April 01
2020
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Daniel Sarmiento
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25th March 2020
Covid-19 Data, Tech & IP External Relations & Trade General Development Internal Market

European Commission issues Guidelines on direct foreign investment to protect critical European assets

The European Commission issued this evening Guidelines to ensure a strong EU-wide approach to foreign investment screening. The aim is to preserve EU companies and critical assets, notably in areas such as health, medical research, biotechnology and infrastructures that are essential for security and public order, without undermining the EU’s general openness to foreign investment.

Under existing EU rules, Member States are empowered to screen foreign direct investments (FDI) from non-EU countries on grounds of security or public order. Protection of public health is recognised as an overriding reason in the general interest. As a result, 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.

By issuing its Guidelines, the Commission:

  • Calls upon Member States that already have an existing screening mechanism in place to make full use of tools available to them under EU and national law to prevent capital flows from non-EU countries that could undermine Europe’s security or public order.
  • 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 to security or public order in the EU.
  • Encourages cooperation between Member States, as it comes to FDI screening cases where foreign investment could have an effect on the EU single market. 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.
  • Recalls under which specific circumstances free movement of capital, notably from third countries, linked to acquisitions of stakes may be restricted.

Read the full text of the Guidelines here.

Read the Commission’s Press Release, with the background information on screeing of foreign direct investments, here.

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