Screening of investments: political agreement reached on an EU framework

The EU will soon be able to coordinate scrutiny of investments from third countries in strategic sectors to check that they do not threaten security or public order.

The Presidency today reached a provisional agreement with European Parliament representatives on an EU framework for screening foreign direct investments (FDIs). The agreement will now be submitted for political endorsement by EU ambassadors.

“Today agreement will provide better protection for Europe and its citizens. This is not about closing down our markets but about acting responsibly. We are determined to keep our technology sectors and key infrastructure safe. I now encourage member states to endorse this ambitious reform.”
Margarete Schramböck, Austrian Federal Minister for Digital and Economic Affairs and President of the Council

The EU is the number one destination for FDIs and is a very open market. However, in recent years there has been a surge in investments relating to critical EU assets which are not the result of normal market forces. For example, opaque state-owned enterprises or private firms with close government links have been buying EU firms using cutting-edge or dual use technologies (such as artificial intelligence, robotics or nanotechnologies) and strategic infrastructure assets which could have a potential impact on the EU’s security or public order.

Currently, fewer than half of EU member states have legislation in place that allows them to review FDIs. On the basis of the rules agreed today, member states will retain the power to review and potentially block foreign direct investment on security and public order grounds. In the same way, they will not be required to adopt or maintain a screening mechanism. However, existing and new mechanisms will have to meet a number of EU-wide characteristics, such as the respect of the non-discrimination principle, the protection of confidential information, the right to judicial redress against national authorities’ decisions or clearly defined applicable procedural rules.

The regulation will enable the Commission to issue advisory opinions to the member states where it considers that an investment, whether planned or completed, would be likely to affect security or public order in one or more member state. 

The text also foresees a cooperation mechanism between member states and the Commission. Member states will need to inform each other and the Commission of any foreign direct investment that is undergoing screening by their national authority. Upon request, they will also need to make available certain information, such as the ownership structure of the foreign investor and the financing of the investment. 

Next steps:

The agreement will be submitted to EU ambassadors for endorsement on behalf of the Council, following technical finalisation of the text. Parliament and Council will then be called on to adopt the proposed regulation at first reading.

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