Screening of foreign direct investments Regulation (FDI)
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Summary
Regulation (EU) 2019/452 establishes an EU framework for the screening of foreign direct investments (FDI) into the Union on grounds of security or public order. It sets minimum requirements for Member States that maintain screening mechanisms and creates a cooperation mechanism for information exchange and comments between Member States and the Commission. The Regulation does not harmonise national screening systems or oblige Member States to introduce a screening mechanism.
Who is affected?
Member States that operate (or choose to operate) FDI screening mechanisms, the European Commission, and other Member States participating in the cooperation mechanism. Foreign investors and EU undertakings receiving foreign investment may be affected through information requests, timelines and potential conditions or prohibitions under national screening decisions.
Scope
Applies to foreign direct investments likely to affect security or public order in one or more Member States, including investments in sensitive sectors and projects/programmes of Union interest.
Key Points
- Creates an EU cooperation mechanism for Member States and the Commission to exchange information and issue comments/opinions on specific FDI cases.
- Sets core requirements for Member States’ screening mechanisms (e.g., transparency, non-discrimination between third countries, timeframes, confidentiality, judicial redress).
- Identifies factors that may be considered when assessing whether an FDI may affect security or public order (e.g., critical infrastructure, critical technologies, supply of critical inputs, access to sensitive information, freedom and pluralism of the media).
- Provides for Commission opinions, including where an investment may affect projects or programmes of Union interest (listed in an annex).
- Clarifies that final screening decisions remain with the Member State where the investment is planned or has been completed.
Key Deadlines
- — Date of application (framework and cooperation mechanism become applicable)
Frequently Asked Questions
Who must comply with Regulation (EU) 2019/452 on the screening of foreign direct investments?
Member States that have or choose to establish FDI screening mechanisms must comply with the Regulation’s requirements. Foreign investors and EU undertakings involved in FDI transactions may also be affected by national screening processes and information requests.
What is the scope of the FDI Screening Regulation?
The Regulation applies to foreign direct investments that may affect security or public order in one or more EU Member States. It covers investments in sensitive sectors and in projects or programmes of Union interest.
Does the Regulation require all Member States to have an FDI screening mechanism?
No, the Regulation does not oblige Member States to introduce a screening mechanism. It only sets minimum requirements for those Member States that choose to operate such mechanisms.
What are the key obligations for Member States under this Regulation?
Member States with screening mechanisms must ensure transparency, non-discrimination, clear timeframes, confidentiality, and judicial redress. They must also participate in the EU cooperation mechanism for information exchange and consider comments or opinions from other Member States and the Commission.
What penalties or consequences may arise from non-compliance?
The Regulation itself does not specify penalties for non-compliance but requires Member States to ensure effective implementation of its provisions. Failure to comply could lead to infringement proceedings by the Commission under EU law.
How does the cooperation mechanism work under this Regulation?
The cooperation mechanism allows Member States and the Commission to exchange information and issue comments or opinions on specific FDI cases. Member States must notify relevant investments and consider input from others before making final screening decisions.
What factors are considered when assessing FDI under this Regulation?
Factors include the potential impact on critical infrastructure, critical technologies, supply of critical inputs, access to sensitive information, and the freedom and pluralism of the media. These help determine whether an investment may affect security or public order.
How does this Regulation interact with national laws and other EU regulations?
The Regulation does not harmonise national screening systems but sets minimum standards and a cooperation framework. It operates alongside national laws and other relevant EU legislation, particularly in areas such as competition and the single market.
What practical steps should companies or investors take to ensure compliance?
Companies and investors should check if the target Member State has an FDI screening mechanism and understand its requirements. They should be prepared to provide information, observe timelines, and potentially address concerns raised through the EU cooperation mechanism.
Who makes the final decision on whether an FDI is approved or blocked?
The final decision on screening and approval or prohibition of an FDI rests with the Member State where the investment is planned or has been completed, even after considering comments or opinions from other Member States or the Commission.
Key Terms
- Foreign Direct Investment (FDI)
- An investment by a non-EU person or entity aimed at establishing or maintaining lasting and direct links with an EU undertaking, including acquisitions of significant influence or control.
- Screening Mechanism
- A national procedure or system for assessing, authorising, or restricting foreign direct investments on grounds of security or public order.
- Cooperation Mechanism
- The EU-level process established by the Regulation for information exchange and consultation between Member States and the European Commission regarding FDI cases.
- Critical Infrastructure
- Physical or virtual systems and assets essential for the functioning of society and the economy, such as energy, transport, water, health, and financial infrastructure.
- Critical Technologies
- Technologies crucial for security or public order, including artificial intelligence, robotics, semiconductors, cybersecurity, and space or nuclear technologies.
- Projects or Programmes of Union Interest
- EU-funded or coordinated projects and programmes listed in the Regulation’s annex, considered vital for the Union’s interests and potentially affected by FDI.
- Commission Opinion
- A formal statement issued by the European Commission under the Regulation, providing its view on whether a specific FDI may affect security or public order.
- Non-Discrimination
- The requirement that Member States’ screening mechanisms must not discriminate between investors from different third (non-EU) countries.
- Judicial Redress
- The right for parties affected by a screening decision to challenge it before a court or tribunal in the relevant Member State.
- Confidentiality
- The obligation to protect sensitive information obtained during the screening process from unauthorised disclosure.