ANNOUNCEMENT 21 Mar 2019

In March 2019, the European Union issued a regulation establishing a framework for screening direct foreign investments. The framework introduced a cooperation mechanism between Member States and the Commission as well as encouraging international cooperation. Additionally, the framework introduced notification and reporting requirements on Member States concerning foreign investments in the country and related decisions. 

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 1 neutral
  • 0 liberalising

SOURCE

Official Journal of the European Union, Regulation (EU) (EU) 2019/452 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 19 March 2019, published in the Official Journal of the European Union on 21 March 2019: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.LI.2019.079.01.0001.01.ENG&WT.mc_id=Twitter&hootPostID=4e7c0c587f9916ed4aff042607234f4c

European Commission, Press release of 5 March 2019, Foreign Investment Screening: new European framework to enter into force in April 2019: http://europa.eu/rapid/press-release_IP-19-1532_en.htm

Update September 2020
Official Journal of the European Union, Commission Delegated Regulation (EU) 2020/1298 of 13 July 2020 amending the Annex to Regulation (EU) 2019/452 of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into the Union. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32020R1298

Update December 2021
Official Journal of the European Union, Commission Delegated Regulation (EU) 2021/2126 of 29 September 2021 amending the Annex to Regulation (EU) 2019/452 of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into the Union
C/2021/6924. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32021R2126#ntr1-L_2021432EN.01000101-E0001

Inception date: 11 Oct 2020 | Removal date: open ended

FDI: Entry and ownership rule

On 21 March 2019, the European Union issued Regulation (EU) 2019/452 establishing a framework for screening direct foreign investments. The framework overall consist of five elements. 

Firstly, the framework will introduce a cooperation mechanism facilitating information opinion exchange between Member States and the EU Commission.

Secondly, the framework intends to encourage international cooperation concerning investment screening including best practice, areas of common concern and general knowledge sharing.

Thirdly, the EU Commission will be able, under the new regulation, to issue opinion statements on individual investments which may pose a threat to security or public order of several Member states "or when an investment could undermine a project or programme of interest to the whole EU, such as Horizon 2020 or Galileo".

Fourthly, under the regulation, Member States are required to notify the Commission of the introduction of or the amendment to the national screening regime including the approval (with or without conditions) and prohibition of foreign investments. In this context, Member States are required to notify "decisions regarding foreign direct investments likely to affect projects or programmes of Union interest". 

Fifthly, Member States are required to submit a report on foreign direct investments that have taken place in their territories. 

In this context, the Regulation stipulated that: "It is appropriate to lay down the essential elements of the framework for the screening of foreign direct investments by a Member State to allow investors, the Commission and other Member States to understand how such investments are likely to be screened. Those elements should at least include timeframes for the screening and the possibility for foreign investors to seek recourse against screening decisions. Rules and procedures relating to screening mechanisms should be transparent and should not discriminate between third countries."

In determining foreign investment which may affect public order or security, the Commission stipulated that it should be possible to "consider all relevant factors" including "effects on critical infrastructure, technologies (including key enabling technologies) and inputs which are essential for security or the maintenance of public order, the disruption, failure, loss or destruction of which would have a significant impact in a Member State or in the Union." Additionally, the regulation highlights that this might also be taking into account whether the foreign investment is made by an entity which is in owned (directly or indirectly) by a third country government including "State-led outward projects or programmes". Whilst the regulation does not exemplify such programmes, these could technically be programmes promoting SOEs foreign investments in infrastructure abroad, e.g. see related state act. 

In this context, President Jean-Claude Juncker stated in a press release: "Today's decision is a proof the EU is able to act quickly when strategic interests of our citizens and economy are at stake. With the new investment screening framework, we are now much better equipped to ensure that investments coming from countries outside the EU actually benefit our interests. I committed to work for a Europe that protects, in trade as in other areas; with this new legislation in place we are delivering on a crucial part of our promise."

The regulation entered into force 20 days following the date of publication, i.e. on 10 April 2019. However, the Regulation will apply from 11 October 2020.

Update

On 18 September 2020, the EU adopted Commission Delegated Regulation (EU) 2020/1298 that provides further specifications with regards to the EU programmes which are critical to the Union and should be covered by the aforementioned scheme. 

On 3 December 2021, the EU adopted Commission Delegated Regulation (EU) 2021/2126 updating the list of EU programmes that are critical to the Union and should be covered by the aforementioned scheme.

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