YSEC Volume I (2020)
Common European Law on Investment Screening (CELIS)
This Volume presents the very first, interdisciplinarily grounded, comprehensive appraisal of a future “Common European Law on Investment Screening”. Thereby, it provides a foundation for a European administrative law framework for investment screening by setting out viable solutions and evaluating their pros and cons.
Daimler, the harbour terminal in Zeebrugge, or Saxo Bank are only three recent examples of controversially discussed company takeovers in Europe. The “elephant in the room” is China and its “Belt and Road Initiative”. The political will in Europe is growing to more actively control investments flowing into the EU. The current regulatory initiatives raise several fundamental, constitutional and regulatory issues. Surprisingly, they have not been addressed in any depth so far. The Volume takes stock of the current rather fragmented regulatory approaches and combines contributions from leading international academics, practitioners, and policy makers in their respective fields. Due to the Volume’s comprehensive approach, it is expected to influence the broader debate on the EU’s upcoming regulation of this matter.
YSEC is addressed to readers from academia as well as to representatives from government, business, and civil society.
This chapter provides an introduction to the following 30 contributions written by leading Asian, European and North American experts on foreign direct investment on the recently adopted Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investment into the Union (hereinafter the EU Screening Regulation). It is the result of a conference organized at the University of Gothenburg in March 2019, just 2 weeks before the EU Screening Regulation was adopted. The volume takes stock of the historic move towards a Common European Law on Investment Screening (CELIS).
Over time there has been a major shift in the assessment of the pros and cons of free capital flows. In the Treaty of Rome, a safeguard clause confined the obligation to liberalize capital movements “to the extent necessary to ensure the proper functioning of the Common Market.” Up till the early 1980s, the stabilizing role attributed to capital controls outweighed the textbook economic costs of controls. The establishment of the European Monetary System marked a new beginning as freedom of capital movements was seen as forcing economic discipline and promoting economic reforms and the convergence of policies. Most motives for controlling capital movements no longer apply as the incompatible trinity of having free capital flows, stable exchange rates and autonomous monetary policy at the same time is resolved by the transition to the euro. At the same time, national security and critical infrastructure concerns have gained prominence. The EU framework for investment screening that was agreed to address these concerns should not infringe upon the acquis of free capital flows. Economic interests should not be mixed with national security concerns, and investment screening should not become an extension of industrial policy. Alternative approaches are proposed that would address concerns of intellectual property and reciprocity. Lessons are drawn from an earlier episode when similar concerns were raised with respect to Japan. The negotiation of a bilateral investment treaty between the EU and China, including mutual access rules, would further the view that Europe profits from remaining open to the outside world while European corporations operate on a level playing field.
China is the panda in the room: its extensive foreign investment policy in recent years, whilst only incrementally opening its own internal market, serves as justification and yardstick for investment screening worldwide. But asymmetrical investment policies and the One Belt One Road initiative only provided the trigger for political action in Europe. The EU investment screening mechanism is justified by concerns that are mainly related to public security. This was overdue. However, the procedure set up does not provide sufficient legal certainty, given the various undefined and vague terms, including public order. The cooperation mechanism might therefore, contrary to its laudable intentions, become another element in the ongoing efforts by the EU Commission to politicize investment law, allowing for political horse-trading. It is further argued that economic statecraft demands a clear commitment to the rule of law and to the positive economic aspects of FDI. Investment screening should not become part of the overall negative stance that the EU took relating to investment protection as such. This approach has already undermined the trust of many investors in the integrity of the EU legal system. Attaching new regulatory hurdles to the free flow of capital should serve the purposes of the EU, which include free and fair trade, the integration of legal and economic systems, and a global level playing field.
Stephan F. Wernicke (2020)
This chapter deals with the process that led to the adoption of the EU Screening Regulation. The chapter starts with a description of the political debate that sparked the idea to harmonise the screening of FDI in the EU. Having laid down the political and economic context, the author describes the legal context where the EU Screening Regulation was to fit in before presenting a detailed account of the legislative process, predominantly from the perspective of the European Parliament.
Joanna Warchol (2020)
At the end of 2018, the German and French governments substantially tightened the applicable regulatory framework for the review of foreign investment by significantly extending the investment sectors subject to review and by lowering the relevant thresholds triggering the screening mechanism. For this reason, this chapter demonstrates and analyzes the current foreign investment control regimes in Germany and France. In particular, the strong tendency by both governments towards a stricter approach regarding the screening of foreign investment and the legal implications thereof will be outlined. It will be shown that foreign investment screening in Germany and France has become a serious public policy instrument to safeguard national economic interests.
This chapter addresses the investment screening mechanisms of Spain, Portugal and Italy and the choice by Greece not to implement a formal screening mechanism, testing them against the aims and requirements of Regulation (EU) 2019/452. It is argued that the four countries analysed in this chapter share a common liberal approach to foreign investment, which pervades their domestic laws on the matter, and that such approach appears capable of ensuring full cooperation between southern European countries and the EU Commission towards a common European framework for the screening of foreign investment.
In this chapter, the authors present the current state of national legislation in Poland, Lithuania and Latvia enacted to protect national and public security in the context of foreign direct investment (FDI). The authors discuss the following aspects related to FDI screening: investors subject to screening, protected objects, transactions subject to screening, screening criteria, competent authorities, procedures, administrative/judicial review and consequences of unlawful transactions. Thereafter, an analysis of the different national legal regimes is made in the light of the EU Screening Regulation.
Romania does not yet have a separate law regulating the screening of foreign investments. Therefore, it is difficult to argue that the 2011 amendment to Romania’s Competition Law, which allows the blocking of a takeover for national security reasons, can be considered a comprehensive investment screening mechanism under EU Regulation 2019/452. If it can be considered as such, then the summary procedures described in the Competition Law fall short of the requirements of the EU Regulation. Compared to Romania, Hungary has very recently adopted Law LVII of 2018 and Government Decree 246/2018, which set up a detailed investment screening mechanism for national security reasons, in sensitive economic sectors. The Hungarian mechanism is mostly in line with the Regulation’s mandatory minimum requirements. It only falls short when it comes to better detailing some of the grounds based on which non-EU, non-EEA, or non-Swiss foreign investors can have their investments blocked, and it does not include provisions on the protection of sensitive information. It is to be seen how effective the Hungarian mechanism becomes as a number of foreign investors will be affected by it.
This chapter analyses Acts (here, the translation of ‘lag’ and ‘lov’ into English is ‘Act’) on investment screening and protective security agreements in Finland, Norway, Sweden and Denmark. To put the existing Acts into perspective, also potential future Acts are discussed. The following questions are asked: Which acquisitions are screened/monitored or subject to protective security agreements? Which sectors and factors are considered? Which are the reasons for rejection? This chapter shows that Sweden, Norway, Denmark and Finland have quite different systems. Out of the four countries, Finland has the only investment screening mechanism, but to accommodate the new EU Screening Regulation on investment screening, the Act needs to be somewhat updated.
This chapter focuses on procedures and mechanisms to control foreign direct investments into the EU banking and insurance sector. It explains and analyzes the relationship between the prudential ownership control procedures under EU supervisory law and the proposed FDI screening mechanisms under Regulation 2019/452. In the outset, an overview on prudential ownership control and the FDI screening mechanisms under Regulation 2019/452 is given. Then the main areas and principles of prudential supervision are described for credit institutions, insurance companies and investment firms, followed by a detailed explanation of prudential ownership control requirements and procedures. On this basis, an analysis of the new framework for the screening of foreign direct investments under Regulation 2019/452 is undertaken with regard to the possible design of the screening mechanisms, the application of such mechanisms to financial institutions in addition to the prudential ownership control procedures and the new cooperation mechanisms between Member States and the Commission. The analysis shows that Member States are not obliged to adopt an FDI screening mechanism for foreign direct investments into financial institutions. As prudential ownership control requirements always apply, a Member State may refrain from setting up an additional FDI screening mechanism if security and public order in the sense of Regulation 2019/452 are effectively protected by prudential ownership control procedures. This may be the case with regard to the protection of the financial infrastructure of the Member States and the Union against risks posed by certain foreign investments; the same could be held with regard to the protection of sensitive data collected by financial institutions and to the defence against foreign investors involved in criminal activities. So far, the prudential ownership control procedures may be described as a hidden investment screening mechanism already in place. However, as the prudential ownership control is neutral as to the origin of a foreign investor and does not discriminate against certain foreign states, it may be necessary for Member States to set up an FDI screening mechanism at least to screen the proposed acquisition of qualifying holdings in financial institutions by certain foreign states and state funds. Furthermore, Regulation 2019/452 provides for cooperation mechanisms between Member States and the Commission with regard to foreign direct investments, independent of whether such investments are subject to FDI screenings or not, for which there is no corresponding concept under supervisory law.
The contribution gives an overview of existing secondary law that can be perceived as hidden control mechanisms and barriers to foreign investment into defence and security companies. Such provisions can be found in merger control law, public procurement law, and R&D funding instruments. In addition, the piece examines the role of Article 346 TFEU as a means to enable national investment screening measures in the defence sector, and the correct interpretation of the provision.
One of the main characteristics of the transport sector is its enormous demand for long-term financial investments in physical infrastructure, which is hardly matched by any other sector. Traditionally, these investments are still undertaken mostly by public bodies, i.e. by the State itself, its organs or private entities under public control and supervision. However, there are continuously shrinking public finance capacities in many areas, and this also includes the transport sector. At the same time, there is an ever-increasing investment demand to replace or at least overhaul ageing infrastructure like roads, railway networks, inland waterways and transport hubs (sea ports and airports). On the one hand, the resulting infrastructure gaps might be partially bridged by private investors—although private investors usually take a rather cautious approach when it comes to financial “adventures” in the area of upgrading any physical transport-related infrastructure. On the other hand, the transport sector is part of the legal understanding of “critical infrastructure” where EU-wide investment screening is generally possible in the future. It is submitted, however, that this inclusion will not generate any significant negative effects or political concerns. The general message in the transport sector is that any large-scale private investments are most welcome—although they still might be subject to a screening exercise at the domestic level, less likely by the European Commission. It is difficult to imagine scenarios where private investments cannot be brought in line—at least via negotiations and contractual clarifications—with existing projects or programmes of EU interest or where security or public order would be negatively affected. As a result, Regulation (EU) 2019/452 will neither generate negative effects in the transport sector, nor will it boost any foreign direct investments in an area where it is already most difficult to attract sufficient private capital to address public needs.
To a large extent, the energy sector consists of what can be termed critical infrastructure. It is therefore not surprising that the EU’s new foreign direct investment screening mechanism also includes the energy sector.
However, existing EU legislation has provisions that can perform the same function as the more formal screening mechanism. This chapter presents and analyzes this legislation. It is concluded that the present EU energy legislation already contains tools regarding investment control.
Bent Ole Gram Mortensen (2020)
This chapter analyses whether European IT and telecommunications law provides any possibilities to ban direct investments and network supply by third country-companies. A closer look onto the prohibitions of discrimination and the concept of general authorisation shows that preventive investment control in general is neither intended nor justified by the relevant EU directives. Even when interpreting German eligibility requirements for admission to the frequency auction (5G), the main purposes of European telecommunications law—open competition and technological dynamism—hinder a strict exclusion of suppliers from third countries.
The chapter reviews the mechanism of foreign direct investment controls as implemented in Russia under the auspices of the Federal Law “On Foreign Investments in Russia” No. 160-FZ and Federal Law No. 57-FZ “On the procedure for making foreign investments in companies which are of strategic importance for ensuring the country’s defence and state security”. The author examines the definition of the foreign investor provided by the laws, analyzes the types of activities deemed of strategic importance for national defence and security and describes the thresholds triggering obligations of obtaining prior clearance of foreign investment transactions. A separate section of the chapter is devoted to the analysis of the procedures for obtaining clearances and the consequences of non-compliance. The paper also addresses other rules of the Russian legislation that restrict foreign direct investment to Russia. In the last section of the chapter, the author summarizes the experience of 10 years of application of foreign direct investment control mechanisms in Russia and poses questions on the possible implications of Russia’s experience for the EU Regulation establishing a framework for the screening of foreign direct investments into the Union.
As the European Union implements its new regulation on the national screening of foreign investments, it is useful to be mindful of both the contrast (in terms of jurisdiction) and similarities (in terms of substantive areas of focus) between the EU and the U.S. foreign investment review processes. This chapter provides an overview of the U.S. foreign investment review process, including how it has evolved and where it is heading following recent statutory changes.
Japan restricts foreign investments by requiring foreign investors to submit a posttransaction report in general circumstances and a prior notification only when the investment involves certain industries or locations. The competent ministers then screen such investments to determine which are likely to impair national security, public order, or the public safety of Japan or have a significant adverse impact on the smooth operation of the Japanese economy. The most recent amendment to the Japanese regulation lowers the share or voting right acquisition threshold for prior notification from the current 10% to 1% of the total number of shares or voting rights. Although the amendment also introduces an exemption system for foreign investments that do not pose threats to national security, since the change in the threshold for prior notification is relatively large, the amendment is drawing attention from both domestic entities and foreign investors. This chapter introduces the current Japanese foreign investment regulation system and explains the most recent amendment of November 2019, which is expected to enter into effect next spring, along with the purpose behind the amendment.
When China began to institutionalize foreign direct investment in the 1980s, the foreign direct investment (FDI) regime was characterized by a case-by-case approval system in terms of FDI screening. It was later supplemented with an industry guideline for foreign investment in the mid-1990s. In recent years, with the changing situation for global FDI flow and economic landscape in China, China’s FDI regime has undergone a sweeping reform. The traditional regime of FDI screening based on the case-by-case approval and the industrial policy for FDI has given way to the “pre-establishment national treatment plus negative list” approach in the new Foreign Investment Law of the People’s Republic of China. This chapter will examine China’s FDI screening mechanism and, in light of the current social and economic situations, explore the features of the new FDI screening regime in China vis-à-vis that of the EU.
An examination of the respective roles of Member States and the EU in establishing investment screening mechanisms must consider several aspects. On the one hand, investments are an important source of growth, jobs and innovations. On the other, investments can be detrimental to the security of supply in relation to services essential for Member States – for example, when a state-owned company, which is located in a third state, gains control over the only electricity station in a region through investment. This could possibly lead to Member States getting exposed to the risk of being blackmailed or being entirely dependent on other states or foreign companies. To mitigate such risks, the German Federal Ministry for Economic Affairs and Energy lowered the threshold for the national screening mechanism to 10% for investments in certain companies that own critical infrastructure. Simultaneously, the European Union has adopted Regulation 2019/452 establishing a framework for screening of foreign direct investments (hereafter the EU Screening Regulation). These events pose the question of whether the Union itself or the Member States are vested under Union law with the power to adopt investment screening mechanisms, and also which additional legal requirements must be considered in that respect. These questions are answered in three steps. First, an overview of the essential terminology and the intensity of the risks of investments out of third states can cause for the Member States is provided. Second, the competences of the Member States in this area must be examined in light of the fundamental freedoms and the exclusive competence of the Union for the Common Commercial Policy. Third, a closer look will be taken as to the conformity to primary law of the EU Screening Regulation, against the backdrop of the principle of conferral and EU fundamental rights. The analysis will show that Member States are only allowed to adopt rules dealing with direct investments out of third states; the European Union enjoys a wider scope to introduce investment screening mechanisms. However, the conditions provided in the specific provision providing for legislative power may not be disregarded. With this in mind, the EU Screening Regulation is built on uncertain ground, as it allows the Member States to establish individual “commercial policies”, which is contrary to the spirit of Article 207 para 2 TFEU on which this secondary legislation is based.
The following comments are inspired by the thoughtful analysis by Stefan Korte: “In Search for an EU Competence to Establish an Investment Screening Mechanism and Restricting Effects Flowing from Fundamental Freedoms, Fundamental Rights, and Other EU Primary Law” (Korte, Stefan, In Search for an EU Competence to Establish an Investment Screening Mechanism and Restricting Effects Flowing from Fundamental Freedoms, Fundamental Rights, and Other EU Primary Law, in this volume.). It should be made clear that the ambition and scope of these comments is not to address all issues or arguments presented by Korte; rather, the comments are limited to three distinct but interlinked issues: the structure and function of Article 207 of the Treaty on the Functioning of the European Union (TFEU), which leads to an analysis of the role of Article 65 TFEU in explaining national screening mechanisms, and finally the legal basis for Union measures found in Article 64(2) TFEU.
Investment protection is currently pursued for reasons of strategic economic policy. It is the expression of a new geoeconomic rivalry that has created antagonisms and displaced the previous belief in the value of unlimited freedom of movement of capital and freedom of establishment. The paper examines how the new investment protection policy is conducted with recourse to the concepts of “security” and “order.” The paper develops a normative framework with which the rationality of this policy can be assessed and criticized. The resulting picture is ambivalent. There are good reasons to protect investments. However, the existing mechanisms identify these reasons only insufficiently, and the mechanism is only partially “fit for purpose.”
The qualification of a transaction as ‘foreign direct investment’ (FDI) and, more specifically under Regulation (EU) 2019/452 (Screening Regulation), as third country direct investment opens—or closes—the scope of application of the Screening Regulation. Yet the Screening Regulation leaves many questions on that concept open. Therefore, this contribution aims at tackling some of the questions. It comes with two major parts: Sections 2–4 embed FDI in general and the Screening Regulation specifically in broader political and legal contexts, and Section 5 analyses specific legal elements of third country direct investments under the Screening Regulation. Section 2 outlines general fundamental global challenges that affect FDI law and politics. Section 3 contextualises third country investments within relevant EU law. The analysis shows that the Regulation’s definition of direct investments is just transplanted from the three-decades-old Capital Movements Directive. Also, this contribution argues that all third country investments are protected by the freedom of capital movement. They also fall within the scope of protection of EU fundamental rights. Section 4argues for a very fundamental approach: the EU and its EU Member States should strive for a common European screening law and politics. Such a common European understanding goes beyond hard law: it includes the political and legal willingness to discourse and cooperation in order to develop a coherent FDI policy even without a legal obligation under EU law to do so. Yet this section emphasises that the Screening Regulation is set in uneasy contexts. The Regulation is a new policy, it is a key concept in the global struggle for adequate rules, it comes with the temptation of being used as a bargaining chip in international negotiations, and it may generate spillover effects on the internal market. One facet to tackle these uneasy contexts is to apply a strictly legal approach to the Regulation, not to fall prey to ‘reciprocity arguments’, and to consider international law more seriously. Section 5 is the legal centrepiece of this contribution. It starts with an analysis of the Regulation’s definition of direct investments as ‘aiming to establish or to maintain lasting and direct links’ between the investor and target. Whether a transaction qualifies as direct investment or as (mere) portfolio investment should be reviewed under an objective test; the investor’s subjective intentions on how to use the acquired shares do not constitute a legally sound basis. Next, this contribution argues that transactions also qualify as third country ‘direct’ investments if the transaction results in indirect links between a third country investor and an EU target; this would be the case in parent-subsidiary structures on the acquirer’s side. A further focus lies in the analysis of what it means for an investment to bring the opportunities for ‘effective participation in the management or control’ of the target. This contribution argues that an understanding of ‘control’ should seek inspiration from other EU law areas such as the EU merger control law, that ‘management’ should be interpreted in a broad manner (which could include ‘supervisory bodies’) and that the investment-management/control nexus should be fleshed out by a common European quantitative-qualitative approach. Furthermore, this contribution considers ex post screening challenges and the Regulation’s anti-circumvention clauses. The section closes with discussions on third country investors and third countries. While the nationality of the investor’s shareholders must not be taken into consideration, this contribution argues that ‘doubly organised undertakings’ (which have essential corporate relationships to both an EU Member State and a third country) should be qualified as third country investors. Lastly, several categories of countries are analysed regarding their third country qualification: the Organisation for Economic Co-operation and Development (OECD) countries, overseas countries and territories, the European Economic Area states, Switzerland, and the post-Brexit UK.
Following the example of a number of countries, the European Union recently introduced a regulation for a screening mechanism for foreign direct investments. Also preceding the formal EU-wide screening mechanism, major foreign investments, such as pipelines, could be screened by EU Member States, either formally or informally. The Nord Stream 2 (NSP2) pipeline project has been subject to a number of measures in the different phases of its investment that could be understood as informal screening processes. Such measures have been taken not only by the EU and its Member States but also by the United States in the form of extraterritorial sanction threats. In this chapter, experiences with these mechanisms are discussed with the aim of determining whether a common approach, as adopted in the EU, is necessary and desirable.
The purpose of this chapter is to assess the future development of the EU’s foreign direct investment (FDI) screening legislation. This chapter takes as a starting point the newly adopted EU framework for the screening of foreign direct investments into the Union (hereinafter referred to as the “EU FDI framework”) and predicts the evolution of the rules in this legal regime by a comparison of how the EU export control regime has developed over the last 30 years. The two legal regimes share tensions between national security interests of the Member States and Union interests and exclusive competence. The regulatory separation of the export control of military equipment and that of so-called dual-use items allowed for more powers to be moved to the EU, which in turn resulted in more common EU provisions for Member States and private operators. The author concludes that something similar may happen with the FDI framework. As the export control rules still stand and continue to evolve, it is reasonable to expect that the EU FDI screening mechanisms will remain and continue to evolve for the next 25 years.
China is emerging as an economic powerhouse with the globalisation of the world economy. The country takes proactive steps to deepen its global engagement through new initiatives, such as One Belt, One Road (OBOR). It offers good evidence of China’s mercantilist efforts to derive political and geostrategic leverage from the OBOR-related projects. The initiative serves as a key indicator of whether China is primarily to satisfy its national interests or whether it seeks to create a win-win Eurasia. No ready formula can suffice to explain the cross-cutting economic and political factors at play. Arguably, the OBOR initiative appears to be a combination of geopolitical and economic strategies to achieve China’s multiple strategies. It all comes down to whether China could be able to write global governance rules via the OBOR initiatives.
This chapter examines how screening of foreign direct investments could take place through European company law. It scrutinizes the contribution of both CJEU’s case law and the harmonization of European company law to an effective screening of foreign direct investments. On the basis of this approach, this chapter is divided into two parts. The first part focuses on CJEU’s case law, and the second part examines harmonization. An examination of the freedom of establishment of companies in the light of CJEU’s case law on corporate mobility sheds light on the screening of foreign direct investments. The impact of the privatizations of State-owned companies and of CJEU’s golden share case law on the screening of foreign direct investments is discussed. This chapter analyzes how certain harmonizing instruments of European company law could contribute to the screening of foreign direct investments. The relationship between the goals of the harmonization of European company law and the screening of foreign direct investments is also scrutinized. The Takeover Bids Directive with its optionality and reciprocity regime and with its requirements for disclosure of information could contribute to an effective screening of a foreign direct investment behind a takeover bid. Additionally, this chapter examines how the Shareholders Rights Directive II, the Transparency Directive, the Cross-Border Mergers Directive (repealed and consolidated into Directive 2017/1132) and the European Company Statute (Societas Europaea – SE) could contribute to investment screening. Some concluding remarks are deduced on the importance and effectiveness of European company law for the screening of foreign direct investments.
This chapter asks how and why investment treaty obligations of the EU or its Member States may affect the design and operation of EU and Member State investment screening mechanisms. It examines the scope of application of such investment treaty obligations in the area of investment screening on grounds of security or public order. It then assesses the potential for norm conflicts between such treaty obligations and legal acts of the EU or its Member States relating to investment screening by considering the manner in which such obligations are to be applied, taking stock of both the material content of the main applicable protection standards and available general and security exceptions. Finally, the chapter explores the available legal remedies by means of which such potential norm conflicts may be resolved and considers the effects of such remedies on the functioning of investment screening mechanisms.
This chapter examines the relationship between State aid rules and the EU Screening Regulation, which may be characterised as multifaceted. Whereas State aid law in its nature limits Member States’ room for manoeuvre in the sphere of industrial policy, the new EU Screening Regulation provides an arguably broad room for manoeuvre for Member States to intervene in markets to protect public security and public order. However, it may be argued that this broader manoeuvring room could lead to a clash between the two sets of rules. The first facet of the relationship between the rules that are examined is where FDI screening leads to the granting of State aid. This could occur in connection with privatisation of State-owned undertakings; FDI screening may lead to the undertaking being sold to the second-best bidder following a disqualification of the best bidder. Such a situation would prior to the entry into force of the EU Screening Regulation lead to State aid to the buyer. Another facet is third country subsidised FDI. Although this topic has not been addressed explicitly during the legislative process leading to the adoption of the EU Screening Regulation, there are traces of subsidised FDI being an issue of concern, and the EU Screening Regulation in certain ways facilitates that subsidisation of the FDI could be taken into account by the screening Member State. It is concluded that many stones in the relationship between State aid law/third country subsidies and FDI screening are left unturned by the EU Screening Regulation.
This chapter reviews the options of legal redress offered to non-EU investors seeking to place controlling investments in EU member states vis-à-vis measures taken by member states, their investment screening and control mechanisms (ISCMs) and the European Commission under Regulation (EU) 2019/452 (EU Screening Regulation). It matches investors’ goals with legal bases and fora for legal redress to outline procedural options of legal redress. Thereafter, the chapter focusses on the material criteria of review and finds that judicial review is significantly limited regarding the factors that allow ISCMs to screen, prohibit, condition or unwind investments. This finding is valid for the legal bases taken into account, i.e. national law, exemplified by German law, EU law and international investment law, although the legalistic realization of limited revisability varies. Litigation seeking to annul screening decisions of ISCMs or to recover damages in consequence of screening decisions or other actions taken by ISCMs thus faces somber prospects. Fully reviewable procedural rights of investors and the protection by international investment agreements in the post-entry stages of investment provide the most reliable grounds for litigation. The EU Screening Regulation’s pertinent provisions are analyzed and found not to change the legal status quo of third state investors seeking controlling investments in EU member states.
This chapter provides a doctrinal perspective on the EU Screening Regulation. It seeks to present, clarify, and assess the very rules contained therein. Following a sketch of the way in which the rules are organised in the Regulation, the chapter discusses in more detail the rules that are directed at the establishment of “a framework for the screening by Member States of foreign direct investments into the Union on the grounds of security or public order”. It continues by critically assessing the rules that create the “mechanism for cooperation between Member States, and between Member States and the Commission, with regard to foreign direct investments likely to affect security or public order”. The chapter closes with a brief summary and outlook.
The CELIS Institute is an independent non-profit, non-partisan research enterprise dedicated to promoting better regulation of foreign investments in the context of security, public order, and competitiveness. It produces expert analysis and fosters a continuous trusting dialogue between policymakers, the investment community, and academics. The CELIS Institute is the leading forum for studying and debating investment screening policy.