The EU Regulation on Screening of Foreign Direct Investment: A Game Changer?

European Business Law Review, 2020, Forthcoming

25 Pages Posted: 1 Aug 2019 Last revised: 6 Mar 2020

See all articles by Wolf Zwartkruis

Wolf Zwartkruis

Leiden University

Bas J. de Jong

Radboud University Nijmegen

Date Written: April 3, 2019

Abstract

In March 2019, the EU has adopted a Regulation on the screening of foreign direct investment (FDI) which will apply from 11 October 2020. Member States are allowed to use a national screening mechanism for FDI from outside the EU on grounds of widely defined public order or security, including the protection of key technologies. A cooperation mechanism is established between the Member States and the European Commission. The European Commission is authorized to give a non-binding opinion if the FDI affects Union interests.

The Regulation reflects a new attitude of the EU towards FDI, triggered by geopolitical developments especially involving Chinese state-owned enterprises taking over European companies with key technologies. However, the EU’s ambitions are faced by legal and practical challenges. From a legal perspective, the Regulation seems to require an extensive interpretation of the grounds for restriction of free movement as developed by the ECJ and codified in the Regulation. From a practical perspective, making coordination work will not be easy. It requires a significant effort from the Member States and the Commission, and success is by no means guaranteed.

Keywords: Foreign direct investment, Screening mechanism, Public order and public security, Free movement of capital, Freedom of establishment

Suggested Citation

Zwartkruis, Wolf and de Jong, Bas J., The EU Regulation on Screening of Foreign Direct Investment: A Game Changer? (April 3, 2019). European Business Law Review, 2020, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3428247

Wolf Zwartkruis

Leiden University ( email )

Postbus 9500
Leiden, Zuid Holland 2300 RA
Netherlands

Bas J. De Jong (Contact Author)

Radboud University Nijmegen ( email )

Postbus 9108
Nijmegen, 6500 HK
Netherlands

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