Brussels, 25 March 2020

In April 2019, Regulation (EU) 2019/542 for the screening of foreign direct investments into the Union entered into force. This regulation seeks to ensure coordination and cooperation on the screening of foreign direct investments with a risk of jeopardizing public order or security. The regulation does not oblige Member States to screen FDI, but does allow Member States and the Commission to exchange information about specific investments. Moreover, the Commission is allowed to issue opinions on investments possibly constituting a risk to public order or security. Moreover, the regulation sets requirements for Member States who want to keep their screening mechanism or set up a new one.

On the 25th of March 2020, the European Commission has adopted guidelines in view of ensuring a solid EU-wide approach during the COVID-19 crisis and the economic vulnerability that goes along with it. It is recognized that, during the COVID-19 crisis, FDI screening mechanisms should pay particular attention to risks to critical health infrastructures, as well as the supply of critical inputs. It should be avoided at all costs that foreign direct investments jeopardize the health needs of EU citizens.

The Commission calls on Member States to use the already existing FDI screening tools to the fullest extent, and, through the guidelines, provides more clarity on how to use them. It is recognized that, together with security and public order, also public health is an “overriding reason in the general interest.” Moreover, the European Commission calls on Member States that have not done so yet, to adopt an FDI screening mechanism.

Currently, 14 out of 27 EU Member States have such a screening mechanism in place. The Guidelines also contain information regarding under which conditions capital flows from third countries to acquire stakes in a company can be restricted. Such reasons can, for example, relate to ensuring the provision of essential services or to safeguarding security of supply.