Steven Francis and Jonathon Gunn Comment on Proposed Reform to UK Foreign Direct Investment Practices

In an article for Global Legal Post, London insurance partner Steven Francis and corporate associate Jonathan Gunn discussed proposals to reform the United Kingdom’s foreign direct investment (FDI) regime.

A recent report from TheCityUK and Freshfields highlighted the “balancing act” facing the UK government in protecting national security and managing economic and trade interests. Francis noted that the report emphasizes the need to align UK best practices with other jurisdictions. One important recommendation stemming from the report was to eliminate criminal sanctions for corporate non-compliance. 

“UK law often imposes criminal sanctions for administrative corporate failures,” Francis explained. “Prosecutions are not automatic – considerable thought is given to the exercise of discretion, and prosecution is reserved for serious failings only. This is the correct approach to take.”

Gunn said the report’s risk-based approach could help better align security and economic growth, particularly by tamping down on prosecutions for low-risk transactions, which can be triggered on simple technicalities. Reducing pressure on corporations could help provide clarity and decrease prosecutions made from uncertainty, rather than risk, he added.

“The proposals around risk-based fast-track or post-closing procedures are innovative, but openly preferencing investors from certain jurisdictions is likely to be very contentious – or potentially imprudent – in the current geopolitical climate,” Gunn noted.