On National Security Review Institution Regulating Mergers And Acquisitions By Foreign Investors

Since the1990s, the growing wave of cross-border mergers and acquisitions (M&A) has become the main method of international direct investment. The use of foreign investment has become an important part of China’s basic state policy of opening-up. But M&A is a double-edged sword, as the study of it’s negative effects on national security deepens, our legislators’ began to focus on the risks and damages M&A would pose on national security, and eventually issued the "M&A Security Review Notice", marking the formal establishment of the M&A security review system. The dispute about whether we should establish a foreign M&A security review system was settled. However, the question about whether or not to give "national security" an explicit definition is still in dispute. This question is relevant when we’re determining what level of protection should be provided for the national security so that it neither controverts the basic state policy to attract foreign investment nor does it lead to national security damages. This paper argues that, as the Americans did, we should give national security a vague definition and set out a clear standard of review. This way we would not impair the fairness of the system and at the same time leave enough space for the political and diplomatic methods to solve national security issues triggered by foreign M&A, and protect our national interests more comprehensively.The Western developed countries are the foregoers on the M&A security review system, China is just a beginner by comparison. We should learn from their experiences and lessons, such as the informal-prior consultation mechanisms of the US, the principle of reciprocity of Japan, and German’s political implements and so on.There is no doubt that, even though the "M&A Security Review Notice" is an improvement of our earlier laws and regulations regarding to similar issues, it is still flawed. It requires the combination of academic research and judicial practice to perfect. To enact a specific "Foreign Investment Law "and establish a specialized agency to oversee its implementation is the fundamental solution. However, at present, China does not have this legislative agenda. We can only complete and modify the details of the "notice", and try our best to promote the coordination of foreign acquisitions and national security by legal means, and protect our national interests.