Articles

Foreign Direct Investment Screening in the EU

Foreign Direct Investment Screening in the EU

Foreign Direct Investment Screening in the EU

26.03.2019 EU law

On 21 March 2019, Regulation 2019/452/EU was published providing for a framework for the screening of foreign direct investments into the European Union and its Member States. This Regulation shall apply from 11 October 2020.

Objectives

Regulation 2019/452/EU aims to strike a balance between maintaining the EU’s openness to foreign direct investments (‘FDIs’) and ensuring that the EU's essential interests are not undermined.

Member States are allowed to implement FDI screening mechanisms for foreign direct investments, provided (i) that all rules and procedures of the FDI screening mechanism are transparent and non-discriminatory, (ii) that confidential and commercially-sensitive information are protected, and (iii) that foreign investors have a right to appeal.

Member States are also instructed to cooperate with each other and the European Commission by notifying any foreign direct investment undergoing screening. Other Member States or the European Commission can also draw attention to foreign direct investments in a Member State that are not undergoing screening.

Affected investments

Screening is limited to foreign direct investments likely to affect the security or the public order of a Member State or of the EU.

Foreign direct investments are – simplified – all investments by an investor from a third country aiming to establish or to maintain lasting and direct links with an EU company, including investments which enable effective participation in the management or control of that company (art. 2(1)).

In determining whether a foreign direct investment affects the security or the public order, Member States may take into account the potential effects on:

  • critical infrastructure, such as energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities;
  • critical technologies, such as artificial intelligence, robotics, semiconductors, cybersecurity, quantum technologies, nuclear technologies, nanotechnologies and biotechnologies;
  • supply of critical inputs, such as energy, raw materials, and food security;
  • access to sensitive information, including personal data, or the ability to control such information; or
  • the freedom and pluralism of the media.

Furthermore, Member States may take into account:

  • whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding;
  • whether the foreign investor has already been involved in activities affecting security or public order in a Member State; or
  • whether there is a serious risk that the foreign investor engages in illegal or criminal activities.

Impact of Brexit

All investments by an investor from a third country may be subject to the FDI screening mechanism. Given that the United Kingdom will become a third country after Brexit, investments by British investors may therefore also become subject to a FDI screening mechanism.

Reporting and evaluation

The Regulation also provides for a reporting and evaluation mechanism.

By 31 March of each year, Member States must submit to the European Commission an annual report covering the preceding calendar year, which shall include aggregated information on foreign direct investments that took place in their territory. The Commission will collect all information and provide an annual report on the implementation of the Regulation to the European Parliament and to the Council. That report will also be made public. The Commission already published a first in-depth analysis of foreign direct investment flows into the EU on 13 March 2019.

By 12 October 2023 and every five years thereafter, the European Commission will evaluate the functioning and effectiveness of the Regulation and present a report to the European Parliament and to the Council with recommendations to amend the Regulation.

Next steps

Regulation 2019/452/EU does not require Member States to implement an FDI screening mechanism, but Member States who do, must comply with the Regulation. Flanders recently implemented an FDI screening mechanism. To read our blog post on the Flemish FDI screening mechanism: click here.

Team

Related news

21.03.2019 NL law
15 aspects of Brexit you did not know

Short Reads - A Brexit without a deal, or with a deal that does not cover all relevant aspects, is still a potential scenario. We have highlighted a number of unexpected legal consequences of Brexit in such a no deal or incomplete deal scenario.

Read more

10.01.2019 BE law
De vrijwaring van de Vlaamse strategische belangen tegen vijandige buitenlandse investeerders

Articles - Op 1 januari 2019 trad het Vlaamse Bestuursdecreet in werking. Dit decreet bevat – naast diverse generieke bepalingen betreffende de relatie tussen burger en overheid enerzijds, en de organisatie en werking van de overheid anderzijds – een specifieke regeling, die de strategische belangen van Vlaanderen moet vrijwaren.  

Read more

12.03.2019 LU law
Entry into force of the RBE Regulation and update

Articles - The Grand-Ducal Regulation of 15 February 2019 on the registration, payment of administrative fees and access to information recorded in the register of beneficial owners (the “RBE Regulation”) entered into force on 1 March 2019 and depicts the practical aspects of the Law of 13 January 2019 establishing a beneficial owner register (the “RBE Law”). Another document, the LBR Circular 19/01 (the “Circular”) issued by the Luxembourg Business Registers on 25 February 2019  further describes the new register of beneficial owners (the “RBE”) with the aim of helping users. 

Read more

28.09.2018 BE law
Second Belgian Offshore Wind Farm Area to be tendered

Articles - At the Council of Ministers session on 31 August 2018, the principle memorandum Tendering offshore wind farms from 2020 onwards was approved. This memorandum sets out the actions and timing for the new area for offshore wind farm (1.7 GW). Very similar to what has happened in the Netherlands, the right to construct and operate new wind farms will be tendered in hope of not having to grant any subsidies at all.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring