you on how that policy drive might manifest in FDI reviews and potential commitments, or even whether there might be a more skeptical eye looking over US investors than we might've thought was the case not that many years ago.

Anne Bonet (21:06):
Oh, yes. It would be naive to say no. Yes, of course, the evolution of the relationships between Europe and the US and between Belgium and the US, especially the past months and weeks. I mean, like in France, we had some public discussions with the US ambassador last week in the press, it influenced FDI screening from the US. The new wording of the European Commission is like-minded and trusted partners. And it will really depend on the ability of the investor to show coming from the US to show that he's a like-minded interested partner for the Belgian economy.

(21:51):
But I would say we are still country agnostic, which means that the administration will never start from a negative point of view because the investor comes from the US or from China or any other countries. It's just on our checklist, it's just an extra check about risk. Today, an investments coming from the US is maybe more risky than three years ago, or at least seen more risky, perceived more risky. Because for many aspects, the regulation, the US regulation was already a threat to our economy and in the past, and the ability of the US slow to influence the US subsidiaries all around the world, that's something that has existed for years, but now we are facing an US administration claiming that they will use it and make it worse.

(22:48):
So, of course, you cannot expect the European administrations to do just like it was not said at the same time, it helps the European administration and politicians too, because I think in every country there is a political aspect in these decisions. It helps to be more aware, maybe less naive about the old France IVs speech we had in the past, but definitely it changed something. Yeah, doesn't make it very more difficult, but very difficult, but it makes it sensitive.

Jason Hewitt (23:26):
This is a bit of a different question from your perspective, because in some ways, you've already played the role. But I guess my question for both of you that will come back to you is if you were leader or king or dictator or queen of the day and you could implement any change that you wanted in the Belgian FDI regime, what would it be?

Vincent Mussche (23:45):
Okay. Thanks, Jason. Well, my king for the answer would be that I would further give guidance on the scope of application of the regime because that in Belgium, it's really a very tricky environment currently. So, on the one hand, you have a very broad description of the scope of application, which is a bit vaguely worded because it was the outcome of a long political compromise back in time. Adding to that, that the authority is an administrative body whose task is to implement the scope, not to restrict it, meaning that it remains vague and openly worded.

(24:25):
Also looking at our experience, because we've seen clearly a new trend in the second year of the regime where the authority is proactively and very actively sending out letters and almost all major transactions asking why it was not notified in Belgium. And we have seen many letters that clear and even cases that were called in where our understanding of the scope of application is clearly confirmed in the sense that the, I would say, value of the words like critical or essential at this point in time for an authority still going to its learning curve does not really add any level of materiality.

(25:10):
The circular reasoning of the authority more seems to be, for instance, because it's energy related, it's critical. So, that would be my king of the day measure, provides further guidance on scope. This being said, it also understood that the authority will not move on that until the new revised EU regulation will have been adopted and then there might be a rehaul at that point in time. But I think speaking as a lawyer representing a lot of clients doing a big volume of FDI notifications, the market is clearly screaming for better guidance on the relevant sectors. And as a king, I would answer to that.

Jason Hewitt (25:50):
A very wise and judicious use of your powers for the Davidson. I think the guidance is something that investors hugely value, but it will be interesting to see, as you say, we saw political agreement on the EU FDI revisions reached in December. We probably see that getting implemented a little bit later this year, so it'd be very interesting to see how that evolves. And I'll give you the last word today, queen for a day.

Anne Bonet (26:13):
My queen for a day wish I would say more resources. FDIs belongs to the economic security of a country, of Europe. It's very, very broad. It requires a lot of competencies, a lot of knowledge, and we want to go quick and to be predictable. I'm always amazed by the limited number of people involved in the screening, not only in the committees and commissions, but doing the analysis. In France, there are 10. In Belgium, not more. It's not enough to be able from the administration to catch all the diversities, all the diversity in the investments, we have to analyze the sectors, the technologies to be able to give the right answer. And Vincent was talking about the pre-review.

(27:08):
In Belgium, they are not able to do that just because the same people will do the pre-review and the review, and they have already a lot of work. So, they say, "No, no, just notify case when it's full, it's complete. So, we'll do the job only once and not two times." That's really a lack of resources, also financial resources to have access to databases, to information. I think that's something that will really help to improve the mechanism in such a way that it will go quicker for the investors and will enable the administration to be more predictable, to be able to give more guidance because they will be able to analyze a few things upfront without waiting for the notifications.

(27:56):
For the moment, that's how in Belgium they learn, they build up their experience. It's based on the notifications and the questions sent by the lawyers. So, very happy to issue those guidance. They are very happy to date them every six months. They try to be so accurate as possible. But of course, as an administration with limited resources, the risk is not to see a blind spot and more resources would help to identify those blind spots and be able to give more information, I think so, but it's a dream.

Jason Hewitt (28:35):
It's a really interesting insight into the practical reality on Vincent and I are used to being on, I guess, the private practice side of things. So, it's really interesting to have that insight into the practical tools that are important for you on the authority side. And Vincent, thank you so much. It's been a really interesting discussion and looking forward to the next one.

Anne Bonet (28:58):
Thank you, Jason. Thank you, Vincent.

Vincent Mussche (28:59):
Thank you, Anne and Jason, for this very interesting conversation indeed.

Voiceover (29:03):
Thank you for joining us for today's episode of Foreign Correspondent, an FDI podcast. If you like what you're hearing, be sure to subscribe in your favorite podcast app so you don't miss any future conversations. Additional information about Skadden can be found at Skadden.com.