Agreement reached on screening of foreign direct investment for EU security

FDI 2018

Foreign Direct Investment flows in 2017 (European Commission, 2017)

This article is brought to you in association with the European Parliament.


EP trade negotiators agreed on Tuesday with Council and Commission on screening of incoming foreign direct investment to ensure security and public order.

The three institutions backed plans to set up a mechanism to screen foreign direct investment (FDI) in a transparent, predictable and non-discriminatory manner. The aim is to ensure that foreign investments do not pose a threat to critical infrastructure, key technologies or access sensitive information.

The new legislation will allow the EU to remain open to foreign investment. The new rules will also allow for more transparency, better coordination and collective responses if investments threaten security and public order.

Trade committee Chairman Bernd Lange (S&D, DE) and Rapporteur Franck Proust (EPP, FR) made the following statements after the agreement:

“Today we agreed that member states and the Commission will coordinate their efforts to protect European assets from security threats to our citizens. We made sure that civil society stakeholders – including labour unions as well as economic operators – and the European Parliament have a role in implementing this regulation. Moreover, EU countries now must consider how a foreign investment might affect public services and food security in the process of identifying national security concerns.

I am glad that the EU has not given in to protectionist temptations that arise in these uncertain times. Overall, this regulation is a good first step to build on in the coming legislative terms”, said Bernd Lange (S&D, DE).

“Thanks to a strong political will, we have an agreement that is both well-balanced and ambitious. We are making up for lost time: all the big economies of the world already have a screening mechanism. Each country has to be vigilant, including those who do not yet have a national screening mechanism. I particularly welcome the inclusion of a large number of sectors that are covered by the agreement: the EU is going to be able to protect strategic industries ranging from aerospace, food security and media to electric batteries.” said Franck Proust (EPP, FR).

The chair of the trade committee and the MEP leading on this agreement will talk about the outcome of the negotiations at today’s meeting of the trade committee around 15:40. Follow it live here.

Next steps

The agreement will have to be formally endorsed first by the Council and the Committee on International Trade and the full House of the European Parliament, before entering into force. EU countries that have screening mechanisms will have time to adapt their legislation to the new rules.

Background

Inward foreign direct investment has been an important source of economic growth in the EU. However, it is also a growing source of concern if the investor is a state-owned enterprise, or if the investment is in critical infrastructure projects in fields such as energy or communications, or in enterprises working with key technologies, such as robotics or nuclear technology.

Currently only 13 of the 28 member states has a screening mechanism that examines FDI on grounds of security or public order. The systems vary widely, and countries do not coordinate their approaches even where investments might have an effect in multiple countries. The agreement accepted today does not seek to harmonise national screening mechanisms, but to enhance cooperation among member states and the Commission. It is part of a trade and investment package announced by the Commission in September 2017.

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