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EU Proposes Framework For Screening FDI

by Ulrika Lomas, Tax-News.com, Brussels

19 September 2017


The European Commission has announced plans to establish a new framework for screening foreign direct investment (FDI) into the EU.

According to Commission President Jean-Claude Juncker, "If a foreign, state-owned company wants to purchase a European harbor, part of our energy infrastructure, or a defense technology firm, this should only happen in transparency, with scrutiny and debate. It is a political responsibility to know what is going on in our own backyard so that we can protect our collective security if needed."

Under the proposed EU-level framework, EU member states and the Commission will be able to screen FDI on the grounds of security or public order. The criteria for FDI screening will be: the effects of the proposed FDI on critical infrastructure and/or critical technologies; the security of supply of critical inputs; access to or ability to control sensitive information; and whether the investor is controlled by the government of a third country.

The framework will build on national review mechanisms already in place in 12 EU member states. The Commission said that EU member states will retain the last word in any investment screening.

The proposed Regulation on the screening of FDI into the EU must be approved by the European Parliament and by the European Council.

The Commission has also proposed that, while awaiting approval for the new Regulation, it immediately proceed with two additional measures.

The Commission will set up a coordination group on inward FDI, that will cover all issues under the scope of the proposed screening Regulation and act as a forum for wider discussions. It will be charged with identifying sectors and assets that have strategic implications from a security, public order, and/or control of critical assets point of view at national, cross-border, or European level. The group will exchange information and best practices and analysis on FDI.

In addition, by the end of 2018, the Commission will have carried out an in-depth analysis of FDI flows into the EU. The review will focus on strategic sectors and assets whose control may raise concerns for security or public order reasons. In cooperation with member states, the Commission will collect data, analyse trends, and assess the impact of investments.

EU Vice-President Jyrki Katainen said: "The EU is and will remain one of the most open investment regimes in the world. Foreign direct investment is an important source of growth, jobs, and innovation. However, we cannot turn a blind eye [to] the fact that in certain cases foreign takeovers can be detrimental to our interests."

EU Trade Commissioner Cecilia Malmstrom added: "The aim of what we are proposing is to keep the EU open to foreign investment, with a non-discriminatory, transparent, and predictable framework. A European framework for screening foreign direct investments will allow us to respond collectively and defend our European strategic interests where they are at risk."

TAGS: compliance | investment | business | European Commission | interest | energy | foreign direct investment (FDI) | European Union (EU) | Europe

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