On 24 January 2024, the European Commission (the “Commission”) published its European Economic Security Package (the “EESP”), which included the long-awaited proposal to reform the EU Regulation which established a framework for Foreign Direct Investment screening (the “EU FDI Regulation”). The EESP’s proposed regulation (the “Proposed Regulation”) is one of the EESP’s five initiatives to implement the European Security Strategy (published in June 2023) – for an overview of the EESP, see our Global Policy Watch blog.
The Proposed Regulation seeks to improve the legal framework for foreign investment screening in the European Union and builds upon feedback that the Commission received during its public consultation in 2023. If adopted as proposed, it will significantly change the landscape of foreign investment screening regimes across the EU (for a full report of the public consultation see here).
This blog highlights the key changes under the proposed reform and analyses their impact on global deal making. We also provide an outlook on the next steps for the proposals.
Key takeaways and comment
- Extended scope to include indirect foreign investments through EU subsidiaries and greenfield investments.
- Minimum standards and greater harmonisation across the EU.
- Introduction of call-in powers to review all transactions for at least 15 months after completion.
- Coordinated submission of foreign investment filings in multi-country transactions.
- Focus cooperation between Member States and the Commission on cases more likely to be sensitive.
- More prescriptive guidance on substantive assessments and remedies, including a formal obligation for national screening authorities to prohibit or impose conditions on transactions they conclude are likely to negatively affect security or public order in one or more Member States.
- Increased reporting, while protecting confidential information.