How screening foreign direct investment can protect European interests

How screening foreign direct investment can protect European interests

Foreign direct investment from third countries is a source of growth and jobs. The EU has one of the world’s most open investment regimes, as acknowledged by the OECD, and we will make sure that it will stay just as open in the future. The companies controlled by third country investors are still small in number in the EU, but they have a signi cant economic impact because of their larger than average size and their focus on high- technology sectors.

New investment trends are appearing with some emerging economies, playing an increasing role as providers of foreign direct investment. Over the last 20 years, the share of investment by some partners, such as the US, decreased by around 20%. During the same time period, the share of investment from other countries, such as Brazil and China, increased signi cantly, by over 1000% and by 600% respectively.

The EU wants to and will remain the most attractive destination for foreign direct investment in the world. However, in exceptional cases, foreign investments can become problematic. This is the case where foreign investors may seek to acquire control of or in uence in European undertakings whose activities have repercussions on critical technologies, infrastructure, inputs or sensitive information. In some cases, these investors may be owned or controlled by the state of a third country. Such acquisitions may allow the states in question to use these assets to the detriment not only of the EU’s technological edge but also its security and public order.

Several of the EU’s key international partners have screening mechanisms to address possible risks of foreign direct investments: Australia, Canada, China, India, Japan and the US. 12 EU Member States have put in place similar mechanisms: Austria, Denmark, Finland, France, Germany, Italy, Latvia, Lithuania, Poland, Portugal, Spain and the UK. Though they share the same goal, they di er signi cantly in their design and scope.

The Commission’s proposal enables the EU Member States and the Commission to screen foreign direct investment on the grounds of security or public order.

The EU screening framework will be transparent, non-discriminatory and predictable. The Commission will be able to screen foreign investment likely to a ect projects or programmes of Union interest in the area of research (Horizon 2020), space (Galileo), and transport, energy and telecommunication networks (Trans-European Networks – TEN).

The new Regulation needs the approval of the European Parliament and EU Member States. In addition and with immediate e ect, the Commission will carry out an in-depth analysis of foreign direct investment ows into the EU, focussing on strategic sectors and set up a coordination group with Member States.