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(BRUSSELS) – “We are not naïve free traders” said EC president Jean-Claude Juncker as he welcomed Wednesday’s agreement by EU institutions on screening incoming foreign direct investment to ensure security.
Political agreement on an EU framework for screening of foreign direct investment, reached by the European Parliament, Council and Commission, will ensure that the EU and its Member States can protect their essential interests while maintaining what is acknowledged to be one of the most open investment regimes in the world.
The EU is the number one destination for FDIs and is a very open market. However, in recent years there has been a surge in investments relating to critical EU assets which are not the result of normal market forces.
“Europe must always defend its strategic interests and that is precisely what this new framework will help us to do,” said Mr Juncker: “This is what I mean when I say that we are not naïve free traders.”
“This is not about closing down our markets but about acting responsibly,” said Austria’s Minister for Digital and Economic Affairs Margarete Schramboeck, for the EU presidency: “We are determined to keep our technology sectors and key infrastructure safe.”
Openness to foreign direct investment is enshrined in the EU Treaties. Foreign direct investment fuels economic growth, innovation and employment. However, in some cases foreign investors might seek to acquire strategic assets that allow them to control or influence European enterprises the activities of which are critical for the security and public order in the EU and in its Member States.
Currently, fewer than half of EU member states have legislation in place that allows them to review FDIs. On the basis of the rules agreed, member states will retain the power to review and potentially block foreign direct investment on security and public order grounds.
In the same way, they will not be required to adopt or maintain a screening mechanism. However, existing and new mechanisms will have to meet a number of EU-wide characteristics, such as the respect of the non-discrimination principle, the protection of confidential information, the right to judicial redress against national authorities’ decisions or clearly defined applicable procedural rules.
The regulation will enable the Commission to issue advisory opinions to the member states where it considers that an investment, whether planned or completed, would be likely to affect security or public order in one or more member state.
The text also foresees a cooperation mechanism between member states and the Commission. Member states will need to inform each other and the Commission of any foreign direct investment that is undergoing screening by their national authority. Upon request, they will also need to make available certain information, such as the ownership structure of the foreign investor and the financing of the investment.
The two co-legislators have now to give the final green light to the proposal so that it can enter into force.
