European Union

General overview

Background

Historically, there was no comprehensive framework for the screening of foreign direct investment (FDI) operating across the European Union. Instead, individual Member States could adopt their own FDI screening regimes without any supranational mechanism enabling coordination among Member States or promoting common standards. The lack of a harmonised approach to FDI screening raised concerns about the effective assessment and control of risks to security and public order where a relevant investment might have an adverse effect across multiple Member States (with this risk exacerbated by the high degree of integration achieved within the EU internal market).

On 10 May 2017, the European Commission (the Commission) published a ‘Reflection paper on harnessing globalisation’[2] in which it launched a debate on how the European Union and the Member States could shape globalisation in a way that could benefit all. In this paper, the Commission underlined its commitment to build an open, sustainable, fair and rules-based system of global trade. In this context, the Commission recognised the importance of inbound FDI for economic growth, job creation and innovation in the European Union. However, the Commission also affirmed its commitment to protect the EU economy and citizens when foreign countries or companies engage in unfair practices or make acquisitions raising EU security and public order concerns.

On 13 September 2017, the Commission published ‘Communication on Welcoming Foreign Direct Investment while Protecting Essential Interests’, in which it laid down, for the first time, a proposal for an EU-wide FDI screening mechanism.[3] In this Communication, the Commission again acknowledged the substantial economic and wider societal benefits arising from FDI. It also reiterated, however, the risk to security or public order that could potentially arise when foreign investors – particularly those that are state-owned or controlled – seek to acquire control of or influence over European undertakings whose activities relate to critical technologies, infrastructure, inputs or sensitive information.

To address these concerns – and recognising that closer cooperation and better coordination between Member States were essential to ensure the effective scrutiny of FDI – the Commission proposed (on the basis of Article 207 of the Treaty on the Functioning of the European Union) the creation of an EU-wide framework for the screening of foreign direct investment into the European Union on grounds of security or public order.[4]

The EU Regulation on foreign investment screening

On 10 April 2019, the EU Regulation on foreign investment screening (the FDI Regulation) entered into force and became fully operational on 11 October 2020.[5] The main objectives of the FDI Regulation are to provide an EU-wide cooperation framework between the Member States and the Commission and to establish common criteria to identify risks relating to the acquisition or control by foreign investors of strategic assets that might threaten security or public order. The Regulation is only concerned with inward FDI (i.e., investment from abroad in assets based in the European Union). The FDI Regulation does not apply to intra-EU investments. Similarly, it does not regulate EU investors’ access to third-country markets (which is governed by other trade and investment policy instruments).

The FDI Regulation does not create a pan-EU system for vetting FDI at EU level. The Commission still has limited powers, as set out above. The primary responsibility for vetting FDI remains with the Member States, which will continue to apply national law while respecting the provisions of the FDI Regulation. The FDI Regulation also does not oblige Member States to adopt an FDI screening mechanism or seek to achieve the full harmonisation of existing FDI screening mechanisms across the European Union. Instead, it provides for information sharing and cooperation between Member States and the Commission. This involves the mandatory notification to the Commission and other Member States of any FDI scrutinised at the national level, including the provision of certain specified information. The FDI Regulation also requires that existing (and any new) regimes comply with a minimum set of requirements, while also encouraging those Member States that currently do not have an FDI regime to adopt relevant rules.

Screening factors

The FDI Regulation only applies to FDI that may raise concerns relating to security and public order. Although the concepts of ‘security’ and ‘public order’ are not expressly defined in the FDI Regulation, its Article 4(1) provides the following non-exhaustive list of sensitive sectors and other relevant factors that the Member States and the Commission may focus on when determining whether an FDI is likely to affect security or public order:

  • critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
  • critical technologies and dual-use items as defined in point 1 of Article 2 of Council Regulation (EC) No. 428/2009,[6] including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies;
  • the supply of critical inputs, including energy or raw materials, as well as food security;
  • access to sensitive information, including personal data, or the ability to control that information; or
  • the freedom and pluralism of the media.

Article 4(2) of the FDI Regulation further provides that in determining whether an FDI is likely to affect security or public order, the Member States and the Commission may also take into account whether the foreign investor is directly or indirectly controlled by the government of a third country, including through significant state-backed funding rather than direct ownership.

Screening mechanisms of Member States

As mentioned above, the FDI Regulation does not oblige Member States to adopt an FDI screening mechanism or to fully harmonise existing FDI screening mechanisms across the European Union. Article 3(1) of the FDI Regulation specifically provides that ‘Member States may maintain, amend or adopt mechanisms to screen foreign direct investments in their territory on the grounds of security or public order’.

However, the FDI Regulation does require Member States to be transparent about the circumstances in which FDI will trigger a review, and the procedure to be applied in such a circumstance. In terms of the procedure, Member States are under an obligation to set time frames of a sufficient length to allow for the possibility of comments from other Member States or an opinion from the Commission, and for those comments and opinions to be taken into consideration.[7]

The FDI Regulation also requires Member States’ FDI screening regimes not to discriminate in respect of third countries, to protect confidential (including commercially sensitive) information and to allow foreign investors a right of appeal against screening decisions that are not in their favour.[8]

Member States are under a reporting obligation to notify their existing screening mechanisms (and any amendments thereto) to the Commission. The Commission maintains a publicly available list of this information.[9] Member States also need to comply with an annual reporting obligation regarding the application of their FDI screening regimes. This comprises aggregated information about the FDI that took place in their territories, including details of the transactions screened, prohibitions and conditions imposed, the value of screened investment and its origin. With this information, the Commission will produce an annual report that will be made publicly available.[10]

Cooperation, collaboration and information sharing

Cooperation, collaboration and information sharing are central themes of the FDI Regulation. It establishes a framework enabling Member States and the Commission to comment on FDI taking place in another Member State, irrespective of whether the Member State receiving the FDI has chosen to screen the FDI or not. More explanation as to the precise workings of this cooperative framework is provided in the section below titled ‘Review process’.

As noted above, the new framework introduced by the FDI Regulation is not intended to replace domestic regimes. Although Member States are required to give ‘due consideration’ to the comments of the other Member States and to the opinion of the Commission, the Member State receiving the FDI retains authority as the final decision maker.[11] It follows that the FDI Regulation does not establish a single, centralised review process (a ‘one-stop-shop’ system), as is the case under the EU Merger Regulation in respect of qualifying transactions.

The Commission does have greater influence with respect to projects or programmes of Union interest (such as Horizon 2020, the Trans-European Networks for Energy, the European Defence Industrial Development and Galileo),[12] on the grounds that these projects serve the Union as a whole and represent an important contribution to its economic growth, jobs and competitiveness. In these circumstances, Member States are required to take ‘utmost account’ of the Commission’s opinion and to provide an explanation to the Commission in the event that its opinion is not followed.[13]

Relevant authorities

As explained above, the decision to screen FDI or to adopt any measures relating to a specific FDI remains the sole responsibility of Member States. Accordingly, the competent authorities that deal with specific FDI screening cases at the national level are appointed by relevant Member States in accordance with their own internal procedures. The FDI Regulation does establish, however, that each Member State and the Commission shall appoint a relevant contact point for all matters relating to the implementation of the Regulation.[14]

Within the Commission, all matters relating to the implementation of the FDI Regulation are handled by the Directorate-General for Trade, and more specifically by Unit TRADE-F-4. This unit is in charge of, inter alia, screening individual FDI cases, receiving and analysing the notifications sent by Member States, coordinating with the other Commission services and EU Member States and drafting opinions.

Article 12 of the FDI Regulation also provides that the group of experts on the screening of FDI into the European Union, created in 2017,[15] will continue to advise the Commission and the Member States on the implementation of the FDI Regulation. This group of experts, which is chaired by the Commission and composed of representatives of the Member States, does not advise on individual FDI screening cases but instead shares best practices and lessons learned, and exchanges views on trends and issues of common concern relating to FDI.

Scope of the FDI Regulation

The FDI Regulation covers any FDI from third countries. It applies to all sectors of the economy and is not subject to any monetary thresholds.

‘Foreign direct investment’ is defined in Article 2(1) of the FDI Regulation as:

an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity in a Member State, including investments which enable effective participation in the management or control of a company carrying out an economic activity.

A ‘foreign investor’ is defined in Article 2(2) of the FDI Regulation as ‘a natural person of a third country or an undertaking of a third country, intending to make or having made a foreign direct investment’.

The FDI Regulation does not apply to portfolio investments. According to the Commission, this is because ‘portfolio investments’ – defined by the Court of Justice of the European Union as ‘the acquisition of shares on the capital market solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking’[16] – are generally less likely than FDI to pose risks in terms of security or public order. However, where they represent an acquisition of a shareholding that confers certain rights on the shareholder or connected shareholders under the national company law (e.g., 5 per cent), they might be of relevance in terms of security or public order.[17]

Review process

Article 6(1) of the FDI Regulation provides that Member States must notify the Commission and the other Member States of any FDI that is undergoing screening in their territory by providing the information mentioned in Article 9(2) of the FDI Regulation as soon as possible. This should include a list of those Member States whose security or public order is deemed likely to be affected by the FDI, as well as information concerning:

  • the ownership structure of the investor;
  • the value of the FDI;
  • the business operations of both the investor and the target (including the Member States in which they operate);
  • the funding of the investments (and the source of funding); and
  • the date of completion.

A submission made by a Member State pursuant to Article 6 of the FDI Regulation triggers what is known as a Phase 1 review period, which lasts a maximum of 15 calendar days.[18] During this period, other Member States who consider that the notified FDI is likely to affect their security or public order, or who have relevant information to share with the Member State undertaking the screening, can reserve the right to provide comments and ask questions. The Commission must notify the screening Member State that comments were provided.[19]

If the Commission considers that the notified FDI is likely to affect security or public order in more than one Member State, or a project or programme of Union interest, or when the Commission has relevant information to share, the Commission can issue an opinion addressed to the screening Member State.[20] The Commission must also notify the screening Member State of its intention to issue an opinion by no later than the end of the 15 calendar days.

Within those 15 calendar days, other Member States and the Commission may also request that the Member State undertaking the screening provides additional information, which opens what is known as a Phase 2. Any request for additional information must be duly justified, limited to information necessary to provide comments (in the case of a Member State) or to issue an opinion (in the case of the Commission) proportionate to the purpose of the request and not unduly burdensome. Requests for information and replies provided by Member States must be sent to the Commission simultaneously.[21]

The Commission may issue an opinion irrespective of whether any Member States provided comments or not.[22] In any event, the Commission must notify the other Member States that an opinion was issued. The Commission must send any opinion to the Member State undertaking the screening within a reasonable period, in any case no later than 35 calendar days from receipt of the notification.[23] However, if additional information was requested, the Commission must send an opinion no later than 20 calendar days from receipt of the additional information, which in practice means that any information request effectively stops the clock of the review.[24]

If a Member State has chosen not to screen FDI, the Commission or other Member States may nevertheless request that it provides this information. However, the cooperation mechanism should only be used for the purpose of protecting security or public order and the party requesting the information should duly justify the requests on these grounds.[25] Article 7 of the FDI Regulation is silent as to how Member States that have chosen not to screen FDI should take into account comments from other Member States or an opinion from the Commission but it is assumed that those Member States should also give ‘due consideration’ to any comments and opinions.[26]

As mentioned at Article 6(9) of the FDI Regulation, comments and opinions are non-binding on Member States that maintain the final decision regarding an FDI undergoing screening at the national level. However, as mentioned above, the Member State must give due consideration to the comments of other Member States and the opinions of the Commission. In the event that the Member State does not follow the opinion of the Commission, it must provide reasons.

Impact of covid-19

Throughout the covid-19 pandemic, the Commission has sought to balance conflicting policy interests. It has generally maintained an open attitude towards FDI, recognising its positive effect in areas such as economic growth, technological innovation and employment rates. However, the pandemic exacerbated concerns about supply chain security and the foreign ownership of critical healthcare assets and businesses.

On 26 March 2020 – during the early stages of the pandemic – the Commission issued Guidance to Member States on FDI[27] and cautioned against an increased risk of attempts by foreign investors to acquire vital healthcare capacities (e.g., for the production of medical or protective equipment) or critical infrastructure, businesses or assets in related industries, such as research establishments (e.g., for the development of vaccines). In this context, the Commission urged Member States to exercise vigilance and apply FDI screening mechanisms rigorously.

The Commission also called on those Member States that did not have a FDI screening mechanism, or whose screening mechanisms did not cover all relevant transactions, to set up a fully developed screening mechanism and, in the meantime, to use all other available options to address cases in which the acquisition or control of a particular business, infrastructure or technology would create a risk to security and public order in the European Union, including a risk to critical health infrastructures and supply of critical inputs.

Recent enforcement practice and current trends

Commission’s first annual report on FDI screening

On 23 November 2021, the Commission published the ‘First Annual Report on the screening of foreign direct investments into the Union’ (the Report)[28] and the accompanying Commission Staff Working Document,[29] pursuant to the annual reporting obligation under Article 5 of the FDI Regulation.

According to the Report, global FDI flows fell sharply in 2020 to €885 billion (a 35 per cent decrease from 2019). In the European Union, the effects of the covid-19 pandemic were even more pronounced, with inward FDI falling by 71 per cent to €98 billion (from €335 billion in 2019). There were 34 per cent fewer foreign M&A deals announced in the European Union compared with 2019 and although deal-making slowly recovered in the first quarter of 2021, it still remained 30 per cent below the level of 2019. The majority of inward FDI into the European Union in 2020 originated in the United States and Canada (35 per cent), followed by the United Kingdom (30.5 per cent). The remainder originated mainly in Member States of the European Free Trade Association (12.1 per cent, of which 7.5 per cent was from Switzerland), a number of offshore jurisdictions[30] (6.9 per cent), developed Asian countries[31] (5.6 per cent) and China (2.5 per cent).

It is no surprise that not all sectors of the economy have been affected equally by covid-19. Some, such as medical supplies, pharmaceutical manufacturing and e-commerce, experienced unprecedented levels of deal-making. Other sectors, such as tourism, leisure, aviation and marine transportation, were negatively affected. The hardest-hit sector was accommodation, with a 70 per cent drop in the number of foreign deals. Similarly, manufacturing suffered a 40 per cent drop in the number of foreign deals in 2020 as compared with the previous year. The least affected sector was information and communication technologies (ICT), which experienced a relatively modest drop of 12 per cent in 2020.

Statistics on notifications and outcomes

Despite the sharp decline in inward FDI, Member States reported 1,793 notifications under their national FDI screening regimes. Of these notifications, 80 per cent were not formally screened, either because of an evident lack of impact on security or public order or because they fell outside the scope of the national screening mechanism. A large majority of the remaining 20 per cent of cases that underwent formal screening were approved (91 per cent), either without (79 per cent) or with conditions (12 per cent). A very small proportion of cases were prohibited (2 per cent) or aborted by the parties for unknown reasons (7 per cent).

Following the entry into force of the FDI Regulation on 11 October 2020 and up to 30 June 2021, a total of 265 cases were notified to the Commission by 11 Member States pursuant to Article 6 of the FDI Regulation. More than 90 per cent of these notifications were made by five Member States: Austria, France, Germany, Italy and Spain. The majority of these notifications concerned manufacturing, ICT and the wholesale and retail sectors. The five main countries of origin of these 265 cases were the United States, the United Kingdom, China, Canada and the United Arab Emirates.

Of the 265 cases notified, 80 per cent (212) were closed in Phase 1 (i.e., within the initial 15 calendar days), with the remaining 14 per cent (36 cases) proceeding to Phase 2. As at 1 July 2021, 6 per cent of cases (17) were still ongoing. According to the Report, most cases were closed rapidly in Phase 1 within the prescribed 15 calendar days. In terms of Phase 2 cases, the average duration from the date the Commission reserved the right to issue an opinion pursuant to Article 6(6) of the FDI Regulation to the date it received additional information from a notifying Member State was 31 calendar days, with a wide range from two to 101 calendar days. This discrepancy in duration is mainly because of the time needed by the Member States to collect the relevant information from the investor and provide a response to the Commission’s request for information.

More Member States putting screening mechanisms in place

As at 3 December 2021, 18 of the 27 Member States had FDI screening mechanisms in place. Several of the remaining nine Member States are in the process of adopting relevant FDI rules.[32] It can be observed that the adoption of the FDI Regulation, and the debate around its adoption – including in the context of responding to the covid-19 pandemic – has led to a general strengthening of the existing FDI screening mechanisms and encouraged the adoption of new domestic regimes. According to the Report, it remains the Commission’s strong expectation that all 27 Member States will put national FDI screening mechanisms in place.

Comments on operation of the system and areas for improvement

The Report also asked Member States to comment on three topics: (1) the value added by the FDI Regulation and the cooperation mechanism; (2) any significant procedural issues encountered; and (3) possible ways of addressing those issues. All Member States considered the FDI Regulation to be a very valuable tool for gaining a comprehensive overview of FDI into the European Union. However, they also pointed out several issues when applying the FDI Regulation: some Member States complained about resource constraints to deal with additional and complex FDI cases; others referred to excessively short timelines to ask questions or make comments, and inconsistencies between timelines at the European Union and national levels. Some Member States suggested that too many FDI transactions were being notified, sometimes with no relevance in terms of security and public order. One Member State complained about excessively burdensome requests for information. Another suggested a need for further clarification of some key aspects of the FDI Regulation.

The Commission reviewed the comments and provided its views in the Report. In relation to resource constraints, the Commission noted that it had allocated additional resources to deal with FDI notifications, encouraging Member States to do the same. Regarding the difference in timelines, the Commission pointed out that the FDI Regulation did not harmonise timelines among the Member States and that any adjustments would require a change to the Regulation. The Commission was against the introduction of filtering criteria to reduce the number of cases notified because, according to the Commission, a transaction that does not seem sensitive to one Member State may be sensitive to others. Regarding the clarification of certain concepts of the FDI Regulation, the Commission reiterated that it had already clarified certain key concepts in an updated document setting out frequently asked questions.[33]

In terms of next steps, the Commission indicated that it has launched a comprehensive study to examine discrepancies between the Member States’ legislation and the policy consequences on the effectiveness and efficiency of the FDI Regulation. The Commission also mentioned that it will give serious consideration to the possible issuance of guidance for the benefit of the Member States’ screening authorities and investors, subject to consultation with the broader public. The Commission noted that it was still early days for considering possible future amendments to the FDI Regulation. However, as mentioned in the Report, Article 15 of the Regulation provides an obligation for the Commission to ‘evaluate the functioning and effectiveness of this Regulation and present a report to the European Parliament and to the Council’ by 12 October 2023, and for the Commission to recommend amendments to the FDI Regulation, where required.

Practical insights and strategic guidance for investors

For the purposes of practical deal planning, foreign investors should be aware that the screening of FDI under the FDI Regulation is likely to exceed the basic periods identified in the preceding sections. This is because the review period of 35 calendar days provided by the FDI Regulation (i.e., for Phase 2 investigations) may be extended when requests for information are made by the Commission or other Member States.

As mentioned above, the Commission must send any opinion to the Member State undertaking the screening within a reasonable period and, in any case, no later than 35 calendar days from receipt of the notification.[34] However, if additional information is requested, the Commission must send an opinion no later than 20 calendar days from receipt of the additional information. In practice, this means that the review period is suspended each time there is an information request. According to the Commission’s first annual report, however, most Phase 1 cases were reviewed rapidly (within the prescribed 15 calendar days) and the average duration for Phase 2 cases was 31 calendar days.

The operation of the FDI Regulation is also likely to increase the complexity and rigour of FDI screening processes. The standard form used by the Commission to collect information in respect of FDI is generally more comprehensive than equivalent forms used in various Member States (e.g., the Commission’s form requires detailed information about the target, such as an explanation of the products, services and business operations after completion of the transaction, the target’s main competitors, whether the target owns any patents or other intellectual property rights, etc.).[35] It appears likely that Member States will in future seek the same or substantially the same information, increasing the information requirements on affected businesses. On a precautionary basis, it is advisable for foreign investors to collect all the necessary information required by the Commission’s form in anticipation that the information may be required for national purposes.

In the longer term, heightened cooperation and information sharing among authorities under the FDI Regulation may provide some benefits to foreign investors by encouraging greater consistency among Member States, leading to more certain and predictable outcomes (notwithstanding political considerations that may play a more prominent role in FDI screening reviews than in merger control proceedings).

Key developments

On 17 June 2020, the Commission issued a ‘White Paper on levelling the playing field as regards foreign subsidies’, launching a public consultation on a number of ambitious and far-reaching possible options and legal instruments to address distortions in the EU’s internal market resulting from foreign subsidies.[36]

In this White Paper, the Commission argued that there is a regulatory gap that is not addressed by existing legal tools. For example, the EU state aid rules apply to public support provided by the Member States but they do not cover subsidies granted by non-EU authorities. Similarly, EU competition rules do not cover conduct that distorts competition in the internal market resulting from foreign subsidies.

The Commission also considered that the scope of the FDI Regulation is insufficient as it only covers the likely effects of FDI on security and public order but it does not specifically tackle the issue of distortions caused by foreign subsidies.

To address these concerns, on 5 May 2021, the Commission issued its proposed Regulation on foreign subsidies distorting the EU market.[37] If adopted in its current form, the proposed Regulation would have a transformative effect and significantly increase the regulatory risk and burdens for foreign companies operating or investing in the European Union.

Companies that are in receipt of ‘foreign subsidies’ – a concept that is very broadly defined in the proposed Regulation – could be subject to wide-ranging investigative action affecting the way they conduct their business, whereas in relation to merger and acquisition activity, there would be a further regulatory review process that would need to be navigated in parallel to existing merger control regimes and FDI screening processes.

The proposed Regulation provides for three different regimes to address foreign subsidies:

  • a general ex officio tool for the Commission to investigate allegedly distortive foreign subsidies;
  • a notification-based tool in relation to potentially subsidised mergers and acquisitions, with suspensory effect; and
  • a notification-based tool in relation to potentially subsidised public procurement bids, with suspensory effect.

Although each of these three tools has different areas of application, the substantive components that the Commission will be examining are the same, namely (1) the existence of a ‘foreign subsidy’, (2) whether the subsidy causes a ‘distortion’ in the EU market, (3) whether the negative effects in the EU market may be balanced by any positive effects of the subsidy, and (4) the measures or commitments required to address the distortions.

The proposed Regulation is far-reaching in scope and, if passed in its current form, has the potential to significantly increase the regulatory risk and burdens for foreign companies operating or investing in the European Union. It remains to be seen how the proposed tools would operate in practice as the provisions of the proposed Regulation give rise to a number of difficulties and uncertainties that will require further clarification.

The Commission’s proposal will now be passed on to the EU’s legislature, the EU Council and the EU Parliament, which will have to agree on a joint text if the proposed Regulation is to be passed. There is an expectation that the proposed Regulation will be adopted in the latter half of 2022, although controversial aspects of this new regime mean the passage of the proposed Regulation through the EU institutions will likely prove time-consuming and material amendments may be required to secure approval.


Notes

1 Kyriakos Fountoukakos and Daniel Vowden are partners and Daniel Barrio is an associate at Herbert Smith Freehills LLP.

3 Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions on Welcoming Foreign Direct Investment while Protecting Essential Interests, COM/2017/0494 final, 13 September 2017, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52017DC0494.

4 Proposal for a Regulation of the European Parliament and of the Council establishing a framework for screening of foreign direct investments into the European Union, COM(2017) 487 final, 13 September 2017, available at https://ec.europa.eu/transparency/documents-register/detail?ref=COM(2017)487&lang=en.

5 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, OJ L 79 I/1 [FDI Regulation], available at https://eur-lex.europa.eu/eli/reg/2019/452/oj.

6 Council Regulation (EC) No. 428/2009 of 5 May 2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items, OJ L 134, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32009R0428.

7 FDI Regulation, Article 3.

8 ibid.

9 ibid.

10 FDI Regulation, Article 5.

11 id., Article 6(9).

12 FDI Regulation, Article 8(3) defines projects or programmes of Union interest as ‘those projects and programmes which involve a substantial amount or a significant share of Union funding, or which are covered by Union law regarding critical infrastructure, critical technologies or critical inputs which are essential for security or public order’. The list of projects or programmes of Union interest is set out in the Annex to the FDI Regulation.

13 FDI Regulation, Article 8(2)(c).

14 id., Article 11(1).

15 Commission Decision of 29 November 2017 setting up the group of experts on the screening of foreign direct investments into the European Union, C(2017)7866, available at https://ec.europa.eu/transparency/documents-register/detail?ref=C(2017)7866&lang=en.

16 Joined cases C-282/04 and C-283/04, Commission v. Kingdom of the Netherlands, 28 September 2006, CLI:EU:C:2006:608, para. 19.

17 Communication from the Commission Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of Regulation (EU) 2019/452 (FDI Screening Regulation), 2020/C 99 I/01 C/2020/1981, of 26 March 2020, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A52020XC0326%2803%29.

18 FDI Regulation, Article 6(6).

19 id., Article 6(2).

20 id., Article 6(3).

21 id., Article 6(6).

22 id., Article 6(3).

23 id., Article 6(7).

24 ibid.

25 id., Article 7.

26 id., Recital 17.

27 Communication from the Commission Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of Regulation (EU) 2019/452 (FDI Screening Regulation), 2020/C 99 I/01, 26 March 2020, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A52020XC0326%2803%29.

28 ‘First Annual Report on the screening of foreign direct investments into the Union’, COM(2021) 714 final (23 November 2021), available at https://trade.ec.europa.eu/doclib/docs/2021/november/tradoc_159935.pdf.

29 ‘Screening of FDI into the Union and its Member States’, SWD(2021) 334 final (23 November 2021), available at https://trade.ec.europa.eu/doclib/docs/2021/november/tradoc_159939.pdf.

30 Bermuda, British Virgin Islands, Cayman Islands, Mauritius and the UK Channel Islands.

31 Japan, Korea, Singapore and Taiwan.

32 List of screening mechanisms notified by Member States, as at 3 December 2021, available at https://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157946.pdf.

33 Frequently asked questions on Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union, available at https://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157945.pdf

34 FDI Regulation, Article 6(7).

36 European Commission, White Paper on levelling the playing field as regards foreign subsidies, COM(2020) 253 final, 17 June 2020, available at https://ec.europa.eu/competition/international/overview/foreign_subsidies_white_paper.pdf.

37 Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market, COM(2021) 223 final, 5 May 2021, available at https://ec.europa.eu/competition/international/overview/proposal_for_regulation.pdf.

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