Comparative Study On Procedural Rules Of National Security Review Of Foreign Investment

Maintaining national security and promoting open-up of investment are both the interests of the host country,and the measures taken to maintain these two interests often have contradictions.The host country generally balances these two interests through legal rules and successively established a national security review system for foreign investment.The Article 35 of the Foreign Investment Law of People's Republic of China(hereinafter referred to as “Foreign Investment Law”)passed in March,2019 makes a principle provision in regard to security review system and proposes to establish a such system.However,the specific content and procedures of the national security review system are not specified in detail.Therefore,the current procedures of security review system are mainly based on the current Notice on Establishing Security Review System for Mergers and Acquisitions(hereinafter referred to as “Notice on National Security Review”)and Provisions of the Ministry of Commerce on the Implementation of the Security Review System for Mergers and Acquisitions(hereinafter referred to as “Provisions of the Ministry of Commerce”).The contents of the abovementioned two documents have established the basic framework of China's review system,and the procedural rules are beginning to take shape.However,the provisions of starting mode and reviewing stage are not clearenough,the flexible measures and mitigation measures are less and far from perfect,affecting the efficiency of review and flexibility and effectiveness of reviewing procedure,and on the other hand may hinder beneficial foreign investment.The promulgation of the Foreign Investment Law its Article 35 also mean that China should introduce supporting laws and regulations on such system and improve the procedural rules of the system as soon as possible to ensure the smooth implementation of the Foreign Investment Law.Like other legal systems,the laws and system of such system are also composed of substantive rules and procedural rules.An effective design of procedural rules is a prerequisite for achieving good results of substantive rules.Under such system,the balance of the substitutive rules also needs to be ensured through corresponding design of procedure.In order to maintain a balance between open-up of investment and national security,some representative countries have designed relatively complete basic procedures for the starting mode and reviewing stage,and have used flexible measures and mitigation measures depending on the situation during the reviewing process,including withdrawal of application,informal negotiations,proof of no objection and conditional approval,which can avoid reviewing body to restrict or prohibit foreign investment only based on rigid procedural rules.In addition,although the Foreign Investment Law has deleted the chapter regarding such system in the Foreign Investment Law published in 2015(hereinafter referred to as “Draft for Comment”)and the specific content of the system is not currently provided in the Foreign Investment Law,but the contents of this chapter are also worthy of reference for the improvement of the procedural rules of the national security review system and the introduction of related supporting measures.As a “safety valve”,the key to achieve the balance of procedural rules is how we prudently open the “entries” and set more “exits” when designing the procedure.This paper will begin from the concept and theoretical basis of procedures of national security review of foreign investment,analyzing the necessity of the balanceof procedures of national security review of foreign investment,and also through reviewing and carding the current situation of legislation of the system and analyzing the current regulations and problems of the procedural rules to study the specific situation of the procedural rules of the national security review procedures.In the meanwhile,choosing the United States,Germany and Canada as representative countries,this paper will compare the procedural rules of the extraterritorial national security system from the perspective of basic procedures of review,flexible measures and measures of mitigation.Further on the basis of the above motioned comparison and contents available for references in Draft for Comment,this paper will discuss the achievement of the balance of procedures of national security review of foreign investment to from the abovementioned three aspects,and suggest that China should clearly define the nature of the reviewing body,the decision-making mechanism,and improve and enrich the flexible measures and mitigation measures and etc.,in order to serve the perfection of the procedure and also the introduction of relevant supporting rules.