In an opinion on the draft EU framework for the screening of foreign direct investment (FDI) into the EU from third countries, which was adopted on Thursday 19 April, the European Economic and Social Committee (EESC) advocates very careful screening of foreign investment – which is both an important source of growth, jobs and innovation but which can also involve risks for national security and public order in the EU.
In the view of EESC rapporteur Christian Bäumler from Germany (Group II, Workers), "foreign investment in key technologies and in sensitive infrastructure such as energy and water supply, and financial services must be controlled".
The control of FDI in companies or sectors with strategic importance for national security and public order in the EU is carried out in an inconsistent and uncoordinated way, the EESC states. For the member countries that do not have a screening mechanism, FDI from third countries is carried out without any control and, for the 12 member countries that do have a screening mechanism, there is no exchange of information between them.
The EESC thus supports a screening system at EU level that would enable the shortfalls to be addressed and the current differences between the member states to be remedied, while ensuring the protection of national and European interests.
While it commends the Commission's proposal for a regulation establishing a European framework for filtering FDI from third countries into the EU (see EUROPE 11862), the EESC nevertheless says that the breadth of the problem is not yet fully known due to the lack of a full impact analysis of investment flows when the legislative procedure was started.
"The proposed EU screening mechanism is a step forward, but it cannot yet fully safeguard EU and member states' interests. In such a case, at this stage, the system must not become burdensome, time-consuming and costly", co-rapporteur Gintaras Morkis from Lithuania (Group I, Employers) states.
The EESC is concerned that in the Commission's proposal, the Commission only reserves the right to screen an investment when the latter might affect programmes of EU interest. Such an approach carries with it the risk that foreign investors wishing to take over important businesses will select, as an entry point, the country which is most vulnerable and, via the internal market, will gain access to countries with stronger investment protection, the EESC states.
For the EESC, the EU needs to exercise its competence in the area of foreign investment screening when FDI has cross-border implications for the whole EU or certain regions.
Furthermore, the EESC supports broadening investment screening to include key technologies when the investor is controlled by, or has close ties to, the government of a third country. The EESC also proposes that the regulation should include a separate screening procedure for FDI undertaken by governments of third countries, or investors with close ties to such governments.
The EESC opinion notes that, while the EU is one of the economies most open to FDI, frequently EU investors do not enjoy the same rights in third countries as outside investors do into the EU.
The EESC thus calls on the Commission to apply the principle of reciprocity in all EU negotiations with third countries concerning FDI. (Original version in French by Emmanuel Hagry)