The Proposed Revision to the EU
Introduction
Earlier in the The legislative proposal builds, as noted in the Commission’s 4th Annual Report on the screening of foreign direct investments (FDI),
on the experience gained by the Commission and EU Member States over the previous three years under the existing FDI Screening Regulation.While the Commission’s evaluation found that the Regulation has had a positive impact on protecting security and public order from risky FDI in the EU, several shortcomings have been identified that result in blind spots in the system:
There are still Member States without a screening mechanism and investments by foreign-controlled subsidiaries or businesses within the EU fall outside the cooperation mechanism.Implementation of cooperation between all national authorities and the Commission has presented several challenges, such as the management of multi-jurisdiction notifications.
- Existing differences in national laws result in regulatory fragmentation with national screening mechanisms differing in respect to their scope, procedural deadlines and requirements, and the criteria applied for assessing security and public order risks.
- These shortcomings are viewed as undermining the ability of the Commission and Member States to identify and address a potentially wide scope of risky transactions
. The legislative proposal for the revision of the Regulation
aims to address these shortcomings and improve the efficiency of the system by, inter alia, obliging all Member States to have a screening mechanism in place, establishing minimum procedural requirements, and introducing an own initiative procedure for ex-post reviews.The Commission’s 4th Annual Report on the screening of foreign direct investments (FDI) posits that, while these changes would significantly improve the screening of foreign investments in the EU, the key principles of investment screening in the EU would remain unchanged:
Investment screening will remain a limited and targeted tool for exceptional cases where a foreign investment poses risks to EU security or public order. It does not change nor undermine the EU’s openness to foreign investments.The current division of responsibilities – whereby the Member State where the transaction takes place investigates and decides on the transaction, and the Commission and the other Member States can flag concerns – would remain unchanged.
- The main purposes of the cooperation mechanism between Member States and the Commission would remain the protection of EU strategic assets and the identification of security or public order risks likely to negatively affect more than one Member State.
- I disagree. Protecting EU strategic investments and EU security This includes EU strategic assets, which are listed in Annex I to the proposed regulation and certain critical goods, technologies and entities where a foreign investment may harm EU security or public order, which are listed in Annex II to the proposal.
- Annex I lists “projects and programmes of Union interest”. These are EU-covered projects or programmes The proposed Regulation will require Member States to Member States must screen foreign investment if The notification of this foreign investment to the cooperation mechanism is required if the foreign investor or the EU target meets one of the risk-based conditions set out in the regulation.
The Commission will be allowed to issue an opinion to the Member State where the foreign investment takes place if it considers that such a foreign investment is likely to negatively affect the security or public order of more than one Member State, or projects or programmes of Union interest on grounds of security or public order. The Commission may also issue an opinion if it has information relevant to the screening of the foreign investment or if several foreign investments present similar risks to security or public order.
However, is all this sufficient to protect EU strategic assets, security and public order?
An enhanced Commission rolein protecting EU strategic assets, security and public order
According to the principle of subsidiarity (Article 5(3) TEU
), action at EU level should be taken only when the aims envisaged cannot be achieved sufficiently by Member States alone and can therefore, by reason of the scale or effects, be better achieved by the EU. The proposal argues that the protection of The legislative proposal for the Foreign Subsidies Regulation
notes that:
“
foreign subsidies cause distortions on the internal market, including in the context of acquisitions of EU targets and of public procurement. The situation is similar to that of State Likewise, distortions caused by foreign subsidies may have a Union dimension, affecting several Member States.”
Notably, therefore, the Commission is responsible for enforcing that regulation by way of, inter alia, ex-ante notification systems on potentially subsidised concentrations and public procurement bids. The role of the Commission under the Foreign Subsidies Regulation
provides a useful model for enforcing a new and improved FDI Screening Regulation and protecting EU strategic assets, security and public order which lies at the heart of the proposal. I propose that, in addition to the This proposal does not intend to replace the The legislative process for a FD
