New Procedural Rules for Trade Secrets in Germany

On April 1, 2025, the Act to Strengthen Germany as a Location for Justice—formally titled Justizstandort-Stärkungsgesetz of October 7, 2024 (Federal Law Gazette 2024 I No. 302)—entered into force. This legislation aims to enhance Germany’s attractiveness as a venue for international commercial litigation by, among other things, establishing commercial courts and permitting the use of English in civil proceedings.
To strengthen the protection of trade secrets, the new law amends both the German Code of Civil Procedure (ZPO) and the Introductory Act to the Code of Civil Procedure (EGZPO). These changes respond to a growing practical need for stronger procedural safeguards for trade secrets across a broader range of legal disputes.
Procedural protection for trade secrets is primarily governed by Sections 16–20 of the Trade Secrets Act (Geschäftsgeheimnisgesetz, or GeschGehG). However, these provisions only apply directly to proceedings involving claims brought under the Trade Secrets Act itself. They do not extend to other civil cases where trade secrets could be relevant—such as disputes over confidentiality obligations in employment or service contracts, or in copyright matters.
This limited scope was confirmed by the Higher Regional Court of Düsseldorf in a decision dated January 11, 2021 (Case No. 20 W 68/20, GRUR-RS 2021, 7875, paras. 12–13), where the court held that Sections 16 ff. GeschGehG could not be applied analogously to copyright disputes.
While certain provisions of the German Courts Constitution Act (GVG)—namely Sections 172 no. 2, 173(2), and 174(3)—do allow for some restriction of public access in civil proceedings, they offer only limited protection. For one, parties do not have a legal entitlement to a non-public hearing. More importantly, these provisions only take effect from the oral hearing onward and do not protect sensitive information disclosed in earlier stages, such as in the statement of claim. As a result, litigants may be forced to choose between withholding crucial information—thereby risking procedural disadvantages—or disclosing trade secrets and compromising confidentiality.
Furthermore, under the current legal framework, the confidentiality obligation in Section 174(3) sentence 1 GVG does not restrict the use of information acquired through the proceedings. This means an opposing party may legally use trade secret information for their own benefit outside the courtroom (see Bundestag printed matter 20/8649 of October 6, 2023, p. 32).
To address this gap, the newly introduced Section 273a ZPO now provides a comprehensive framework for the procedural protection of trade secrets in all civil proceedings governed by the ZPO—not just in commercial court matters. Upon request by a party, the court may designate certain disputed information as confidential, in whole or in part, if it qualifies as a trade secret under Section 2 no. 1 GeschGehG. Notably, it is sufficient for the information to potentially be a trade secret.
Once such a designation is made, the procedural protections of Sections 16–20 GeschGehG apply accordingly. This includes, for example, the obligation to treat the information confidentially under Section 16(2) GeschGehG, and the prohibition on using or disclosing it outside the proceedings—unless the information was already known to the parties independently of the litigation.
According to the transitional provision in Section 37b EGZPO, the new Section 273a ZPO applies immediately upon the Act’s entry into force, including to cases that were already pending at the time. Parties and practitioners must therefore be aware that the new rule is applicable to ongoing proceedings.
Why This Matters
The new Section 273a ZPO marks a significant shift in the procedural protection of trade secrets in German civil litigation. Whether you’re navigating ongoing proceedings or planning future litigation strategy, it’s crucial to understand how these changes affect your rights and obligations. 

DHS Terminates Temporary Protected Status for Afghanistan

On May 13, 2025, Secretary of Homeland Security Kristin Noem announced the termination of Temporary Protected Status (TPS) for Afghanistan. The TPS designation for Afghanistan is set to expire on May 20, 2025, and the termination will take effect July 14, 2025.
What Is TPS – And How Does It Work?
TPS is a form of humanitarian protection the U.S. government provides to nationals of certain countries experiencing ongoing armed conflict, environmental disasters, or other extraordinary and temporary conditions that prevent safe return.
During the TPS period, the beneficiaries:

are eligible to remain in the United States;
cannot be removed from the United States;
are authorized to work, provided they continue to meet TPS requirements;
may apply for and be granted travel authorization at the discretion of Homeland Security (DHS)

TPS does not lead to or confer lawful permanent resident status or any other immigration status.
The Immigration and Nationality Act authorizes the DHS secretary to designate a foreign state for TPS if certain conditions exist. In making such a designation, the secretary considers:

whether returning nationals would face serious threats to their personal safety due to armed conflict;
whether there are extraordinary and temporary conditions that prevent safe return; and
whether permitting aliens to remain temporarily in the United States is contrary to the national interest of the United States.

The secretary’s determination is discretionary and not subject to judicial review. 
Why Was TPS for Afghanistan Terminated?
Afghanistan was initially designated for TPS on May 20, 2022, due to ongoing armed conflict and extraordinary temporary conditions. On Sept. 25, 2023, DHS extended and redesignated Afghanistan for an additional 18 months, beginning on Nov. 21, 2023, until May 20, 2025.
Secretary Noem stated that after reviewing the current conditions in Afghanistan, including significant improvements in security and economic stability, the situation no longer meets the statutory criteria for TPS. DHS concluded that returning Afghan nationals no longer poses a serious threat to their safety, and allowing Afghan nationals to remain temporarily in the United States is not aligned with the national interest.
What Is the Potential Impact of the Termination?
Once a country’s TPS designation is terminated, beneficiaries revert to the same immigration status or category that they maintained before TPS (if still valid), or any other lawfully obtained immigration status or category they acquired while under TPS. Afghan nationals will be required to depart the United States by the termination date unless they obtain another form of lawful immigration status. They must also report their timely departure to the U.S. Customs and Border Protection.

IRS Roundup May 2 – May 13, 2025

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for May 2, 2025 – May 13, 2025.
IRS GUIDANCE
May 2, 2025: The IRS issued Revenue Procedure 2025-20, providing guidance on the domestic asset/liability percentages and domestic investment yields used by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under Section 842(b) of the Internal Revenue Code (Code) for taxable years beginning after December 31, 2023.
May 5, 2025: The IRS released Internal Revenue Bulletin 2025-19, which includes Revenue Ruling 2025-10 and Revenue Procedure 2025-18.
Revenue Ruling 2025-10 provides various prescribed rates for federal income tax purposes for May 2025, including:

The short-, mid-, and long-term applicable federal rates for purposes of Code Section 1274(d).
The short-, mid-, and long-term adjusted applicable federal rates for purposes of Code Section 1288(b).
The adjusted federal long-term rate and the long-term tax-exempt rate from Code Section 382(f).
The appropriate percentages for determining the low-income housing credit from Code Section 42(b)(1) (but only for buildings placed in service during May 2025).
The federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of Code Section 752.

Revenue Procedure 2025-18 provides issuers of qualified mortgage bonds (defined in Code Section 143(a)) and mortgage credit certificates (defined in Code Section 25(c)) with guidance related to nationwide purchase prices for residences, as well as the average area purchase price for residences located in statistical areas in each US state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam.
May 6, 2025: The IRS issued Revenue Procedure 2025-21, modifying Section 12 of Revenue Procedure 2024-32.
Executive Order 14219, issued through the Department of Government Efficiency’s deregulatory initiative, directed agencies to initiate a review process for identification and removal of certain regulations and guidance. Pursuant to Executive Order 14219, the US Department of the Treasury and the IRS identified Section 12 of Revenue Procedure 2024-32 as a regulation needing modification.
Revenue Procedure 2024-32 specifies the procedure by which the sponsor of a defined benefit plan, which is subject to the funding requirements of Code Section 430, may request approval from the IRS for the use of plan-specific substitute mortality tables. Section 12.02 of Revenue Procedure 2024-32 specifies that if a plan sponsor wishes to use plan-specific mortality tables, it must develop and request approval for the use of new plan-specific mortality tables for plan years beginning on or after January 1, 2026. Revenue Procedure 2025-21 provides immediate relief for some of those plan sponsors by narrowing the category of plan sponsors that must request approval of new plan-specific substitute mortality tables.
May 12, 2025: The IRS issued Revenue Ruling 2025-11, determining the interest rates on overpayments and underpayments of tax under Code Section 6621. For corporations, an overpayment rate of 6% and an underpayment rate of 7% is established for the calendar quarter beginning July 1, 2025. Where a portion of a corporate overpayment exceeds $10,000 during the calendar quarter beginning July 1, 2025, the overpayment rate is 4.5%. For large corporate underpayments, the underpayment rate for the calendar quarter beginning July 1, 2025, is 9%.
May 12, 2025: The IRS released Internal Revenue Bulletin 2025-20, which includes Notice 2025-25 and Notice 2025-26.
Notice 2025-25 publishes the inflation adjustment factor for credits under Code Section 45Q on carbon oxide sequestration, which is used to determine the amount of the credit allowable under Section 45Q for taxpayers that make an election under Code Section 45Q(b)(3) to have the dollar amounts applicable under Code Section 45Q(a)(1) or (2) apply.
Notice 2025-26 publishes the reference price under Code Section 45K(d)(2)(C) for calendar year 2024. The reference price applies in determining the amount of the enhanced oil recovery credit under Code Section 43, the marginal well production credit for qualified crude oil production under Code Section 45I, and the applicable percentage under Code Section 613A used in determining the percentage of depletion in the case of oil and natural gas produced from marginal properties.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
THE “BIG, BEAUTIFUL BILL”
A recent tax bill, which some practitioners are calling the “Big, Beautiful Bill,” is currently being deliberated in Congress. As of the publication date of this edition of the IRS Roundup, a few of the notable provisions in the Big, Beautiful Bill include:

A proposed disallowance of “substitute payments” related to state and local taxes.
The proposal of a 23% pass-through business deduction, up from the current deduction of 20%.
The renewal of a research and development expensing provision through 2029, including a 100% bonus depreciation.
A phaseout of certain clean electricity credits, marking a notable change to the Inflation Reduction Act of 2022.
The reinstatement of a partial charitable contribution deduction for nonitemizers.
The proposed disallowance of certain amortization deductions for sports franchises.
An extension of various provisions expected to sunset in 2026.

Harassment in the Workplace: A Major Challenge for Employers in France

During the first quarter of 2025, the French Supreme Court has rendered a number of rulings on harassment in the workplace. Whether moral, institutional, environmental or sexual, harassment is a burning topic and the French labor courts have repeatedly reminded employers of their obligations in this area.1 
In addition to the important decision rendered by the Criminal Section of the French Supreme Court on 21 January 20252 establishing the concept of institutional moral harassment, a number of rulings have clarified the scope of the employer’s obligation to ensure a safe place of work (safety obligation).
The Employee Does Not Need to Expressly Describe the Reported Behavior as “Harassment”
In a decision dated 8 January 2025, the French Supreme Court confirmed that the employer’s obligation to prevent harassment is independent of the categorization of the wrongful behavior by the employee victim of the harassment. In other words, there is no need for the victim to describe the alleged facts as harassment in order to benefit from the safety obligation.3 
This position, which is in line with the Supreme Court’s decision dated 19 April 20234, now prevents employers from avoiding liability based upon an employee’s failure to describe prohibited acts as “harassment”.
Scope of the Safety Obligation: No Automatic Reinstatement of a Protected Employee Suspected of Sexual Harassment
In another decision rendered on 8 January 20255 by the French Supreme Court, an employee (who was a union representative) was accused of inappropriate behavior towards one of his colleagues, consisting of indecent advances and gestures with sexual connotations, insistent attitudes and physical contact such as kissing close to the lips. In accordance with French law, the employer asked for the labor inspector’s authorization to dismiss this employee, which was denied. Despite this denial, the employer refused to reinstate the employee, who terminated his employment contract and brought an action before the labor court. 
In this situation, the employer faced a dilemma: to either reinstate the employee, as provided for by French law under Article L.2411-1 of the Labor Code, or to comply with the safety obligation to prevent and put an end to any harassment situation in accordance with Article L.1153-5 of the Labor Code.
The Court of Appeal found that the employer’s refusal to reinstate the employee despite the labor inspector’s decision constituted a violation of the protected status given to employees holding the position of trade union representative.
The French Supreme Court, on the other hand, considered that the Court of Appeal should have “investigated whether the impossibility of reinstating the employee was not the result of a risk of sexual harassment that the employer was required to prevent”. Reinstatement of the accused employee is therefore not automatic, and the employer must take into account its duty to avoid and prevent any situation of harassment. 
Internal Investigations: Recommendation of the French Defender of Rights (Défenseur Des Droits)
On 5 February 20256 the French Defender of Rights published a recommended guide for employers, to help them to deal with reports of harassment or discrimination more effectively. Even though this guide does not have legal force, in practice it provides general guidelines that judges could use as a check list in case of litigation.
These recommendations are designed in particular to help employers with the implementation of their reporting and internal investigation processes. 
The French Defender of Rights has set out the following steps which employers should take: 

Set up reporting systems and informing employees of the same;
React to the claim and protect the employees’ interests (taking into account each employee’s health situation and protecting the alleged victim’s safety);
Implement internal investigations in compliance with principles of confidentiality and impartiality;
Legally qualify the facts brought to the employer’s attention (e.g. harassment, mismanagement, etc.) and sanction employees accordingly. 

The publication of this guidance confirms the importance of topics relating to employees’ health and safety. 
These decisions and guidance make it even more imperative that employers make certain that they are well-prepared to prevent and respond to claims of harassment and discrimination when they arise. Action items include making certain that compliant procedures are in place and that they are followed. Responses to claims should be audited to ensure both legal compliance and practical effectiveness. Given the specificities of the legal requirements, employers should not hesitate to seek assistance to do so.
Footnotes

1 Article L.1152-4 of the Labor Code; Article L.1153-5 of the Labor Code; Article L.4121-1 of the Labor Code
2 Court of Cassation, Criminal Division, 21 January 2025, no. 22-87145
3 Court of Cassation, Social Division, 8 January 2025, no. 23-19996
4 Court of Cassation, Social Division, 19 April 2023, no. 21-21053
5 Court of Cassation, Social Division, 8 January 2025, no. 23-12574
6 Framework decision no. 2025-019 of 5 February 2025

Spotlight on: Changes to Childcare and Parental Leave

Japan – Amendments to the Childcare and Family Care Leave Act took effect on 1 April 2025, with further amendments to take effect on 1 October 2025.
Singapore – Amendments to the Child Development Co-Savings Act 2001 took effect on 1 April 2025.
Indonesia – Law No. 4 of 2024 regarding Maternal and Child Welfare During the First Thousand Days of Life took effect on 2 July 2024 (Law 4/2024).
Australia – Amendments to the unpaid parental leave (UPL) provisions in the Fair Work Act 2009(Cth) (FW Act) took effect on 1 July 2023.

Japan
Amendments to the Childcare and Family Care Leave Act took effect on 1 April 2025, with further amendments to take effect on 1 October 2025.

Expansion of eligibility for overtime exemption request –Eligible parents can now request an exemption from overtime if they care for children up to elementary school (primary school) age. Previously, this was only available to eligible parents caring for children up to 3 years of age.
Expansion of eligibility for family care leave –Eligible employees who have worked for less than six months are now able to avail themselves of family care leave. Previously, employers can omit such employees by executing a labour-management agreement.
Extension of sick/injured etc. childcare leave – Eligible employees may now utilise this leave for events integral to school life such as starting school ceremony and graduation ceremony. Previously, this was limited to use when a child is sick or injured or requires a vaccination or health check.
Introduction of flexible working options – Employers are now required to offer remote working options to those caring for family members who need continuous care or have a child under 3 years of age.

From October 2025, employers are also required to offer at least two flexible working options to parents with children aged between 3 and 6.

Singapore
Amendments to the Child Development Co-Savings Act 2001 took effect on 1 April 2025.

Replacement of shared parental leave –Eligible working parents are now entitled to six weeks of shared parental leave. Previously, eligible working fathers could only share a portion of the mother’s government-paid maternity leave.
Expansion of government-paid paternity leave –Eligible working fathers are now entitled to four weeks of government-paid paternity leave. Previously, eligible working fathers were only entitled to two weeks of government-paid paternity leave.

Indonesia
Law No. 4 of 2024 regarding Maternal and Child Welfare During the First Thousand Days of Life took effect on 2 July 2024 (Law 4/2024).

Extension of maternity leave – Eligible working mothers may now take up to six months of maternity leave (four months at full pay, two months at 75% pay). This new law augments the position set out in Law No. 13 of 2003 regarding Manpower, as amended (Manpower Law), which provided for paid maternity leave, to be taken 1.5 months prior to giving birth and 1.5 months after giving birth.
Introduction of paternity leave – Eligible working fathers are now entitled to two days of paid paternity leave during delivery and up to an additional three days of paternity after delivery or other period as may be agreed with the employer. Eligible working fathers are also entitled to two days of paid leave in the event of a miscarriage. Previously, the Manpower Law only provided for two days of paid leave for both instances.

Australia
Amendments to the unpaid parental leave (UPL) provisions in the Fair Work Act 2009(Cth) (FW Act) took effect on 1 July 2023.
1. Increased flexible UPL entitlements –As part of their entitlement to up to 24 months of UPL, eligible employees are entitled to the following amounts of flexible UPL:

Flexible UPL Entitlement
Date of Birth or Adoption of Child

100 days
1 July 2023 – 30 June 2024

110 days
1 July 2024 – 30 June 2025

120 days
1 July 2025 – 30 June 2026

130 days
On and from 1 July 2026

Prior to 1 July 2023, eligible employees were entitled to 30 days of UPL. Flexible UPL, which can be used in periods of one day or more at a time, may be taken at any time within 24 months of the birth or adoption of their child. 
2. Full UPL entitlement for employee couples –“Employee couples”, being couples where both employees have access to UPL, may access their full UPL entitlement (being 12 months of UPL with the right to request a further period of 12 months), regardless of how much leave their spouse or partner takes. Prior to 1 July 2023, an employee couple could only take a combined period of 24 months of UPL. 
3. No limitation to concurrent leave –Employee couples may take UPL concurrently without any limitation. Prior to 1 July 2023, the FW Act imposed certain limitations on employee couples who were taking UPL at the same time (e.g. employee couples could not take more than eight weeks of UPL concurrently).

Nanterre Court of Justice Issues First Decision About Introduction of AI in the Workplace in France

For the first time, a French court has ruled on the implementation of artificial intelligence (AI) processes within a company.

Quick Hits

For the first time, a French court has ruled on the implementation of AI processes within a company, emphasizing the necessity of works council consultation even during experimental phases.
The Nanterre Court of Justice determined that the deployment of AI applications in a pilot phase required prior consultation with the works council, leading to the suspension of the project and a fine for the company.
The ruling highlights the importance for employers of carefully assessing the scope of AI tools experimentation to ensure compliance with consultation obligations and avoid legal penalties.

More specifically, the Nanterre Court of Justice was called upon to determine the prerogatives of the works council when AI technologies are introduced into the workplace.
In this case, a company had presented in January 2024 to its works council a project to deploy new computer applications using artificial intelligence processes.
The works council had asked to be consulted on the matter and had issued an injunction against the company to open the consultation and suspend the implementation of the new tools.
The company had finally initiated the works council consultation, even if it considered that a mere experimentation of AI tools could not fall into the scope of the consultation process of the works council.
However, the works council, considering that it did not have enough time to study the project and did not have sufficient information about it, took legal action to obtain an extension of the consultation period with suspension of the project under penalty of a fine of €50,000 per day and per offense, as well as €10,000 in damages for infringement of its prerogatives because the AI applications submitted for its consultation had been implemented without waiting for its opinion.
On this point, it should be noted that in France, the works council, which is an elected body representing the company’s staff, has prerogatives that in some cases oblige the employer to inform it, but also to consult it, before being able to make a final decision. The consultation process means that the works council renders an opinion about the project before any implementation. This opinion is not binding, which means the employer can deploy the project even if the works council renders a negative opinion.
However, in the absence of consultation prior to the implementation of the project, the works council may take legal action to request the opening of the consultation and the suspension of the implementation of the project under penalty. The works council may also consider that failure to consult infringes its proper functioning, which is a criminal offense.
Indeed, in application of Article L.2312-15 of the French Labor Code,
[t]he social and economic committee issues opinions and recommendations in the exercise of its consultative powers. To this end, it has sufficient time for examination and precise, written information transmitted or made available by the employer, and the employer’s reasoned response to its own observations. […] If the committee considers that it does not have sufficient information, it may refer the matter to the president of the court, who will rule on the merits of the case in an expedited procedure, so that he may order the employer to provide the missing information.”

Within the area of new technologies, the prerogatives relating to consultation of the works council are numerous and variable, as it is stipulated that in companies with at least fifty employees, the works council must be:

informed and consulted, particularly when introducing new technologies and any significant change affecting health and safety or working conditions (Article L.2312-8 of the Labor Code);
informed, prior to their introduction into the company, about automated personnel management processes and any changes to them, and consulted, prior to the decision to implement them in the company, about the means or techniques enabling the monitoring of employees’ activity (Article L.2312-38 of the Labor Code); and
consulted where a type of processing, particularly when using new technologies, and taking into account the nature, scope, context, and purposes of the processing, is likely to result in a high risk to the rights and freedoms of natural persons, the controller shall carry out, prior to the processing an analysis of the impact of the envisaged processing operations on the protection of personal data (article 35(9) of the European Union’s General Data Protect Regulation (GDPR)).

In addition, regarding AI applications, it is worth noting that the EU’s regulation of June 13, 2024, on AI (Regulation (EU) 2024/1689) provides in its Recital 92 that in certain cases the
Regulation is without prejudice to obligations for employers to inform or to inform and consult workers or their representatives under Union or national law and practice, including Directive 2002/14/EC of the European Parliament and of the Council, on decisions to put into service or use AI systems. It remains necessary to ensure information of workers and their representatives on the planned deployment of high-risk AI systems at the workplace where the conditions for those information or information and consultation obligations in other legal instruments are not fulfilled. Moreover, such information right is ancillary and necessary to the objective of protecting fundamental rights that underlies this Regulation. Therefore, an information requirement to that effect should be laid down in this Regulation, without affecting any existing rights of workers.

In the case at hand, the company considered that the works council consultation was irrelevant as the AI tools were in the process of being tested and had not yet been implemented within the company.
However, the Nanterre Court of Justice, in a decision of February 14, 2025 (N° RG 24/01457), ruled that the deployment of the AI applications had been in a pilot phase for several months, involving the use of the AI tools, at least partially, by all the employees concerned.
To reach this conclusion, the court relied on the fact that certain software programs, such as Finovox, had been made available to all employees reporting to the chief operating officer (COO) and that the employees of the communications department had all been trained in the Synthesia software program. As such, the employer could not validly claim that such an implementation was experimental since so many employees had been trained and allowed to use AI tools.
The court, therefore, considered that the pilot phase could not be regarded as a simple experiment but should instead be analyzed as an initial implementation of the AI applications subject to the prior consultation of the works council.
The court therefore ordered:

the suspension of the project until the end of the works council consultation period, subject to a penalty of €1,000 per day per violation observed for ninety days; and
the payment of damages amounting to €5,000 to the works council.

Key Takeaways
In light of the Nanterre Court of Justice’s ruling, employers in France may want to remain cautious before deploying AI tools, even if it is worth noting that:

the ruling is only a summary decision, i.e., an emergency measure pending a decision on the merits of the case; and
this decision confirms that an experimental implementation of AI might be feasible, provided that it is followed by an information and consultation of the works council, prior to a complete deployment of AI tools. However, the range and scope of this experimentation is to be assessed with care because a court might consider the experiment actually demonstrates that a decision to implement AI was irrevocably taken.

Throwing Away the Toaster: Where AI Controls Are Now and May be Heading

Years ago, when I was a baby lawyer living in a group house in DC, we had a toaster—my toaster. I had owned the toaster since college and it was showing its age. Eventually, you had to hold down the thing[1] to keep the bread lowered in the slots and toasting. But the appliance still heated bread and produced toast. One morning, I became so frustrated with that toaster and the thing-holding-down effort that I threw the toaster out, fully intending to get a new toaster.
The following day, my housemate, we’ll call him Mike,[2] raised an important series of questions:
Mike: Did you throw away the toaster?
Me: Yes. I was frustrated that it did not work right.
Mike: Did you get a new toaster?
Me: No, but I will soon.
Mike: Did our old toaster make toast?
Me: [pause] Ah . . . well, I mean, umm, yes. I see your point.
Anyhow, on a possibly related note, on May 14, 2025, BIS announced that it will rescind the AI Diffusion Rule and that, until the time of the official recission, would not enforce the Biden-era regulation.
Stop-Gap Stopped
Reading the BIS announcements, it appears that, once the AI Diffusion Rule is officially rescinded, there will not be any U.S. export control that restricts the provision of cloud computing through Infrastructure as a Service (IaaS). While the export of the certain ICs will still be controlled, ICs already owned or lawfully obtained could be put to any purpose, such as providing IaaS services for the development of AI in China.
If we return to October 2023, we see a comment made regarding the 2022 semiconductor regulations, highlighting that those rules, as then written, “may give China computational access to their equivalent ‘supercomputers’ via an IaaS arrangement.” (88 Fed. Reg. 73467). BIS acknowledged that the semiconductor regulations did not then cover IaaS, when it recognized that it was “concerned regarding the potential for China to use IaaS solutions to undermine the effectiveness of the October 7 IFR controls and [BIS] continues to evaluate how it may approach this through a regulatory response.” A plain reading of that statement indicates that the semiconductor regulations were not meant to (or could not be read to) cover IaaS.
However, the 2025 AI Diffusion Rule attempted to cover to that regulatory loophole and prohibit IaaS access for Chinese AI development. The Rule created ECCN 4E091 to cover certain AI models and then created a presumption that certain IaaS services would result in an unauthorized export of those 4E091 AI models. Effectively, that presumption created a restriction on cloud service providers to be able to provide certain IaaS services to entities in the PRC. With the recission of the AI Diffusion Rule, it appears that the loophole has been reopened.
Guidance Through and Inter-Rule Interim
In tandem with the rescission of the AI Diffusion Rule, BIS also issued three guidance documents that (1) put companies on notice that the Huawei Ascend 910 series chips are presumptively subject to General Prohibition 10[3], (2) provides guidance on due diligence that companies can conduct to prevent diversion of controlled ICs, and (3) reiterates existing controls that put restrictions on certain end-users and end-uses.
Those three guidance documents give the impression of a certain tension in the rulemaking process and they provide some hints as to be in store for the replacement AI rule:
On one hand, the new administration rescinded the AI Diffusion Rule in line with, if not in response to, calls from U.S. AI-related industry. The administration also recognized that there may have been flaws with the AI Diffusion Rule. For instance, the tiered approach to limiting and restricting exports of controlled ICs exclude many countries that are friendly to the U.S.—such as Iceland, Israel, and much of the EU and Eastern Europe. The AI Diffusion Rule did not put those U.S.-aligned countries on a tier in which they could freely acquire U.S. AI-supporting chips and, additionally, did not present a clear path for how those countries could move into the more favored tier.
As an alternative to the tiered approach researchers have suggested the idea of a country-by-country approach. That approach appears to be consistent with the administration’s recent trip to the Middle East, where it is reported that agreements with Saudi Arabia and the UAE have been negotiated to purchase U.S. producers’ GPUs (notwithstanding the fact that, under current regulations, those countries face restrictions on the purchase of certain advance semiconductors because of diversion risk).
While major semiconductor manufacturers have been the face of the recission effort, other major AI infrastructure players have been lobbying the administration to have the rule rescinded. Those companies had established or were working on data center projects in countries like Malaysia, Brazil, or India that were affected by the AI Diffusion Rule, particularly in how it limited compute capacity in those countries and restricted the use of the data centers.
On the other hand, with the AI Diffusion Rule scrapped, and no replacement ready, we suspect that officials at Commerce could be concerned about the re-opening of the IaaS loophole. The guidance documents appear to attempt to try to cover the gap left by the recission of the AI Diffusion Rule. In those guidance documents, BIS explains a policy whereby sellers of controlled ICs would need to conduct additional due diligence of IaaS providers when red flags are present. That approach stands in contrast to the AI Diffusion Rule, which put some diligence requirement on the service providers. In that we see a significant clue that a new replacement rule will likely find some way to restrict IaaS providers, but balance the interests of U.S. chip manufacturers and AI hyperscalers.
The guidance also announced the Huawei Ascend 910-series chips were presumptively a foreign direct product and subject to the EAR, presumptively violative of the EAR, and ultimately subject to General Prohibit 10. Ostensibly, that guidance could have a chilling effect on the purchase of Huawei chips, particularly in countries that wish to align with U.S. policy, and would help U.S. semiconductor manufacturers regain any ground lost to Huawei in those markets.
Striking a Balance in the New AI Rule
Looking to the future, the yet-to-be-seen replacement rule is going to have to balance the competing interests of a U.S. semiconductor and AI industry that want to expand freely and globally, and the national security concerns of those in government who would want restrict access to advanced semiconductors and AI technology by countries of concern.
For example, U.S. chipmakers will want to continue selling their leading edge GPUs to data centers in Malaysia and India. At the same time, U.S. export policy hawks would want to mitigate the risk of putting immense compute power proximate to, and potentially at the disposal of, PRC AI developers. Additionally, cloud service providers in Southeast Asia will want to be able to sell their services to the largest customer in the region, and would consider using Huawei chips over U.S. alternatives if it meant they could do so. That may mean that BIS cannot put too many restrictions on the region before the chipmakers and hyperscalers begin to voice objections and press to reduce the regulation.
Now that we have thrown away the toaster, selecting a new one—writing a new AI diffusion regulation—will require regulators to walk a narrow line to satisfy the interests of both industry and national security. Those interests are not necessarily opposed to one another, but their interests may be divergent, and it will be up to drafters to find a potentially very narrow common ground.

FOOTNOTES
[1] You know. The thing. It’s a technical term in the appliance repair world.
[2] Because that was his name. In fact, it still is.
[3] General Prohibit 10—or GP10 as it is affectionately known around the Sheppard Mullin offices—is a comprehensive prohibition on essentially doing anything with an item, including destroying or moving the item, if has caused a violation or will cause a violation of the EAR.

Workplace Strategies Watercooler 2025: The AI-Powered Workplace of Today and Tomorrow [Podcast]

In this installment of our Workplace Strategies Watercooler 2025 podcast series, Jenn Betts (shareholder, Pittsburgh), Simon McMenemy (partner, London), and Danielle Ochs (shareholder, San Francisco) discuss the evolving landscape of artificial intelligence (AI) in the workplace and provide an update on the global regulatory frameworks governing AI use. Simon, who is co-chair of Ogletree’s Cybersecurity and Privacy Practice Group, breaks down the four levels of risk and their associated regulations specified in the EU AI Act, which will take effect in August 2026, and the need for employers to prepare now for the Act’s stringent regulations and steep penalties for noncompliance. Jenn and Danielle, who are co-chairs of the Technology Practice Group, discuss the Trump administration’s focus on innovation with limited regulation, as well as the likelihood of state-level regulation.

Section 899: Proposed Legislation Would Increase US Tax Rates on Many Foreign Individuals, Companies, and Governments

Under the proposed Defending American Jobs and Investment Act, introduced in the House of Representatives and approved by the House Ways and Means Committee on May 14, 2025, as part of the Trump administration’s tax package known as “The One, Big, Beautiful Bill,” a new Section 899 would be added to the Internal Revenue Code. This proposed provision—titled “Enforcement of Remedies Against Unfair Foreign Taxes”—represents a significant new international tax enforcement measure.
According to the administration, the proposed Section 899 is intended to serve as a strong legislative response to the growing use of foreign tax regimes that, in its view, unfairly target and burden U.S. businesses and individuals operating abroad. The provision would authorize countermeasures against persons and companies located in jurisdictions that impose what the legislation defines as an “unfair foreign tax.”
The bill is expected to be considered by the full House next week as part of the reconciliation measure. Presuming it passes the House, this portion of the reconciliation measure will then be considered by the Senate Finance Committee, where provisions of the House measure could be changed, and then the full Senate. 

Go-To Guide

Proposed Section 899 would significantly increase U.S. federal income tax rates—by 5% to 20%—on certain types of income earned by non-U.S. individuals and entities that are tax residents of, or are established or effectively managed in, “discriminatory foreign countries.” These jurisdictions are defined as those that impose an “unfair foreign tax” under the proposed legislation. 
These elevated rates would apply to passive U.S. source income (such as dividends, interest, royalties, and rents), as well as income effectively connected with a U.S. trade or business (ECI). 
The legislation defines “unfair foreign taxes” broadly, encompassing digital services taxes and other measures that have been widely adopted by foreign jurisdictions. As a result, a large number of non-U.S. individuals and entities could fall within the scope of the increased tax rates. 
These higher rates would apply across a broad spectrum of existing tax provisions and would affect nonresident individuals, foreign corporations, and even sovereign entities. 
If enacted, Section 899 would introduce substantial economic and compliance challenges, particularly for foreign governments, multinational enterprises, and investors with connections to jurisdictions that impose taxes perceived to disproportionately impact U.S. interests—such as digital services taxes or global minimum tax regimes. 
Taxpayers potentially impacted by this proposal should carefully assess how their U.S. tax exposure could change under the new rules and evaluate possible strategies to mitigate adverse effects.

Click here to continue reading the full GT Alert.

Brussels Regulatory Brief: April 2025

Antitrust and Competition
European and UK Antitrust Enforcers Impose Fines Over End-of-Life Vehicles Recycling Cartel 
On 1 April 2024, both the European Commission (the Commission) and the UK Competition and Markets Authority (CMA) fined major car manufacturers and trade associations for participating in a 15-year long cartel concerning end-of-life vehicle recycling. The Commission’s and CMA’s decisions highlight the authorities’ interest in pursuing novel theories of harm that may have an adverse impact on the green transition.
Financial Affairs
EU Institutions Finalize Omnibus I; EFRAG adopts Work Plan to Simplify ESRS
The European Parliament and the Council of the European Union finalized the legislative procedure for Omnibus I, while the European Financial Reporting Advisory Group (EFRAG) adopted the work plan detailing next steps for European Sustainability Reporting Standards (ESRS) simplification.
Commission Presents Savings and Investments Union
The Commission presented its Savings and Investment Union, outlining future legislative and nonlegislative initiatives to strengthen EU capital markets.
Sanctions
European Court of Justice Confirmed that the Ban on the Export of EU Banknotes to Russia Also Applies when the Money Is Intended to Finance Medical Treatments
The European Court of Justice ruled that only amounts strictly necessary for travel and basic living expenses may be brought into Russia.
Antitrust and Competition
European and UK Antitrust Enforcers Impose Fines Over End-of-Life Vehicles Recycling Cartel 
On 15 March 2022, the European Commission (Commission) and the UK Competition and Markets Authority (CMA) conducted parallel unannounced inspections (dawn raids) at the premises of companies and trade associations active in the automotive sector in several EU member states and in the United Kingdom. On 1 April 2025, the Commission fined 15 major car manufacturers and a trade association a total of approximately €458 million for participating in a 15-year-long cartel concerning the recycling of end-of-life vehicles (ELVs), i.e., cars that are no longer fit for use, either due to age, wear and tear, or damage. On the same day, the CMA imposed fines against 10 car manufacturers and two trade associations of approximately £77.7 million for breaching UK competition law for a similar conduct affecting the UK market.
Both the Commission and the CMA found that the parties infringed EU and UK competition law by colluding on two aspects:

Car manufacturers agreed not to pay car dismantlers for processing ELVs and shared commercially sensitive information on their individual agreements with car dismantlers. The car dismantlers were therefore unable to negotiate a price with the car manufacturers. 
The parties also agreed not to advertise how ELVs could be recycled, recovered, and reused, and how much recycled materials are used in new cars. The Commission stated that the car companies’ objective was to prevent consumers from considering recycling information when choosing a car, which could lower the pressure on companies to improve their environmental efforts and go beyond legal requirements on recyclability. 

The Commission’s and CMA’s investigations involved trade associations that were found to act as a facilitator of the cartel by arranging meetings and contacts between car manufacturers.
Both investigations were triggered by a leniency application submitted by one of the cartel participants. As this participant has revealed the cartel, it was not fined and received full immunity from penalties. In addition, all companies admitted their involvement in the cartel and agreed to settle the case, which reduced the fine by 10% in the Commission’s investigation and 20% in the CMA’s investigation.
Teresa Ribera, executive vice president for Clean, Just and Competitive Transition, commented: 
We will not tolerate cartels of any kind, and that includes those that suppress customer awareness and demand for more environmental-friendly products. High quality recycling in key sectors such as automotive will be central to meeting our circular economy objectives, not only to cut waste and emissions, but also to reduce dependencies, lower production costs and create a more sustainable and competitive industrial model in Europe.

The Commission also stated that this investigation was the largest settlement case it has concluded so far. This shows that the Commission can use the settlement procedure in exceptionally large settlement cases. Also, this parallel investigation illustrates the Commission’s and the CMA’s close coordination in investigating novel theories of harm that may have an adverse impact on the green transition.
Financial Affairs
EU Institutions Finalize Omnibus I; EFRAG Adopts Work Plan to Simplify ESRS
On 3 April, the European Parliament approved the text of the first part of the Omnibus package (Omnibus I). Omnibus I postpones the application date of the reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) by two years for certain groups of companies, and it also postpones the transposition deadline as the first wave of application of the Corporate Sustainability Due Diligence Directive by one year. Members of the European Parliament (MEPs) largely supported the proposal: 531 voted in favor, 69 against, and 17 abstained. The pro-European political groups (the European People’s Party, the Socialists and Democrats, and Renew Europe) were able to reach an agreement to approve the content of the proposal a few hours before the votes. Further, the final text of Omnibus I was published in the Official Journal of the European Union on 17 April and is now in force at the EU level. The directive mandates member states to transpose it into national law by 31 December 2025. 
In a related development, the European Financial Advisory Reporting Group (EFRAG) adopted its work plan on the simplification of European Sustainability Reporting Standards (ESRS) under CSRD. This review is part of EFRAG’s broader mandate to assess the entire ESRS framework, as set out in a mandate letter from Commissioner Maria Luís Albuquerque. EFRAG is expected to submit its technical advice to the Commission by 31 October 2025. 
Now that the first part of the package is completed, MEPs and member states at the Council of the European Union are discussing internally their approach to the second part (Omnibus II), which introduces substantial simplification amendments to the obligations and requirements notably comprised in these two frameworks. Check this article for a summary of the proposed amendments by Omnibus II.
Commission Presents Savings and Investments Union
On 19 March, the Commission issued a Communication on the Savings and Investments Union, seeking to offer EU citizens broader access to capital markets and better financing opportunities for businesses. The strategy focuses on four key pillars: (i) citizens and savings, (ii) investments and financing, (iii) integration and scale, and (iv) efficient supervision in the single market. For each pillar, the Commission underlined both legislative and nonlegislative actions to be adopted throughout 2025 and 2026. 
For citizens and savings, the Commission underlined that it would facilitate negotiations between the European Parliament and member states on the Retail Investment Strategy, but it will not hesitate to withdraw the proposal if the negotiations do not meet the objectives of the strategy. Key initiatives include a review of pension frameworks to bolster retail investor participation, a financial literacy strategy by Q3 2025, and a EU-wide framework for savings and investment accounts. For the investment and financing pillar, the Commission aims to facilitate equity investments by institutional investors, revise Solvency II criteria for long-term equity investments, and streamline securitization requirements by mid-2025, with additional reforms targeting private market liquidity due in 2026.
On integration and supervision, the Commission plans to reduce capital market fragmentation and enhance cross-border activity through emerging technologies such as artificial intelligence, simplifying rules for asset managers and potentially reviewing the Shareholders Rights Directive. In the context of capital markets integration, the Commission launched a public consultation to gather views on obstacles to financial markets integration across the European Union. On oversight, reforms to the European Supervisory Authorities could delegate supervisory powers to EU-level bodies, particularly for crypto services and large cross-border managers. 
The Commission will conduct a midterm review of the strategy by mid-2027 to assess progress and refine initiatives.
Sanctions
European Court of Justice Confirmed that the Ban on the Export of EU Banknotes to Russia Also Applies when the Money Is Intended to Finance Medical Treatments
Under EU sanctions imposed on Russia, it is prohibited to sell, supply, transfer, or export banknotes denominated in any official currency of an EU member state to Russia or to any natural or legal person, entity, or body in Russia, including the Russian government and the Central Bank of the Russian Federation, or for use in Russia. Only three limited exemptions to this general ban exist: (i) export of banknotes for the personal use of natural persons traveling to Russia or members of their immediate families traveling with them, (ii) export of banknotes for the official purposes of diplomatic missions, or (iii) export necessary for civil society and media activities that directly promote democracy, human rights, or the rule of law in Russia.
In case C-246/24, Generalstaatsanwaltschaft Frankfurt am Main, delivered on 20 April 2025, the European Court of Justice addressed the situation where German customs officers discovered a passenger heading to Russia carrying nearly €15,000 in banknotes. The passenger stated the money was intended not only for travel costs but also for medical procedures in Russia, including dental work, hormone therapy for fertility, and follow-up care after breast surgery. Authorities confiscated most of the money, permitting the passenger to retain around €1,000 for travel-related needs.
The court ruled that carrying banknotes to Russia for medical treatment does not qualify as personal use under the exemption. The court reiterated that exceptions are to be interpreted strictly so that general rules are not negated. A broad interpretation of the exemption would result in a situation where it would be possible to transfer to Russia, without restriction, large sums of banknotes to make personal purchases of any kind there, and, moreover, it would be difficult to verify that such purchases are carried out. 
The exemption in question is limited to covering costs directly related to the journey and stay—medical treatments do not fall within that scope, as the EU sanctions are ultimately intended to prevent the Russian economic system from gaining access to cash denominated in any currency of a EU member state to support Russia’s activities in the war in Ukraine.
Additional Authors: Petr Bartoš, Vittoriana Todisco, Kathleen Keating, Sara Rayon Gonzalez, Covadonga Corell Perez de Rada, Simas Gerdvila, Edoardo Crosetto, and Martina Pesci.

Europe: Ireland Agrees Mutual Recognition of Funds Framework With Hong Kong

The Central Bank of Ireland (CBI) and the Securities and Futures Commission of Hong Kong (SFC) entered into a Memorandum of Understanding on 14 May 2025 establishing a framework for the mutual recognition of funds (MRF) between the two jurisdictions.
SFC developed the MRF programme to streamline the distribution of partner country funds to the public in Hong Kong and of Hong Kong funds in partner countries. Ireland is the sixth European partner country to participate in the framework following Switzerland, France, the UK, Luxembourg and the Netherlands. As part of the programme, the SFC has launched a new Fund Authorisation Simple Track scheme, known as FASTrack, which allows for authorisation in Hong Kong of MRF eligible funds within 15 business days.
As part of its agreement with the CBI, the SFC has announced that the following Irish UCITS funds will meet its MRF eligibility requirements:
(a) General equity funds, bond funds, mixed funds and funds that invest in other schemes;(b) Feeder funds where the underlying funds fall within (a), (c), (d) or (e).(c) Unlisted index funds;(d) Passively managed index tracking ETFs; and(e) Listed active ETFs.
In addition, the UCITS must have a CBI authorised management company meeting certain capital requirements, appoint a Hong Kong based representative and comply with applicable Irish domestic laws and regulations relating to the sale, distribution and ongoing compliance of funds.
The inclusion of ETFs is notable and will amplify focus on accessing the ETF Connect programme between Hong Kong and Mainland China and further discussions as to whether there may be a future entry point for Irish ETFs.
Overall, this is a very welcome development for Irish UCITS funds and should increase Hong Kong’s attractiveness as a target country for distribution.

Global Trade in 2025: Outbound Investment Restrictions

Motivated by a rapidly evolving geopolitical climate, governments around the globe have increasingly scrutinized and intervened in transactions under foreign direct investment (FDI) screening regimes in recent years. Rising protectionism, concerns over cybersecurity threats, Covid-19 and the desire to protect critical domestic industries have driven the expansion of FDI regimes beyond purely national security or defense specific industries.
More than 100 jurisdictions now apply FDI screening in some form. The notification triggers and review processes vary significantly between these regimes, and their proliferation has significantly increased complexity for investors planning cross-border investments.
The New Frontier: Outbound Investment Screening
Having spent the last few years building and/or refining inward investment screening, governments are now turning to outbound investment screening, amidst concerns about economic dependence and technology leakage. Governments are increasingly concerned about offshoring of critical capabilities, which can facilitate the development of sensitive technologies in potentially hostile states and lead to over reliance on third countries, creating economic dependencies that can be exploited for geopolitical purposes.
The People’s Republic of China (PRC), Japan, South Korea and Taiwan already have outbound investment screening for domestic entities, primarily in sectors considered critical to national security and technological competitiveness. The US and Europe are now catching up, with US screening for outbound investments into certain sectors in “Countries of Concern” applicable from January 2025, and the EU launching an outbound investment monitoring exercise in similar categories of critical technology. While the EU and UK have not implemented formal outbound investment screening, each has signaled its concerns.
US: Outbound Investment Program (Executive Order 14105)
Regulatory expansions to maintain US technological leadership have included rules to monitor and restrict outbound investment – so-called “reverse CFIUS.” On August 9, 2023, President Biden issued Executive Order 14105 – “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.” On October 28, 2024, the US Department of the Treasury issued final regulations implementing Executive Order 14105, which address investments by US persons in certain identified technologies in “Countries of Concern”, including PRC and the Special Administrative Regions of Hong Kong and Macau.
The regulations, which became effective January 2, 2025, prohibit certain transactions by US persons implicating highly strategic technologies, and create a post-closing notification requirement for certain other transactions. Under the regulations, the obligations on US persons will apply if such person has actual or constructive knowledge of relevant facts or circumstances relating to a transaction. A US person has such knowledge under the regulations if it possesses actual knowledge that a fact or circumstance exists or is substantially certain to occur; an awareness of a high probability of the existence or future occurrence of a fact or circumstance, or could have possessed such awareness through a reasonable and diligent inquiry.
The categories of covered transactions include the acquisition of an equity interest or a contingent equity interest, certain debt financing that grants certain rights to the lender, the conversion of a contingent equity interest, certain “greenfield” investments (building a new facility) or other corporate expansions, the entry into a joint venture, and certain investments as a limited partner or equivalent (LP) in a non-US person pooled investment fund. Excepted transactions include investments in publicly traded securities, certain LP investments with a threshold of $2,000,000, derivatives, buyouts of country of concern ownership, intracompany transactions, certain pre-final rule binding commitments, certain syndicated debt financings, and equity-based compensation.
The regulations apply to the conduct of US persons only and defines a US person as “any United States citizen, lawful permanent resident, entity organized under the laws of the United States or any jurisdiction within the United States, including any foreign branch of any such entity, or any person in the United States.” Under the America First Investment Policy issued in February 2025, the US administration is considering new or expanded restrictions on US outbound investment in the PRC in sectors such as semiconductors, artificial intelligence, quantum, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by the PRC’s national Military-Civil Fusion strategy.
EU: Market Monitoring to Inform Future Policy on Outbound Investment Screening
On January 15, 2025, the European Commission published a Recommendation on reviewing outbound investments in technology areas critical for the economic security of the Union. The Recommendation asks EU Member States to review investments made between January 2021 and June 2026 by EU-based investors into third countries in three critical technologies for economic security: semiconductors, artificial intelligence and quantum technologies.
The EU Recommendation applies to acquisitions, mergers, “greenfield” investments, joint ventures, venture capital investments and the transfer of certain tangible and intangible assets, including IP or know-how. Non-controlling investments limited to seeking a return on invested capital are excluded. Member States are requested to gather information through mandatory or voluntary notification processes, and to perform a risk assessment of covered transactions with the European Commission.
The EU Recommendation covers the same three technologies as the US outbound regulations, although some of the definitions are narrower. The US outbound regulations also apply to non-controlling investments, although in other respects the EU Recommendation is wider because it covers all third countries as well as IP licensing.
This will be a significant information gathering exercise for transaction parties, Member States and the European Commission, with Member State progress reports due in July 2025 and final reports in July 2026. The review will inform a decision on whether further action is needed to regulate outbound investment at EU and/or national level.
In the meantime, Member States are continuing to expand FDI screening regimes for inward investment, with Ireland’s the latest to come into force in January, and Greece publishing its proposed screening framework in April. On May 8, 2025, the European Parliament endorsed revised rules for screening foreign investments into and within the EU. Under the proposed new rules, certain sectors such as critical raw materials and transport infrastructure will be subject to mandatory FDI screening by Member States. National procedures will be harmonized, and the Commission will have the power to intervene. Member States are now negotiating the text of the legislation, currently aiming to reach agreement in June.
UK: Position on Outbound Investment
In May 2024, the UK government published updated guidance on the National Security and Investment Act (NSIA), emphasizing that it can apply to “outward direct investment” from the UK. The NSIA may apply to the acquisition of an entity or asset outside the UK if the entity carries on activities in the UK or supplies goods or services to the UK, or the asset is used for these purposes.
This is not a change. It has been the position since the NSIA came into force in January 2022. However, it is noteworthy that the UK government chose to underline these powers and provide examples of when the NSIA would apply to acquisitions of a non-UK entity or asset.
The UK government has indicated that it is considering more substantive rules on outward investment screening, to complement the existing tools of export controls and inbound investment screening.
Strategies For Asset Managers to Mitigate Risks to Deal Certainty, Timelines and Costs

Conduct outbound investment reviews early in the deal process to assess exposure to “countries of concern” (e.g., China, Hong Kong, Macau).
Screen for sector sensitivity — artificial intelligence, quantum technology and semiconductors.
Include side-letter language addressing outbound investment screening compliance.
Diligence efforts should conform to the knowledge standard in the US outbound regulations and include:

inquiries to the relevant counterparty (e.g. the prospective portfolio company, fund manager or seller).
contractual representations or warranties that the target portfolio company does not engage in the in-scope technologies; or that the target fund is not a covered foreign person.
consideration of relevant public and non-public information, including the use of available public and commercial databases to verify information provided by the counterparty.

Monitor the evolving regulatory landscape and be prepared to adjust investment strategies and structures accordingly. Understanding the underlying policy drivers will enable investors to navigate regimes more effectively and reduce execution risk.
And finally…reconsider your government relations strategy: governments are trying to strike a balance between protecting national interests and encouraging investment, so they are continually seeking feedback and there are many opportunities to shape the policy debate.

Todd J. Ohlms, Robert Pommer, Seetha Ramachandran, Nathan Schuur, Jonathan M. Weiss, Mary Wilks, William D. Dalsen, Adam L. Deming, Adam Farbiarz, and Hena M. Vora contributed to this article