Promoted in the European Parliament by the EPP Group and by its rapporteur Frank Proust (France), the proposal for a joint framework to screen foreign direct investment (FDI) by third countries in the EU, tabled by the Commission on 14 September (see EUROPE 11862), received the clear support of the S&D and Greens/EFA groups and more muted support from the GUE/NGL Group during a third debate on the subject in the international trade committee on Wednesday 22 November. The ECR and ALDE Groups fear a limit on inward FDI and interference in the sovereignty of member states.
In the face of FDI from third countries which is not guided by market rules but by political and strategic decisions and with the EU being one of the few economic powers not to have a screening system when the trend since 2009 has been towards protectionism, according to the OECD, this proposal seeks to establish a common framework for screening inward FDI with better coordination of information exchange among member states, Proust said.
The draft regulation is not looking to close the door on foreign investors, to replace existing national mechanisms or to take decisions at EU level rather than in the state where the FDI is to be made; it seeks to improve the exchange of information among member states, he said, announcing technical briefings and the public hearing on 22 and 23 January.
S&D MEPs strongly supported a European screening instrument for certain FDI, for example from China, but fully respecting subsidiarity. Alessia Mosca (Italy) called for the introduction of “defence of European interests to evaluate the care to be taken on certain investments”. Inmaculada Rodríguez-Piñero Fernández (Spain) argued for “a more ambitious mechanism against aggressive FDI”, calling also for consideration should be given at EU level to foreign dis-investment, such as that by China in Piraeus, Greece.
On behalf of the Greens/EFA, Yannick Jadot (France) backed an EU-level mechanism of this kind which would make it possible to scrutinise “proposals with major political implications in terms of energy and technological sovereignty”, such as the proposed Russian gas pipeline Nord Stream-2 and the Chinese investment in Hinckley Point. Jadot argued for close coordination. “It’s not about the Commission deciding in place of the states but about putting in place collaboration and cooperation provisions”, he added, calling for a clear picture to be drawn up of the EU’s strategic sectors and of the human rights situation in the countries from which the FDI comes. He also argued for scrutiny to be given to the FDI of EU multinationals which interfere too much in domestic political issues in Africa.
“This is not about protectionist policy but about safeguarding the public interest and safety. The member states will retain the final decision-making power but this framework will allow them to support one another”, said Reinhard Bütikofer (Greens/EFA, Germany), rapporteur for the industry committee opinion. He called on the EU to look closely at the American FDI screening mechanism, CFIUS, reform of which is under discussion. He also called for “reciprocity requirements to be linked to an instrument that makes it possible to take action on investments that are motivated by political and strategic interests”.
“The Commission is sending the wrong signal. The EU needs FDI from third countries. This kind of investment control will spread”, warned Joachim Starbatty (Germany) on behalf of the ECR Group, laying great stress on the reciprocity principle. “The principle is openness; scrutiny and control are matters for the states”, he added, calling for “what happens elsewhere to be examined, lessons to be drawn and then a strategy developed to identify irregular investment, on the basis of exchange of information and best practice”.
For the ALDE group, Dita Charanzova (Czech Republic) said that this mechanism was “inappropriate” because “it would add to the administrative burden on member states and could give them the impression of interference in their sovereign decisions”. The Liberals support better coordination, studies on FDI into the EU, and exchange of information but they are not persuaded by the idea of fresh legislation, she said, pointing out that the decision to reject or agree to inward FDI should be one for member states and calling for the full implementation of existing legislation which already provides safeguards on mergers, energy supply and airspace.
Stelios Kouloglou (Greece), speaking for the GUE/NGL, called for the regulation to contain social and environmental criteria to ensure protection for workers and the environment. He also argued that it should not be compulsory and that the principle of subsidiarity should be respected. Helmut Scholz (Germany) underlined the need for “investment screening to be based on a well-defined industrial policy”. “We have a number of sectors which are extremely important and those are the ones that have to be protected”, he insisted. He, too, was critical that “the EU left Greece to manage all its own with the Chinese investment in the port of Piraeus”.
Carlo Pettinato, Head of the Investment Unit at the Commission’s DG Trade, made clear that the proposal was not seeking to put in place a bureaucratic mechanism that would give the Commission a screening and decision-making role. “It’s more a framework to help member states which already have a screening mechanism for inward FDI, respecting a minimum common framework in terms of procedure, non-discrimination, transparency and bringing greater clarity and legal security for foreign investors”, he said. The final say will rest with the member states but the Commission will be able to offer its point of view taking account of EU interests and the member states will be able to cooperate and share information, he said. (Original version in French by Emmanuel Hagry)