EU institutions reach political agreement on new EU framework for screening foreign direct investment

On 20 November 2018, negotiators for the European Parliament, the European Commission and the Council reached a political agreement on a proposed new EU framework for screening foreign direct investment (FDI) which will allow EU Member States to call for investments in certain industries from outside the EU to be vetted. This follows several months of discussion between the three EU institutions (which is shorter than the typical EU legislative timetable). EU institutions are expected to formally adopt the new rules in the coming weeks, following which there is expected to be a 15-month period to bring them into force.

The new rules establish an EU-wide cooperation and information-sharing framework between EU institutions and national authorities, including ongoing notification obligations and an opportunity for Member States and the Commission to comment on screening of planned or completed FDI in other Member States. While Member States will retain the power to approve or reject transactions, the new rules increase the ability of the Commission and other Member States to influence FDI into the bloc, including through the Commission issuing advisory opinions and one-third of Member States requesting extra scrutiny.

The screening framework will apply to FDI in sensitive industries such as media, land, real estate, data processing and utilities and electoral infrastructure. It will be engaged where the Commission or Member States consider the FDI may present a risk to national security or public order. Transactions concluded after the new rules come into effect may be scrutinised up to 18 months after the investment is made.

The agreement follows proposals made by the Commission in September 2017 and a short period of negotiation between the European Parliament, the European Council and the Commission. It also follows recent national reviews and reforms in Germany, France, Italy, Japan, Canada, the US and the UK, which we reported on earlier (link here).