international regulatory enforcement
EU Adopted Regulation on Screening of Foreign Investments
By Dr. Regina Engelstädter & Sebastian Ens
In August 2019, the EU adopted the Regulation on the Screening of Foreign Direct Investments (“Regulation”), which will apply as of 11 October 2020 in all Member States.
The Regulation is the first EU-wide investment screening legislation. Whilst it does not introduce an independent regulatory body with the capacity of issuing binding decisions, the new Regulation does create a legal framework of information sharing and cooperation between Member States and the European Commission (“EC”).
It is fair to expect that the Regulation will have a real impact on foreign investment contracts, both from a timing, as well as from a substantive point of view.
Complexity of foreign investment reviews will be increased, besides national regulations interests of other MS and the EU have to be considered.
The European framework will maintain the national competences. Each Member State keeps the last word in any investment screening undertaken by such MS.
Member States, which already have screening mechanisms in place, may adjust them in accordance with the Regulation. However, this is not obligatory.
If a Member State decides to implement a screening mechanism, it must comply with certain minimum standards in accordance with the Regulation.