You are here

Screening of foreign direct investments into the European Union

EESC opinion: Screening of foreign direct investments into the European Union

Composition of the study group

Administrator: Mr Georges-Henry Carrard | Assistant: Ms. Carlotta Isabella Iapichino

Key points:

The EESC emphasises that foreign direct investment is a major source of growth, jobs and innovation. Foreign direct investment has always been a key factor for positive economic and social development in the EU. The EESC supports an open investment environment and welcomes foreign direct investment.

The EESC notes that foreign investment, while useful, may also carry risks and jeopardise national security and public order in one or more Member States and therefore calls for the EU's openness towards foreign direct investment to be complemented by robust and effective policy measures.

The EESC welcomes the Commission's proposal for a Regulation of the European Parliament and of the Council establishing a framework for screening of foreign direct investments into the European Union, but notes that the extent of the problem is not yet fully known, as the Commission did not analyse investment flows and their impact when initiating the legislative procedure.

The screening of investments in businesses and entities that are of strategic importance for national security and public order of the EU is patchy and uncoordinated: some countries have a screening procedure while others do not, meaning that investments in the latter countries are not screened at all. A system at EU level must remedy this shortcoming, remove disparities between Member States, and safeguard national and European interests. The EESC points out that the EU has exclusive competence when it comes to foreign direct investment. Where national screening systems exist in the EU Member States, the legal basis for these systems must be created so as to avoid legal uncertainty.

The EESC is concerned that the European Commission only reserves the right to screen investment when such investment might affect projects or programmes of Union interest. Where foreign direct investment has a cross-border impact on the whole EU or parts of it, the EU needs to make use of its competence in terms of investment screening.

The EESC recommends involving the social partners and civil society in an appropriate way.

The EESC suggests extending investment screening to sensitive areas of infrastructure and facilities that maintain societal functions. These include energy and water distribution, transport, digital infrastructure, financial services and financial markets, as well as the health sector.

The EESC supports broadening investment screening to key technologies, where an investor is controlled by, or has close ties to, a third country's government. The EESC suggests that the regulation should include a separate screening procedure for foreign direct investment made by third-country governments, or investors with close ties to such governments.

Although the issue of reciprocity is not addressed in the proposal for the Regulation, the EESC calls on the Commission to apply the principle of reciprocity in all cases of the EU negotiations with the third countries on FDI as more non-EU investors purchase EU businesses and entities while the EU investors often are facing barriers to investing in other countries.