The European Commission (“EC”) has recently adopted five initiatives as part of the European Economic Security Strategy unveiled in June 2023.
The initiatives are aimed at bolstering the EU’s economic security interests. Their main focus is a proposal for a new EU FDI Screening Regulation, which remains subject to adoption by the European Parliament and the Council, and as proposed would comprise a complete overhaul of the existing EU FDI regime:
(1) All EU Member States would be required to adopt and maintain FDI screening;
(2) Investments in the EU made by investors registered in the EU but controlled by non-EU persons would fall within the scope of the EU screening cooperation mechanism;
(3) The EU screening cooperation mechanism would apply to ‘greenfield’ investments if they are reportable at the EU Member State level;
(4) All EU Member States would need to screen a minimum set of activities specified in Annex I and Annex II, but would be free to review other activities as well;
(5) The EU screening cooperation mechanism would be reinforced: notifying EU Member States would need to take “utmost consideration” of comments/opinion from other EU Member States and the EC and justify any divergence from those comments/opinion;
(6) The EC and Member States would be able to initiate ex-officio reviews of deals not notified to the EU screening cooperation mechanism for up to 15 months post-closing;
(7) The EU screening cooperation mechanism would likely take 2-3 months in practice, potentially extending the current duration of national FDI review procedures;
(8) The substantive analysis of transactions would focus on a series of common factors related to the investment and the investor;
(9) EU Member States would have to grant investors certain due process guarantees – notably an opportunity to comment ahead of a prohibition or conditional clearance decision;
(10) The Commission proposal will be subject to a long legislative process. It is unlikely that the new Regulation will enter into force before 2027.
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