The European Commission (EC) has issued guidance aimed at protecting EU companies and critical assets in healthcare and related industries, as the economic and social ramifications of the coronavirus outbreak become clearer.

On March 25 the EC issued guidance urging EU member states to be “vigilant” of foreign investment in areas such as health, medical research, biotechnology and critical infrastructure.

“If we want Europe to emerge from this crisis as strong as we entered it, then we must take precautionary measures now,” said EC president Ursula von der Leyen as the guidance was released. “As in any crisis, when our industrial and corporate assets [are] under stress, we need to protect our security and economic sovereignty.”  

Protection of public health is now recognised as “an overriding reason in the general interest”, according to an EC note. As a result, member states can impose mitigating measures – for example, supply commitments to meet national and EU vital needs – or prevent a foreign investor from acquiring or taking over control of a company. 

The new EC guidelines aim to protect European strategic assets from ‘predatory buying’ by foreign investors before the EU FDI screening regulation fully comes into force on October 11 2020. The ramifications of the coronavirus pandemic on various industries, including plummeting valuations of companies on capital markets, prompted the EC’s further guidance.

The EU FDI screening regulation, which was adopted in March 2019, issues common principles for member states to follow, to assess FDI from non-EU countries that could affect the security and public order of the bloc. National FDI screening mechanisms are already in place across 14 EU member states.

The new guidance also publicly called on the remaining EU member states that do not have complete FDI screening mechanisms to “consider all options” to curb FDI that undermines security or public order. It aims to ensure FDI does not have a detrimental impact on “the EU’s capacity to cover the health needs of its citizens”. 

With the Covid-19 outbreak highlighting the EU’s reliance on medical supplies from Asia and the capacity of health infrastructure to respond to a public health emergency, the protection of critical health-related assets and companies will be high on the agenda of European officials. When no national screening of FDI takes place, the regulation enables the EC to assess foreign investments up to 15 months after completion.