On 5 March 2019, the Council of the EU approved a new framework to screen foreign direct investments ("FDI") coming into the EU. This concludes a legislative process kicked off in 2017. The newly adopted Regulation aims to protect the EU's strategic critical assets against investments that are detrimental to the legitimate interests of the Union or its Member States. It sits well with the more ambitious move by France and Germany to shape a European industrial strategy,1 which acknowledges FDI screening as one of its centrepieces.
The new enabling framework
The Regulation does not establish EU-level screening nor does it harmonise existing screening mechanisms or obligate Member States to create an FDI screening mechanism. Instead, it confirms that Member States may maintain, amend or adopt FDI screening mechanisms on grounds of security or public order under the conditions spelled out in the Regulation. It also acknowledges that Member States will retain their final decision-making power on FDI.
Rather, the Regulation seeks to set in place a framework that will enable structured cooperation between the European Commission (EC) and the Member States, while allowing decentralised FDI investment screening by the Member States.
To that end the new framework will:2
Create a cooperation mechanism where Member States and the EC will be able to exchange information and raise concerns related to specific investments; this includes a notification obligation of the Member States towards the EC and other Member States regarding FDIs that are subject to their screening; Allow the EC to issue opinions when an investment poses a threat to the security or public order of more than one Member State, or when an investment could undermine a project of EU interest (e.g. Horizon 2020 or Galileo). The EC is obliged to issue an opinion if at least one third of the Member States believe the FDI may adversely affect their security or public order, or upon a request from the Member State in whose territory the FDI is planned. The Member State to which the opinion is addressed is required to take utmost account of the EC's position and to provide the EC with an explanation should it decide not to follow the EC's recommendations; Encourage international cooperation on investment screening, including sharing experiences, best practices and information on issues of common concern. The cooperation between the EC and the Member State should be...
A New Regulation On FDI Screening In Europe
|Author:||Mr Volker Weiss|
|Profession:||Schoenherr Attorneys at Law|
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