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08 April 2020 / news

European Commission calls for an accrued screening of Foreign Direct Investments (FDI)

Following the COVID-19 crisis and the resulting general market volatility, the European Commission has called upon a coordinated economic response by all member states in the field of foreign direct investment (FDI) screening.

European Commission calls for an accrued screening of Foreign Direct Investments while in Belgium only Flanders introduced such mechanism

Flanders currently has an ex post intervention mechanism in place allowing to annul investments by foreign investors leading to control of public authorities or related bodies that would entail a threat for the strategic interests of Flanders.

A further development of the FDI regime is currently being prepared by the Flemish Government . Also the Federal Government is called upon to take action, in particular with regard to the private strategic sectors.

European Commission calls for action on FDI front

Following the COVID-19 crisis and the resulting general market volatility, the European Commission has called upon a coordinated economic response by all member states in the field of foreign direct investment (FDI) screening

FDI is understood as an investment which establishes or maintains lasting and direct links between investors (natural persons, undertakings or State entities) from third countries (i.e. non-EU countries) and undertakings carrying out an economic activity in a member state, including investments which enable effective participation in the management or control of a company.

In accordance with article 4 of Regulation (EU) 2019/452 (‘FDI Regulation’), foreign direct investment may likely affect security or public order, and therefore require a (ex ante or ex post) screening in the following sectors:

  • critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
  • critical technologies, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies;
  • supply of critical inputs, including energy or raw materials, as well as food security;
  • access to sensitive information, including personal data, or the ability to control such information; or
  • the freedom and pluralism of the media.

In its recent guidance on FDI, the EC emphasizes that health care infrastructure and technologies and the supply of health care products and medicines are undoubtedly critical. It urges member states to make full use of their existing FDI screening mechanisms.

In addition, the EC urges member states where there is not yet a fully-fledged FDI screening mechanism, to put such screening in place as soon as possible.

The EC further emphasizes that in the meantime member states should use all other available options to address cases where the acquisition or control of a particular business, infrastructure or technology would create a risk to security or public order in the EU, including a risk to critical health infrastructures and supply of critical inputs in member state.

Finally the EC draws attention to the fact  that, on the basis of the FDI Regulation, investments completed now or in the following months can be subjected to ex post comments and opinions by member states and the EC as from 11 October 2020. 

Article 7 of the FID Regulation indeed provides that comments or opinions can be made within 15 months after the completion of the investment. Such comments or opinions may lead to ex post mitigating measures being required. For example  for the health care sector, such measures may entail conditions guaranteeing the supply of medical products or devices or imposing compulsory licenses on patented medicines in case of a national emergency such as a pandemic.

Flanders ex post FDI intervention mechanism for investments in public bodies

Flanders currently has an ex post intervention mechanism in place for investments allowing foreign investors to control public authorities or related bodies that would entail a threat for the strategic interests of Flanders.

Articles III.59 – 60 of the Flemish Governance Act   Flemish Governance Act of 7 December 2018 (Bestuursdecreet van 7 december 2018) grants powers to the Flemish government to annul (ex tunc) or declare without effects (ex nunc) decisions or acts of public authorities or related bodies that would allow foreign investors to control such public authorities or related bodies. Such decisions or acts relate e.g. to decisions to sell shares, but also include the conclusion of contracts or settlements. The Flemish Governance Act is understood to be applicable to all foreign investments, but only relates to the Flemish public sector, the private sector being a Federal competence.

The annulment or without-effects declaration can only be decided when previous attempts to find an amicable solution have failed and when  there is a threat of the strategic interests of Flanders. Such threats are to be found: i) when the strategic interests or vital processes of the Flemish government are threatened or the continuity thereof is threatened, or ii) when there is a threat of strategic or sensitive knowledge falling into foreign hands, or iii) when the strategic independence, including the functioning of the democratic order, is threatened.

Further development of the Flemish FDI regime

A broadening  of the Flemish FDI regime and possible measures (ex ante and ex post) is currently on the agenda of the Flemish Government.

The Federal Government is also called upon to take action in the field of FDI monitoring or intervention, in particular with regard to private strategic companies.



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