EU Makes Progress Toward Expanding FDI Screening Rules
A key European Parliament committee this week voted 31-7, with three abstentions, to expand the bloc’s foreign direct investment screening rules, a move that could add more sectors to the scope of FDI restrictions and allow the European Commission to intervene in member state disagreements.
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The parliament’s International Trade Committee on April 8 adopted revised rules that will subject more European sectors to mandatory investment screening by EU nations, including the media services, critical raw materials and transport infrastructure industries. This will help the bloc better “identify and address foreign investment-related security or public order risk,” a Parliament press release said.
It also said the revised rules will help to harmonize FDI screening mechanisms used by various member states and will give the European Commission “the power to intervene on its own initiative or where there are disagreements between Member States about potential security or public order risks emanating from a specific foreign investment.” If the FDI screening authority determines that the deal is “likely to have a negative effect on security or public order,” Parliament said “it will either have to authorise the project subject to mitigating measures, or prohibit it.”
The adoption of the revised rules follows a 2024 proposal from the European Commission that would require all member states to have a screening tool in place and introduce a “minimum sectoral scope” for FDI screening (see 2401240078). Damien Levie, the Commission's top FDI screening official, said the rules approved by the parliament committee this week keep many elements of the commission's 2024 proposal. But it also "goes further," he said, including by proposing a new single online portal for all FDI filings at the national level.
The EU is looking to make progress on the new rules "hopefully soon," Levie said on LinkedIn. The full Parliament must vote on the new rules, and then negotiations with member states “on the final shape of the law” can begin, Parliament said.
Parliament Member Raphael Glucksmann of France called the rules an “ambitious reform” of the EU’s FDI screening law. “This reform will establish a more predictable system that ensures foreign investments do not compromise our security,” he said. “Investors will benefit from greater clarity on procedures, while a harmonised scope and a reinforced role for the Commission will help ensure consistency across the Union."
The Commission in October said all 27 EU member states have either adopted a regime to screen inbound investments or have begun official talks to soon put one in place (see 2410180034).