1.

Ex Officio Review Is Now One of the Bases to Start a National Security Review Under the FIPA (Newly Inserted as Article 5-2 (3) and (6))

Under the proposed amendment, a Minister with authority may initiate ex officio review of a foreign investment by making a request to the MOTIE Minister when he or she becomes aware of a transaction that triggers the national security review (the “FIPA review”) process as falling under Article 5 (1) (ii) of the Enforcement Decree of the FIPA, which concerns the target prong of the FIPA review. The FIPA review is currently triggered when the transaction results in the foreign investor exercising de facto management control of the target (the transaction prong) and the domestic target is a defense material producer; or is in possession of strategic items, state secret contracts, or “national core technologies” or the foreign investment is likely to cause a material impediment to the maintenance of international peace and security otherwise (the target prong). The proposed amendment accordingly clarifies the bases to start a FIPA review as (i) a foreigner files a report on foreign investment that triggers the review process under the FIPA; (ii) a Minister with authority makes a request for ex officio review under the newly introduced provision, and (iii) upon the foreigner’s request for prior confirmation, the MOTIE Minister confirms that the transaction triggers the FIPA review.

At the same time, the proposed amendment seeks to promote the predictability of the process for the involved parties. No request for ex officio review by a Minister shall be made when three years or more have passed since the occurrence of the event that is the basis for the FIPA review or when the MOTIE Minister has already confirmed that the transaction does not trigger the FIPA review upon the foreigner’s request for prior confirmation.
 

2.

The Proposed Amendment Provides the Bases for Request to Submit Materials and Undertake Corrective Measures (Newly Inserted as Article 5-2 (4) and (11))

For the transparency of the process, the proposed amendment expressly provides that the committees have the power to request for the submission of materials to the foreign investors and others.  

The proposed amendment also adds that a corrective order may be issued or other necessary measures may be undertaken if a foreigner fails to report a foreign investment that triggers the FIPA review or files a report in a fraudulent manner or using other improper means.
 

3.

National High-Tech Strategic Technologies (“NHTSTs”) Are Officially Added as One of the Reasons for FIPA Review; FIPA Review May Be Omitted if the Transaction Is Reviewed Under Other Laws and Regulations (Amendment to Article 5 (1); Newly Inserted as Article 5-2 (9))

The proposed amendment adds another basis that triggers the FIPA review, i.e., the transaction is likely to lead to the leakage of NHTSTs. NHTSTs are often more advanced than national core technologies in technical specifications and technologies designated as NHTSTs are automatically considered as national core technologies, therefore they have been construed as also triggering the FIPA review in practice. The proposed amendment acknowledges that a foreign investment on a domestic target in possession of NHTSTs is a ground for the FIPA review.

Meanwhile, the FIPA review may be omitted when the foreign investment has already gone through a review and determination process under other laws and regulations for meeting one of the grounds under the target prong of the FIPA review (Article 5-2 (9) of the proposed bill). As the proposed amendment is silent on the exact meaning of “a review and determination under other laws and regulations,” further clarification by MOTIE seems to be in need.
 

4.

Proposed Amendment Provides the Basis for the Establishment of the Expert Committee and Its Power to Conduct Factual Inquiry (Newly Inserted as Article 5 (5) and (7))

The proposed amendment aims to strengthen the operation of the FIPA review system by providing the legal bases for the establishment of the Expert Committee and for the Expert Committee’s factual inquiry on the materials submitted by foreign investors or others in the FIPA review process.
 

5.

For Pre-confirmation Requests, the MOTIE Shall Respond Within 30 Days (Newly Inserted as Article 5 (1) and (2) of the Bill)

In the event where a foreigner requests the MOTIE to make a prior confirmation on whether the foreign investment is subject to the FIPA review, the MOTIE shall respond within 30 days in principle (not including the time spent for supplementation of materials) to assist prompt decision-making by foreign investors.
 

6.

Timelines for the FIPA Review Are Specified by Stage (Newly Inserted as Article 5-2 (6) and (8))

The timelines on each stage of the FIPA review are adjusted to improve the efficiency of the process. To ensure in-depth review within a reasonable period of time, the proposed amendment provides that (i) the Expert Committee’s review shall be completed within 90 days from the commencement of the FIPA review and may be extended only once by up to 30 days if unavoidable; (ii) the MOTIE Minister shall make the final determination on whether the proposed foreign investment poses a threat to national security, based on the determination by the Foreign Investment Committee, within 45 days from the day the Expert Committee finished its review. However, while setting forth the timeline for each stage as mentioned above, the proposed amendment does not cover what measures can be taken when the deadlines have passed. Further developments in actual cases should be closely monitored.
 

7.

Duty to Make a Public Announcement of the Review Outcome Is Removed (Newly Inserted as Article 5-2 (10) and (12) of the Bill)

Under the current law, the MOTIE Minister shall notify the foreign applicant for the FIPA review and also make a public announcement of his or her conclusion on whether the reviewed transaction posed a threat to national security, the grounds for the final decision, and the content of the condition if the transaction was conditionally approved. The proposed amendment removes the public announcement, while the MOTIE Minister shall still notify the foreigner on the above determination.