The proposal for a regulation on increased screening of foreign direct investments (FDI) has been gaining momentum in recent months due to geopolitical tensions. On Thursday 11 December, the Danish Presidency of the Council of the European Union and negotiators from the European Parliament reached a provisional agreement on the text, which will require each Member State to filter a whole series of foreign investments.
At present, Croatia, Greece and Cyprus still do not have a screening mechanism, although steps are being taken. Not only will these countries have to have a system in place within 18 months of the adoption of the regulation, but they will also have screening obligations for a whole range of investments.
Sectors at risk. The Council of the EU voted in favour of restricted screening in June, but the European Parliament has convinced the Member States to broaden the scope of sectors considered ‘sensitive’ and whose investments should be subject to authorisation.
In addition to the dual-use goods and military equipment sectors, screening will cover: - cutting-edge technologies such as artificial intelligence, quantum computing and semiconductors; - strategic raw materials; - the largest entities in the fields of energy, transport and digital infrastructure; - electoral infrastructures such as voting systems; - certain entities in the financial system (clearing houses, central securities depositories, operators of regulated markets, operators of payment systems and systemically important institutions).
Each Member State is free to monitor more investments if it wishes.
Screening. When analysing FDI, Member State authorities will have to take risk factors into account, including the impact of the investment on European programmes of strategic interest.
Decision. The EU Council was keen to retain a key element of its negotiating mandate: Member States will always have the final say on whether or not to authorise an investment. Parliament wanted to give the European Commission the possibility of taking a final decision when two Member States disagreed on the nature of an investment.
“We achieved a balanced and proportionate framework, focused on the most sensitive technologies and infrastructures, respectful of national prerogatives and efficient for authorities and businesses alike”, praised Danish Industry Minister Morten Bødskov.
Parliament’s rapporteur for the text, Raphaël Glucksmann (S&D, French), welcomed the result, which he felt would provide greater protection against the risks posed by certain foreign powers to the European economy. “These are important times for economic security. After so many wake-up calls, we are, step by step, fleshing out what this concept means and what concrete measures must be taken to protect it”, he explained.
However, Parliament considers that the EU will need to develop additional tools for economic security, to which the European Commission is committed.
Cooperation mechanism. To facilitate the foreign investment screening, the regulation establishes a mechanism for cooperation and exchange between Member States. It will be equipped with a database for exchanging information on individual cases, but also to avoid potential circumventions. (Original version in French by Léa Marchal)