In an Opinion delivered on Thursday, 30 March, Advocate General Tamara Ćapeta of the Court of Justice of the EU stated that European Union law does not, in principle, preclude national legislation that allows the screening of direct investment originating from a third country, even if that investment is made by a company established in the EU (Case C-106/22).
A Hungarian company owned by capital located in Bermuda has challenged the Hungarian authorities’ decision to not allow it to acquire another Hungarian company that owns a quarry considered to be strategic for its contribution to Hungary’s security of supply of sand, clay, and gravel.
In her Opinion, Ms Ćapeta holds the view that the regulation (2019/452) establishing a framework for screening foreign direct investments (see EUROPE 12233/16) includes investments whereby a third-country investor gains control of an EU company through another company based in the EU. These investments fall under the exclusive competence of the EU (Article 207 TFEU).
Member States are able to adopt investment-screening mechanisms, which must comply with internal market rules. In particular, national bodies must justify their decisions to restrict capital flows on compelling grounds of security or public order, and any measure taken must be proportionate to the aim pursued.
In this case, the advocate general recognises that securing the supply of certain raw materials may, in times of crisis, justify a restriction on foreign direct investment. It is for the referring court to examine whether the Hungarian authorities have sufficiently explained how indirect foreign ownership of the quarry in question represents a genuine and serious threat to the security of supply of gravel, sand, and clay in Hungary and why the supply of these materials cannot be secured by less restrictive measures.
See the Opinion of the Advocate General: https://aeur.eu/f/65l (Original version in French by Mathieu Bion)