Juan Enrique Serrano-Moreno*

Introduction

Over the past decade, many states have strengthened or created specific procedures for reviewing foreign investment on national security grounds. In Chile, by contrast, the regulatory framework governing foreign direct investment—Law No. 20,848 and Supreme Decree No. 56 of 2017—remains primarily structured around the promotion and facilitation of investment. As a result, potential strategic risks can only be addressed indirectly through fragmented and sometimes inconsistent administrative decisions.

The acquisition of CGE by the Chinese state-owned company State Grid in 2020 and 2021 marked a turning point. It was the first case in Chile in which national security arguments were invoked in administrative proceedings to question a foreign investment transaction. Since then, other controversial cases involving Chinese firms have emerged, suggesting that Chilean public economic law is not well adapted to the current geopolitical environment.

In this context, the creation of a foreign investment screening procedure in Chile could help reconcile legal certainty with the protection of strategic interests. Yet such a mechanism alone would not be enough. The underlying problem also involves other areas of state authority, particularly infrastructure governance, public procurement, and inter-agency coordination.

Comparative law lessons

The spread of foreign investment screening procedures reflects a broader transformation in international economic governance. Energy grids, ports, submarine cables, digital platforms, semiconductors, and critical mineral supply chains have all become sensitive sectors in which great-power rivalry increasingly unfolds.

Conceptually, these regimes reflect a more holistic understanding of national security. Security is no longer confined to defence or the military-industrial sphere; it now encompasses economic, technological, digital, and informational risks. In a comparative perspective, this evolution generally unfolds in two stages. First, states update their national security doctrine through soft-law instruments. Second, they establish specific procedures for reviewing investment in sensitive sectors, with the executive branch playing the central role.

At the same time, these regimes significantly narrow the scope of judicial review. Courts usually limit themselves to examining procedural defects and possible abuses of power, rather than replacing the executive’s substantive judgment with their own. This helps explain the relatively low level of litigation in this area.

The United States was a pioneer in this field, establishing a political mechanism for foreign investment review through the creation of CFIUS in 1979, later reinforced in 2018. China also adopted a comparable mechanism through the 2015 National Security Law, further developed by the Measures for the Security Review of Foreign Investment, in force since 2021. This trend subsequently consolidated in the European Union, the United Kingdom, Canada, Singapore, and the Philippines, among others.

In the European Union, Regulation (EU) 2019/452 established a coordination framework between the Commission and the Member States for exchanging information, comments, and alerts on investments that may affect security or public order. This is therefore a multilevel model: the Regulation organises cooperation and diffuses a shared language of risk, while leaving each Member State responsible for creating and managing its own screening procedure.

Canada provides a particularly useful example. The Investment Canada Act establishes a national security review procedure in Part IV.1 and in the 2009 regulations. In the Chengze Lithium International–Lithium Chile Inc. case, the Canadian government ordered on 2 November 2022 that the Chinese company Chengze divest from Lithium Chile, a Canadian firm with assets in Chile and Argentina. One notable feature of the Canadian model is its limited transparency, as executive decisions are announced without publication of the underlying administrative act.

Comparative law, therefore, shows that such procedures necessarily rely on discretionary executive decision-making. There is no realistic model of strategic investment control based on market automatisms or highly rule-bound procedures capable of producing a stable body of case law, since challenged decisions remain rare. Where these mechanisms work, they do so by strengthening the administration’s political and technical capacity under clear executive leadership, robust interministerial coordination, and limited judicial intervention. In Chile, this would require sustained strengthening of the body entrusted with the procedure, equipping it with permanent, specialised staff and long-term analytical capacity in legal, economic, technological, and geopolitical fields.

The second lesson is strategic. Comparative experience also suggests that it is unwise to establish a screening procedure without first defining what the state itself understands by national security in its own context. In most of the cases examined, the creation of screening mechanisms was preceded or accompanied by soft-law instruments—doctrines, national strategies, white papers, policy guidelines, or other non-binding framework documents—that identify threats, sensitive sectors, and national priorities.

Conclusions

Chile has two main options for updating its legal framework: either introduce targeted amendments across statutes or adopt a new legislative framework through an Economic Security and Critical Infrastructure Framework Law. The second option appears preferable, as it would bring greater coherence to the reform and make it more intelligible to public opinion, Congress, and international stakeholders.

Moreover, such reform should establish the executive’s obligation to adopt—and periodically update—a soft-law instrument defining a national economic security strategy, as comparative experience suggests. In the Chilean case, the minimum contents of such a strategy could include supply chain resilience, critical minerals, climate change adaptation, digital, energy, port infrastructure, and Chile’s logistical projection towards Antarctica.

Such a strategy would give the executive a clearer basis for justifying decisions adopted through the investment screening procedure. It would also improve interministerial coordination by guiding other administrative actions, including the drafting of tender specifications for public works, services, and concession contracts. The need to regulate by statute the procedure for preparing this strategy is also supported by Chile’s own experience. The failed attempt to adopt a National Security and Defence Strategy under the Piñera administration in 2012 can be explained, at least in part, by the optional nature of that instrument.

A reform framed in these terms would enable presenting the new framework as a stable, general, and non-discriminatory state policy rather than as a contingent response to external pressure or a tool directed against any specific country. That signal would strengthen both the domestic legitimacy of the reform and Chile’s international reputation

*Juan Enrique Serrano-Moreno

Associate Professor, Institute of International Studies, University of Chile.
PhD in Political Science, University of Paris 1 Panthéon-Sorbonne.
https://orcid.org/0000-0002-8466-1556