The eu fdi screening regulation: a tighter control over the foreign investments

As third country investments into the territory of the European Union have increased over the past 20 years, a necessity to screen all foreign direct investment (FDI) has emerged.
According to statistics, economies like Brazil, on the first place, followed by China and Russia, have drastically injected large amounts of capital into the growth of specific sectors, particularly targeting high-tech domains and state-owned enterprises or companies with close ties to governments.

The EU Regulation 2019/452 is the first European protection mechanism ever created, to screen foreign direct investment (FDI) entering the European Union, for the purpose of protecting strategic sectors, such as security and public order.
The new regulation, supported by an overall of 500 votes within the EU Parliament, entered into force on April 10th of 2019.

This valuable tool sets the ground for effective cooperation between all Member States and the Commission, in terms of screening and exchange of crucial information, impacting EU programs and projects. As far as the Commission is concerned, it’s main role will be the supervision of the screened information, as well as the issuance of opinions in case an investment should constitute a threat to the security or the public order of one or more Member States.

The critical EU sectors that are covered by the protection of the new regulation are infrastructure projects such as data, technology, finance, transport, energy, communication, space, artificial intelligence and computer programs. Furthermore, the EP included an extra list of areas that are considered of high importance, such as defense, health, media, biotechnology, water and nutrition.

While the information screening creates a more secure environment for investments to come, the new framework enhances both European and international cooperation, as well all national security mechanisms.

The regulations sets a timeframe of 18 months for all Member States to undertake all necessary steps in order to ensure the application of the EU Regulation 2019/452 all over the European Union territory by October 11th of 2020.

By N. Kalifatidou
Advocate – Legal Consultant
Arsen Theofanidis LLC