The European Commission's annual FDI report: Foreign investment screening shows an increasing trend
The European Commission has presented its third report on the "new" EU mechanisms for the screening of foreign investments. The Commission's report basically reflects the fact that there has been a significant increase in the number of screened investments while, at the same time, several Member States have adopted national FDI rules.
Background
The EU FDI Regulation provides for a cooperation mechanism whereby a Member State is obliged to notify the other Member States and the Commission of foreign investments undergoing investment screening in that Member State. The Commission and the other Member States subsequently share their comments on the investment with the Member State concerned. The Member State screening the investment must then give due consideration to the comments received.
Based on the investments notified by each Member State to the Commission and the other Member States during the past year, the Commission publishes an annual report on the past year's investment screening activities.
The report in brief
- There has been a significant increase in the number of investments notified in Member States that are subject to actual screening. 55% of the investments notified in 2022 were screened compared to 29% in 2021 and 20% the year before.
- 86% of the screened investments were authorised without remedies, while 9% were authorised with commitments, and only 1% of the screened investments were denied. 4% of the cases were closed because the transactions were withdrawn by the parties.
- 59% of the screened transactions were investments in manufacturing, which covers a wide range of sectors such as energy, defence, healthcare, transport, cybersecurity, etc.
- The foreign investments mainly originated from the USA, the UK, China, Japan, Cayman Islands and Canada.
- 90% of the screenings notified to the Commission by the Member States took place in Denmark, Austria, France, Germany, Italy and Spain.
- The Commission completed their assessment of 87% of the notified transactions within 15 days.
According to the Commission, the report confirms that FDI rules do not hinder or limit the EU's openness to foreign investments. In this regard, the Commission states that the rules have contributed to preventing investments potentially detrimental to public order or security without having reduced the overall flow of foreign investments.
Our comments
The report reflects the fact that the EU is increasingly screening foreign investments that can be categorised as having the potential to affect national security or public order. This is not any different in Denmark, which has been one of the Member States that have contributed significantly to the number of cases notified to and screened by the Commission. We expect, however, that Denmark will no longer be a major supplier of notifications to the Commission. The reason is an amendment to the Danish Investment Screening Act in the summer of 2003, which has led to a phased administrative procedure at the Danish Business Authority. Notification (if applicable) to the Commission will therefore only take place in cases moving to phase 2.
The report also reaffirms that the FDI rules are here to stay and that the topicality of the rules is unlikely to diminish. This should also be seen in the light of the EU's political desire to make visible and minimise any risks resulting from such foreign investments in a more polarised world. On this basis, the Commission will at the end of the year present an evaluation and a proposal for a revision of the existing FDI Screening Regulation. This should also be seen in the light of the Commission's considerations whether to introduce screening rules on outbound investments from the EU. Indeed, on 20 March 2023, Mr. Valdis Dombrovskis, Commissioner for Trade, mentioned in the European Parliament's Trade Committee that the Commission is considering whether to propose such rules.
Contact
