Evolving Regulations on National Security and how they Impact Investments

• Every country clearly has a sovereign right to determine what would qualify as a 'national security' related concern.
• India's FDI Policy has a limited list of nine prohibited sectors, which includes atomic energy, tobacco manufacturing, gambling, etc., where FDI is not allowed.
• Specific trigger events (in the form of direct or indirect control), which would lead to increased scrutiny.

Global foreign investment flows have a crucial role to play in economic growth. Dismantling government approvals and controls over inbound investments is often seen as a key factor for assessing ease of doing business.

At the same time, regulatory controls continue to play a key role in assessing investments in sensitive areas for a country. In several countries across the world, including Australia, Canada, Germany, the US and the UK, there has been increasing focus on review and screening of foreign investments from a national security perspective.