In guidelines published on Wednesday 25 March, the European Commission has sounded the alarm and is calling on EU Member States to safeguard all assets deemed “essential for our security and public order” (see EUROPE 12454/12).
Indeed, the wake-up call is brutal in the EU: one of the first lessons of the health crisis the EU is going through, is its extreme dependence on global value chains, including China, deemed the 'factory of the world' (see EUROPE 12444/13).
This dependence has especially highlighted its vulnerability in key sectors. Foremost among these are medical equipment, related and protective industries, biotechnology, infrastructure and medical research, including development of vaccines. It should be noted here that the European Commission has decided, as a matter of urgency, to provide financial support to the German laboratory CurVac, which has been invited by Washington to carry out research on a vaccine (see EUROPE 12447/1).
The European Commission has therefore issued guidance to European Chancelleries, calling on them to be more vigilant in safeguarding critical EU businesses and assets: made more vulnerable by this crisis, these key European assets and technologies could be targeted by foreign investment.
Thinking about FDI at the European level
The European Commission is therefore urging Member States to use “all available tools at EU and national level” to strengthen filtering of FDI. The aim is to assess European needs so that these foreign investments do not adversely affect the EU's ability to meet the health needs of its citizens. It should also be noted that EU rules allow for the protection of legitimate public policy objectives should those objectives be threatened by foreign investment.
To date, national filtering mechanisms have already been put in place in 14 Member States. The European Commission also urged those Member States that do not currently have a filtering mechanism in place, or whose filtering mechanisms do not cover all relevant transactions, to put in place a comprehensive filtering mechanism.
Expand monitoring
The Commission's call for vigilance goes further, moreover, by calling for account to be taken of the risks potentially exacerbated by the volatility or undervaluation of European stock markets, or when it envisages that capital movements will be restricted in the event of “genuine and sufficiently serious threat to a fundamental interest of society”.
The European Commission therefore echoes the call made by nine Member States to the European Council on 25 March to prevent strategic economic assets from being hijacked by hostile takeovers (see EUROPE 12454/1).
To consult the Communication: https://bit.ly/39lXmw0
For a list of filtering mechanisms by country: https://bit.ly/39m7V2m (Original version in French by Hermine Donceel)