The EU framework for the screening of foreign direct investments has officially entered into force on 10 April 2019 and became fully applicable with effect from 11th October 2020.

With Regulation (EU) 2019/452, the EU aims to safeguard Europe’s interests in security and public order by introducing the first EU-wide foreign investment screening cooperation mechanism, whereby Member States examine carefully transactions by foreign companies that target the EU’s strategic interests. In particular, it creates a framework for the exchange of information and opinion between EU member states and the European Commission.

In particular the framework:

• Creates a cooperation mechanism where Member States and the Commission will be able to exchange information and raise concerns related to specific investments;
• Allows the Commission to issue opinions when an investment poses a threat to the security or public order of more than one Member State, or when an investment could undermine a project or programme of interest to the whole EU, such as Horizon 2020 or Galileo;
• Encourages international cooperation on investment screening, including sharing experiences, best practices and information on issues of common concerns;
• Sets certain requirements for Member States who wish to maintain or adopt a screening mechanism at national level. Member States have the right for the final say whether a specific investment operation should be allowed or not in their territory;
• Takes into account the need to operate under short business-friendly deadlines and strong confidentiality requirements; and
• Provides certain basic requirements for Member States that choose to introduce a screening mechanism at national level, particularly (i) transparency and non-discrimination between third parties; (ii) established timeframes for screening; (iii) protection of confidential information; and (iv) the possibility of judicial redress against the Member States’ decisions.

EU Member States are strengthening their investment screening regimes

The Regulation respects the Member States’ right to maintain, amend or adopt the screening mechanisms, as well as their decision-making power regarding any investment investigation in their territory. Accordingly, EU Member States’ national regimes – not the Regulation – continue to regulate the validity of investments in each EU Member State.

While the Regulation promotes a cooperation mechanism between the Commission and Member States to exchange information on investment screening, it does not create an EU-level regulator which could issue a binding opinion and block an investment.