On April 10, 2019, the Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union entered into force. It will become applicable from October 11, 2020.

The Regulation was approved also considering that the major trading partners of the European Union already developed frameworks for the screening of foreign direct investments on the grounds of security or public order.

Whereas 8 clarifies that

the framework for the screening of foreign direct investments and for cooperation should provide Member States and the Commission with the means to address risks to security or public order in a comprehensive manner, and to adapt to changing circumstances, while maintaining the necessary flexibility for Member States to screen foreign direct investments on grounds of security and public order taking into account their individual situations and national specificities. The decision on whether to set up a screening mechanism or to screen a particular foreign direct investment remains the sole responsibility of the Member State concerned.

The Regulation provides a list of factors that may be taken into consideration by the Member States to determine whether a foreign direct investment is likely to affect security or public order. For example, Member States and the Commission may consider its potential effects on critical infrastructure, including 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.

Member States may maintain mechanisms to screen foreign direct investments in their territory, however, they must be transparent and not discriminate among countries. Foreign investors shall have the possibility to seek recourse against screening decisions

The Regulation provides for communication to be facilitated by contact points established in each Member State, which will be involved on all issues relating to the implementation of the Regulation. Also, the EU Commission shall also provide a secure and encrypted system “to support direct cooperation and exchange of information between the contact points.”

Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union is available at https://eur-lex.europa.eu….

For more information on how Regulation (EU) 2019/452  may impact your business, contact Francesca Giannoni-Crystal and Federica Romanelli