FAQs

Before the entry into force of the Regulation in 2019, there was no comprehensive framework at Union level for the screening of foreign direct investments (FDI) on the grounds of security or public order, while the major trading partners of the Union had already developed such frameworks. Given the high degree of integration between Member States’ markets, interconnected supply chains and common infrastructures between Member States, a foreign investment could pose a risk for security or public order beyond the Member State where the investment is made. An input, a service or a technology provided by a company established in one Member State may be critical to the security or public order of another Member State, or to a project of Union interest.

In the past years there have been growing concerns regarding certain foreign investors seeking to acquire control of, or influence in, European firms whose activities have repercussions on technologies, infrastructure, inputs or sensitive information critical for more than one Member State, or on a project of Union interest. Such transactions may put our collective security or public order at risk. This is especially the case when foreign investors are State owned or controlled including control through financing or other means of direction. The framework for FDI screening ensures that the EU is equipped to protect its essential interests while remaining open to investment.

Today, more than ever, the EU’s openness to foreign direct investment (FDI) needs to be balanced by appropriate screening tools to safeguard our security and public order.
Without questioning Europe’s openness to FDI, the Regulation plays an important role in exceptional cases where foreign investors seek to acquire assets which are critical to our essential interests. The Regulation has equipped the EU with a framework and common criteria to identify risks related to the acquisition or control of strategic assets, which threatens security or public order. In addition, it entails a cooperation framework between Member States and the Commission. This underpins the assessment of FDI in Member States, and facilitates the ultimate decision by the Member State where the FDI is planned or completed.

Even though FDI falls within the exclusive competence of the Union, Member States are allowed by the Regulation to maintain screening mechanisms necessary to identify risks to security or public order arising from particular investment transactions. However, without the EU cooperation framework, potential blind spots could exist in relation to “cross-border impacts” as the screening of an investment by a Member State may only take into account risks to the national security or public order of the Member State where the investment is planned or completed. Thanks to the Regulation, Member States and the Commission have a much better overview of foreign investments in the EU as a whole.

In the internal market, a critical technology or infrastructure in one country may also be critical for its neighbours and sometimes for the whole Union. Investments in strategic sectors may also have impacts on EU-funded projects, like the navigation system Galileo, Trans-European Networks in the areas of energy (TEN-E) and transportation (TEN-T), or the EU’s research and innovation programme Horizon Europe.

The Regulation includes an indicative list of factors that Member States and the Commission may take into account when assessing whether a foreign direct investment (FDI) is likely to affect security or public order. These factors include effects on critical infrastructure, technologies (including dual-use items) and inputs, which are essential for security or public order. Effects of an FDI on access to sensitive information, including personal data, or the ability to control such information, or on the freedom and pluralism of the media may also be taken into account when making such an assessment.
Member States and the Commission also take into account the context and circumstances of the FDI, in particular, whether a foreign investor is controlled directly or indirectly (for example through significant funding, including subsidies), by the government of a third country, or is pursuing State-led outward investment projects or programmes.

The assessment is conducted on a case-by-case basis.

The cooperation on FDI screening between Member States and the Commission covers any foreign direct investment (FDI). As defined by the Regulation and confirmed by the European Court of Justice4, this can be 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 target company, in order to carry out 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. Foreign investor means a natural person of a third country or an undertaking of a third country, intending to make or having made a foreign direct investment.

While portfolio investments are not part of the scope of the Regulation, the Regulation does not establish quantitative criteria for the delimitation of portfolio investment and FDI.

FDI can take two different forms: greenfield investments, and mergers and acquisitions (M&As). International greenfield investments typically involve the creation of a new company or the establishment of facilities abroad, while an international merger or acquisition amounts to transferring the ownership of existing assets relating to an economic activity to an owner abroad. Similarly to M&As, if Member States cover greenfield investments in their national screening legislations, then they must notify to the cooperation mechanism the greenfield investments they are screening.

Corporate transactions where the foreign investor and the EU target are owned or controlled by the same foreign company that does not increase its ownership in the EU target may, in principle, not be considered as falling under the scope of the FDI Screening Regulation and do not need to be notified under the cooperation mechanism. Such transactions may occur when a company is undergoing internal restructuring; for example, a holding company selling its participation in a target undertaking to one of its subsidiaries, or a holding company separating part of its business and creating a new subsidiary, which would still be within the same group.

Cases which concern the transfer of ownership, or control, of an EU company from one foreign investor to another foreign investor are covered by the Regulation.

The EU framework does not allow for the screening of foreign direct investment based on other concerns than security and public order.

The purpose of the Regulation is to identify and address potential threats to security or public order caused by foreign direct investments (FDI).

Where a transaction establishes lasting and direct links between a foreign investor and an EU undertaking to which capital is made available in order to carry out an economic activity in the EU, the investment falls under the scope of the Regulation. A public tender awarding a concession for the building and operation of critical infrastructure could, for example, involve FDI and thus fall under the scope of the Regulation. Alternatively, the disposal of State assets, for example, through a privatisation, may also constitute FDI when the investment grants the foreign investor the possibility to participate effectively in the management, or control, of the privatised company (or business) carrying out an economic activity. The acquisition of equipment or services from foreign suppliers does not fall under the scope of the Regulation, unless the transaction would provide for the participation in the management, or control, of an EU company.

Whether a specific public contract or concession might fall under the scope of the Regulation should be assessed on a case-by-case basis, prior to the tender procedure. In view of the above, the Commission services consider that competent authorities of the Member State in which the procedure is undertaken should also check whether the contract to be awarded involves an FDI that should be screened on grounds of security and/or public order. The Commission services also recommend that, where appropriate, the tender notice and/or tender documentation should at the outset mention that the procedure, or the award of the contract, is subject to the FDI Screening Regulation or that this Regulation applies to the investment at issue. This applies equally to all Member States, whether they have a screening mechanism or not.

The Regulation applies to all EU Member States, regardless of whether they have a screening mechanism or not. The procedure will however slightly differ, depending on whether the foreign investment is undergoing a screening procedure at national level or not. For instance, Member States which have a screening mechanism will notify the Commission and the other Member States when a transaction is screened, by providing information on that transaction.

No. The Regulation does not oblige Member States to set up a screening mechanism at national level.

The cooperation is mandatory to the extent that Member States have to notify the Commission and other Member States of any foreign direct investment in their territory that is undergoing screening and have to share certain information through confidential channels. When a Member State or the Commission considers that a foreign direct investment not undergoing screening in another Member State is likely to affect its security or public order, it may request information from the host Member State. This host Member State has to ensure that a minimum level of information is made available to the Commission and the requesting Member State without undue delay through confidential channels. However, some elements are voluntary, such as issuing comments on a foreign direct investment taking place in another Member State.

All Member States are bound by the duty of sincere cooperation. Under the cooperation mechanism a Member State has to give “due consideration” to the comments from other Member States and the opinion of the Commission. This ensures that the host Member State assesses the comments received before it takes a decision on a foreign direct investment at stake. In the context of projects or programmes of Union interest affected by foreign direct investments, the Commission’s opinions must be taken into “utmost account” by host Member States. This means that, by default, the Member States must follow the opinion, or must provide reasons for not doing so.

(1) When an investment is subject to a national screening mechanism, the cooperation mechanism will apply to a completed investment if the national screening mechanism allows it (however, most mechanisms are based on ex-ante notification by the investor).

(2) When an investment is not subject to screening at national level, the cooperation mechanism may be initiated within 15 months after the investment has been completed.

The final decision on whether a foreign investment is authorised remains with the Member State where the investment takes place. While other Member States or the Commission may raise concerns, they cannot block or unwind the investment in question.

Projects and programmes of Union interest involve a substantial EU funding or are established by Union legislation regarding critical infrastructure, critical technologies, or security of supply of critical input. They serve the Union as a whole and represent an important contribution to growth, jobs and competitiveness for the Union’s economy.

The list of projects and programmes of Union interest is 4 published as an annex to the regulation. The Commission is empowered to update this list when necessary.

No. Opinions and comments relating to a specific FDI will not be disclosed as this would undermine the protection of information relevant for security, potentially defence and military matters as well as international relations. It could also undermine the commercial interests of a natural or legal person, or privacy. However, once the regulation is fully applicable, the Commission will publish annual reports on the implementation of the Regulation.

The cooperation mechanism will apply from 11 October 2020.

Investment screening is a new policy area for the EU and for many Member States. The transitional phase will ensure that all legislative and administrative arrangements are put in place at Member States’ level and within the Commission, before the Regulation is operational. This includes, inter alia, adaptation of national screening laws, establishment of contact points and secured channels of information exchange.

The Regulation obliges the Member States and the Commission to protect information obtained in the application of the Regulation in accordance with Union and national laws. Under the Regulation the Commission is required to provide a secured and encrypted system of communication between Member States and the Commission.

No. Businesses (investors or target undertakings) are not required to notify transactions to the Commission or to other Member States. Only the Member State that undertakes the screening of a transaction is under an obligation to notify. The Commission will assess risks to security or public order on the basis of information received from the host Member State or from other available sources. At the same time, Member States that are under obligation to provide information to the Commission or other Member States, may request such information directly from businesses.

Once the Regulation is fully applicable, the Commission will publish annual reports on the implementation of the regulation. Such reports will provide aggregated information about the use of 5 the cooperation mechanism, while preserving the confidentiality of information submitted by individual Member States on the implementation of their national screening mechanisms.

No later than 10 August 2019, the Commission will publish a list of Member States’ screening mechanisms on its website. This list will be updated each time a Member State notifies to the Commission that it has modified or set up its national screening mechanism. Once the Regulation is fully applicable, the Commission will each year provide a public report on the implementation of the regulation. By 12 October 2023 and then every five years, the Commission will evaluate the functioning and effectiveness of the regulation and present a report to the European Parliament and to the Council. This report will be made public.

The Regulation encourages Member States and the Commission to cooperate with the responsible authorities of like-minded countries on issues relating to the screening of foreign direct investments on grounds of security and public order. International cooperation may be pursued in bilateral or plurilateral format, such as the G7 or the OECD. This may include sharing experiences, best practices and information regarding investment trends.

The Group is chaired by the Commission and is composed of representatives of Member States’ authorities. All Member States take part in the group, including those that do not have a national screening mechanism.

No. It does not discuss individual transactions. Its objective is to discuss issues of common concern related to foreign direct investments and exchange best practices and lessons learned from screening investments at national level. The Group is also empowered to advise the Commission on systemic issues relating to the implementation of the regulation and it can be consulted on draft delegated acts updating the list of projects and programmes of Union interest annexed to the regulation. Analysis of foreign direct investments into the EU.

The in-depth analysis on foreign direct investments in the EU was published on 13 March 2019. The Commission intends to continue monitoring EU-wide FDI trends with a view to report regularly on the matter.