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23 July 2009 - Guidelines for Recipient Country Investment Policies relating to National Security have been adopted by the OECD to help governments preserve their reputation for fair treatment of international investors while meeting their countries' security needs.
Over the last five years, national security reviews of incoming investments have become an increasingly important focus for investment policy makers. In 2005, France established the sectors where foreign investment is subject to review. In 2006, China passed legislation to allow the government to block investments affecting national economic security. In 2007, the United States enhanced the review process under the Committee on Foreign Investment in the United States (CFIUS); Japan expanded the sectoral coverage of its investment regulations for national security. In 2008, Korea clarified the procedures to restrict foreign investment for national security reasons; Russia adopted a law on foreign investment in 42 sectors of strategic importance for defence and security. In 2009, Canada and Germany introduced all-sectors national security review mechanisms. In India, the merits of CFIUS type reviews have been debated. There are indications of a growing number of investment transactions being investigated, mitigated or eventually blocked on national security grounds.
Care must be taken to ensure that such measures address genuine security concerns and avoid disguised protectionism, which would impose high costs on national economies and delay recovery. To prevent protectionist use of national security measures and to increase their effectiveness, the OECD Guidelines, which have been adopted by the 30 OECD countries and now form part of OECD legal acquis, recommend steps which governments should take to make their national security measures:
- least-discriminatory,
- transparent and predictable,
- proportionate to the objective pursued,
- and accountable in their application.
OECD countries, together with other emerging economies participating in the Freedom of Investment process, hosted at the OECD, will monitor use of national security measures and publicly report on observance of the new Guidelines.
Information on recent security related measures can be found in the "Inventory of investment measures taken between 15 November 2008 and 15 June 2009", which has just been published and which monitors investment policy developments in 42 countries since the first G20 Summit.
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