Seven months after presenting its strategy on economic security (see EUROPE 13205/7), the European Commission is back with more precise recommendations and roadmaps, accompanied by only one legislative text at this stage. It concerns the revision of the regulation on foreign direct investments (FDI) screening. On Wednesday 24 January, the Commission presented two white papers on export and outbound investment controls. Research and development in critical sectors is also the subject of recommendations (see other news).
Reinforcing foreign investments screening
Although the control and possible restriction of foreign direct investments falls within the competence of the Member States, the European Commission wishes to oblige them to have a screening mechanism. This is not currently the case, and only 22 countries have such a system (Bulgaria, Croatia, Cyprus and Greece do not, and Ireland is in the process of introducing it).
The revised regulations specify the conditions that these mandatory mechanisms must meet. The authorities in the Member States will, for example, have to impose an authorisation procedure on foreign investments affecting a whole list of programmes or projects “of interest to the Union” (Annex I of the text), as well as those in high-risk sectors, listed in Annex II (dual-use goods, advanced semi-conductors, quantum computing, biotechnologies among other technologies).
For investments that do not fall into the above categories, a posteriori screening should be possible when they may affect public order or security.
Where an investment presents a risk, the authorities in the Member States must have the possibility of imposing mitigating measures, or even prohibiting the operation, according to the Commission's proposal.
The European Commissioner for Trade, Valdis Dombrovskis, insisted that the Commission was not interfering in the competences of the Member States. It is more a question of ensuring better coordination, in order to better protect the interests of the Union, according to him.
The sharing of information between the EU27 is also subject to new obligations: each member country will have to publish a report listing the investments monitored, all the accompanying details, the decisions taken by the authorities or the economic sectors targeted, etc.
The European Commission is also proposing to monitor intra-European transactions where the investor is controlled by a non-European entity.
On Wednesday 24 January, the head of the European Commission’s Directorate-General for Trade, Sabine Weyand, said that the three years of investment screening had not led to a slowdown in investment. “The procedures are always carried out within a short period, generally three weeks, and this does not stop an investment”, she told MEPs on the Committee on International Trade (INTA).
See the proposal for a regulation on screening foreign direct investments: https://aeur.eu/f/ajh
Mapping outbound investments
The subject of outbound investments is more sensitive in the Member States. This is why the Commission is proposing to map and analyse the risks over the coming months, before announcing concrete measures in autumn 2025 at the earliest. There is clearly a lack of information on this subject at this stage, said Valdis Dombrovskis. “So first we need to understand the risks and create knowledge and understanding”.
The result is a data-gathering exercise spanning more than a year. Firstly, the Commission is launching a public consultation until April for all stakeholders to react to its White Paper on Outbound Investments. It then provides for a monitoring and risk analysis phase to be carried out by the member countries over a period of one year. In a third phase, the Commission and the Member States will assess the concrete measures to be taken.
MEPs, interest representatives and member states welcome this graduated approach to outbound investments. This is particularly the case for business representatives BusinessEurope and Eurocommerce, who have also warned the institutions against future rules that will be complex for companies to implement.
See the public consultation: https://aeur.eu/f/ajs
See the White Paper on Outbound Investments: https://aeur.eu/f/ajv
Extending export controls
Export controls in the EU are governed by the 2021 regulation on dual-use goods, i.e. goods that can be used for both civilian and military purposes. The text contains a list of products whose exports must be controlled by the Member States. However, this list is a direct result of multilateral export control regimes, which have recently seen the addition of new technologies blocked, notably by Russia.
To get around this, the Commission is suggesting that technologies that have not been able to achieve consensus in multilateral regimes should nevertheless be included in the European list. As a result, their exports will have to be monitored in the Member States. The current situation is uneven, with some Member States going further than others in their controls.
In its White Paper on Export Controls, the Commission announces a recommendation due to be published in the summer of 2024. It should look into the coordination of national checklists.
This harmonisation is crucial, according to one European diplomat, who believes that a “patchwork of national measures” must be avoided.
A high-level discussion forum is also to be set up, says the Commission.
See the White Paper on Export Controls: https://aeur.eu/f/aju (Original version in French by Léa Marchal)