On 25 March, the European Commission ("Commission") issued guidelines in relation to foreign direct investment ("FDI") screening and free movement of capital from non-EU countries, prompting the 14 Member States with national screening mechanisms to use such mechanisms as well as the restrictions on capital movement to block transactions that could pose a risk to critical health infrastructures, supply of critical inputs and other critical sectors as a result of the Covid-19 crisis. The Commission is also urging Member States which currently do not have a screening mechanism to set-up a fully-fledged one.
The EU FDI Screening Regulation, adopted in March 2019 (see the previous Ashurst briefing) sets out an EU-level mechanism to coordinate the screening of foreign investments likely to affect the security and public order of its Member States. This mechanism provides for an obligation to exchange information between Member States and the Commission as well as the possibility for the Commission and Member States to issue comments and opinions on specific transactions up to 15 months after the foreign investment has been completed. The implementation of this mechanism will start on 11 October 2020.
In the Commission guidance, the Commission notes that in the context of the Covid-19 emergency, there could be an increased risk of attempts to acquire healthcare capacities or related industries such as research establishments via FDI and that it is necessary to ensure that such FDI does not have a harmful impact on the EU's capacity to cover the health needs of its citizens. The protection of public health has already been recognised as an overriding reason in the general interest and Member States can impose mitigating measures (such as supply commitments to meet national and EU vital needs) or prevent a foreign investor from acquiring or taking control over a company if such acquisition would result in a threat to their security or public order.
As the Covid-19 crisis has put these rules back into the spotlight, the Commission has also said in a (video) conference that the it could coordinate monitoring of "ongoing and planned foreign acquisitions and sharing the relevant information among member states," as a stopgap arrangement until the EU-wide vetting rules fully apply.
With thanks to Camille Ammeloot of Ashurst for her contribution.
