New guidelines for foreign investment screening

The aim of the Commission is to preserve EU companies and critical assets in the crisis

Photo: EU Phil Hogan

To preserve EU companies and critical assets, especially in areas of health, medical research, biotechnology and infrastructures that are essential for the security and public order, the Commission issued guidelines to ensure that in a time of public health crisis and economic vulnerability, a strong EU-wide approach to foreign investment screening is used.

If we want Europe to emerge from this crisis as strong as we entered it, then we must take precautionary measures now, EC President Ursula von der Leyen stated adding “as in any crisis, when our industrial and corporate assets can be under stress, we need to protect our security and economic sovereignty”. She also urged Member States to make full use of the tools EU has to deal with this situation under European and national law. The EU is and will remain an open market for foreign direct investment, but this openness is not unconditional, von der Leyen noted.

On his part, Trade Commissioner Phil Hogan also said that the EU is and wish to remain open to foreign investment, but because of the current circumstances, he accented on the need “to temper this openness with appropriate controls”. We need to know who invests and for what purpose, he stressed.

EU countries are empowered by the existing rules to screen foreign direct investments (FDI) from non-EU countries on grounds of security or public order and protection of public health is recognised as an overriding reason in the general interest. Member States can impose mitigating measures such as supply commitments to meet national and EU vital needs or prevent a foreign investor from acquiring or taking control over a company.

National FDI screening mechanisms are currently in place in 14 Member States. With the EU foreign investment screening regulation in force since last year, the EU is well equipped to coordinate control of foreign acquisitions done at the Member States' level.

The executive calls on the remaining Member States to set up a fully-fledged screening mechanism and in the meantime to consider all options, in compliance with EU law and international obligations, to address potential cases where the acquisition or control by a foreign investor of a particular business, infrastructure or technology would create a risk.

Foreign acquisitions taking place now already fall under the EU FDI screening regulation, and could be reviewed under the cooperation mechanism established by the regulation, which will be fully operational as from October 2020.

On capital movements, the guidelines also recall under which specific circumstances free movement of capital, notably from third countries, linked to acquisitions of stakes may be restricted, the Commission warned.

 

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