The European Commission has developed a new system of legislative verification of foreign direct investments. The President Jean-Claude Juncker announced it in his speech in front of the European Parliament in Strasbourg on September 13, 2017. Such an initiative was caused by the growing concern of some EU countries (primarily France, Germany and Italy) with regard to the investments from non-EU countries. To date, these investments are often targeted at strategically important sectors of the economy (for example, energy, telecommunications and technology).
In his speech, the President confirmed that the EU will remain open to the foreign direct investment (FDI), but an “energetic and effective policy” should be developed pursuing two objectives: “to ensure an equal playing field with the rest of the world and protect the most important European assets from the investments that damage the legitimate interests of the EU or its individual members”. The verification system proposed by the European Commission is aimed at improving cooperation and coordination between the Member States that check transactions affecting the security or public order. The President set out the developed legislative measures, stressing that, in certain industries, the FDI “should be carried out only in the conditions of transparency”.
On September 14, the European Commission published a proposal on the Regulations which will include the initiative, announced in the speech of Jean-Claude Juncker.
The legislative process should start soon, and the EU Member States are preparing for cardinal changes.
The current approach to screening FDI in the EU assumes the responsibility at the level of the EU Member State, that is, the European Commission does not directly participate in the verification.
The legal uncertainty of the issue in the absence of a formal mechanism of coordination between the EU countries causes the process to become long and burdensome for the foreign investors, and the results differ. In these circumstances, the European Commission stated that its initiative is aimed at creating a solid legislative basis for the national FDI selection mechanisms in accordance with the EU legislation (even when EUMR (EU Merger Regulation) is not applied) and enforcement of the international trade laws. The key aspect of the proposal is the establishment of the channels of communication and cooperation between the EU and its individual members to facilitate the exchange of information on the planned or completed FDI in the territory of one or more states. The Member States will also be able to comment the investments through these channels that may affect their security or public order. Moreover, the EU can make a conclusion about such operations. However, the final decision regarding the specific FDI is based solely on the EU Member State in which the investments are planned or completed – they must “take due account” of comments and / or opinions received, but not connected by them.
In addition, to date, the EU sets out a non-exhaustive list of the consequences that should be taken into account by the EU Member States when inspecting the FDI. They include the impact on infrastructure, technology, confidential information and the materials that are necessary to ensure security or maintain public order. The proposal of the European Commission indicates that in assessing these consequences, the Member States and the EU should also consider whether the foreign investor is controlled directly or indirectly by the government of the third country, including at the expense of significant funding.
The EC also sets out the main elements of the proposed procedural framework to allow investors, the EU and individual Member States to understand better how the investments can be tested, as well as to ensure transparency and non-discrimination between the third countries. In particular, the proposal stipulates that the national FDI screening regimes should have a clear time frame that allows them to take into account the comments of the other EU Member States and the opinion of the European Union. It is also noted in the proposal that the individual investors should be able to reach the judicial indemnity.
