EU Council, Parliament Reach Deal on Updated FDI Screening Rules
The Council of the European Union presidency and European Parliament negotiators agreed this week on a set of updated foreign direct investment screening rules (see 2506170024), including a minimum scope of industries that should be subject to investment screening.
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That scope includes investments involving:
- dual-use items and military equipment
- "hyper-critical technologies," such as AI, quantum technologies and semiconductors
- critical raw materials
- critical entities in energy transport and digital infrastructure
- electoral infrastructure
- a limited list of "financial system entities" including only "central counterparties, central securities depositories, operators of regulated markets, operators of payment systems (excluding central banks) and systemically important institutions."
The EU also agreed that screening decisions will be the "exclusive responsibility of the member state in which the investment is being made," though the new framework is aimed at improving coordination between EU members and the European Commission. EU member states must also, in certain cases, explain how they reached certain investment screening decisions.
The framework also looks to streamline the screening process by creating a new shared database to prevent circumvention of screening requirements and decisions and an optional single portal for the filing of foreign investments. It also clarifies various "risk factors" for assessing foreign investments.
Bernd Lange of Germany, chair of Parliament's international trade committee, said the agreement gives foreign investors "greater clarity regarding risk criteria and establishes transparent, harmonized rules for national screening authorities." He also noted that it requires "all member states to implement a screening mechanism," which will help close "loopholes for high-risk investments" in the EU.
One of Parliament’s negotiators, Raphael Glucksmann of France, said the negotiations "underscored the need for further action at European level" surrounding investment screening, suggesting the bloc should continue to tighten its restrictions. "We welcome the Commission’s commitment to work on this matter," he said. "The Parliament is ready.”
Both the Council and the Parliament must approve the deal before it is formally adopted. The rules would apply 18 months after the regulation takes effect.