Published 9 July 2019
While the U.S.-China hegemonic rivalry has proximately caused a global tightening of national security review of investments, overlooked is the ability of adversaries to influence corporations through share acquisition. The willingness of nations to enter private markets and engage in cross-border investment is an important and transformative dynamic with immense implications. Sovereigns are empowered through shareholding to control corporations and thus substantially influence and/or control another sovereign’s political governance, industrial strength and economic future. At a minimum, dominating the economic high-ground will disadvantage a nation’s strategic enemies. Share purchases can enable control of the “economic/technological high ground” and be effectuated through a method that is generally below the radar without attracting the regulatory attention associated with large transactions or takeovers. Share acquisition can form a stealth stratagem to impact an adversary or obtain valuable information. Therefore, nations should update securities disclosure laws to reflect the transformational developments in emerging technology both directly and indirectly implicating national security concerns. Foreign governmental entities purchasing shares should be strictly monitored to ensure core economic sectors and emergent technology are protected. The trigger percentage should be lowered for governmental buyers. Legitimate governmental investors should not object to heightened disclosure and reporting requirements.
This paper will be part of the TDM Special Issue on "The Changing Paradigm of State-controlled Entities Regulation: Laws, Contracts and Disputes". More information here www.transnational-dispute-management.com/news.asp?key=1719