EU trade committee paves way for FDI screening mechanism

The trade committee of the EU has thrown its weight behind a proposed EU-level tool to screening FDI on grounds of security, to protect strategic investors.

“While the EU remains open for investment, inward FDI needs to be vetted due to the changing nature of investment,” a press release by the EU said on December 10.

The committee’s backing comes after the European Commission proposed the introduction of such a mechanism back in September 2017, and the same commission, alongside the European Parliament and the European Council, agreed on the proposal text in November.

The new regulation offers a list of factors EU members may take into account when screening FDI in strategic industries such as energy, transport, communications, data, space, finance, and technologies, including semiconductors, artificial intelligence and robotics, as well as water, health, defence, media, biotechnology and food security.

The need for a screening mechanism dates back to the rapid surge of FDI from countries such as Brazil and China in the past 20 years, “lately targeting high-tech sectors and often through companies with state ownership or ties to governments”, the press release reads. Other Western countries have taken similar steps always to have a better chance to vet FDI from companies linked to political elites in China as elsewhere. Among others, the White House in the US has broadened the scope of the existing Committee on Foreign Investment in the United States.

The plenary of the European Parliament is now expected to vote on the proposal in February 2019.

Waiting for the European Parliament to approve the proposal, Germany is already considering cutting down to 10% the threshold at which it can trigger investigations of stake purchases by non-European firms in German companies, local business newspaper Handelsblatt reported on December 16.