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The EU screening mechanism for foreign direct investments potentially affecting security and public order in an EU Member State or in the whole EU became fully operational on 11 October 2020. Following the adoption of the EU Foreign Direct Investment Regulation, the European Commission (Commission) and the Member States have developed a coordination framework, consisting of various separate national screening mechanisms. The EU screening mechanism aims at enhancing cooperation and information sharing between the Commission and the Member States. Foreign direct investments (FDI) in sensitive industries will be scrutinized to avoid the loss of critical assets and technology (e.g. in health, energy, transport, media, defense, financial infrastructure sectors, etc.). This is part of the Commission's strategy to protect an increasingly vulnerable regional economy from hostile takeovers by non-EU players (see also European Commission Publishes White Paper Suggesting New EU Filing Obligations for Companies That Have Received Non-EU Subsidies).
The March 2019 FDI Regulation did not establish a unified EU-wide screening mechanism enabling the Commission to block foreign investments, nor did it oblige Member States to adopt their own national screening systems. Rather, this Regulation established common standards for national screening mechanisms to provide for an EU cooperation mechanism including exchange information between the various stakeholders.
Over the last eighteen months, the Commission and Member States have developed a screening mechanism aimed to scrutinize incoming FDI potentially affecting security or public order. This includes:
For further details, please refer to our earlier alerts available:
COVID-19: Impact on Governmental Foreign Investment Screening
EU: Foreign investment screening regulation approved
New EU framework for screening FDI into the EU)
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For further information and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.
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