Brussels–Foreign investments, direct and indirect, in the EU must be subject to mandatory scrutiny by member states to identify and address possible security or public order risks in sectors such as media, critical raw materials, and transportation infrastructure.
Parliament adopted today (May 8) with 378 votes in favor, 173 against, and 24 abstentions its negotiating mandate on the new regulation that will introduce updated rules strengthening the European foreign investment monitoring system.
With the changes approved from the Commission’s initial proposal, the procedures of national control mechanisms will be harmonized, and the EU executive will have the power to intervene on its own initiative or in case of disagreement between member states on potential risks to security or public order arising from a specific foreign investment.
The new law also extends the scope of monitoring, including transactions within the EU where the direct investor is owned by natural or legal persons from a non-EU country, thus including so-called indirect investments.
If the screening authority concludes that the planned investment could adversely affect public safety or order, it can only be authorized under certain conditions, or it will be blocked.
The rapporteur Raphaël Glucksmann (S&D, France) explained, “Right now, the EU’s foreign investment screening system is fragmented, costly for investors, and insufficiently effective at mitigating risks. Leaving large industrial plants, energy grids, and media giants open to foreign takeovers — whether from China, the US, or elsewhere — ultimately puts our security and economic sovereignty on shaky ground.“
Based on the adopted text, MEPs can now begin negotiations with member states on the law’s final form. Parliament and the Council must adopt the final legislation before it can enter into force.
The Foreign Direct Investment Control System, effective since Oct. 11, 2020, aims to contrast risks related to certain foreign investors seeking to acquire control of EU firms that supply critical technologies, infrastructure, or inputs, or hold sensitive information and whose activities are vital for security or public order at the EU level.
The mechanism aims to identify and address security or public order risks related to foreign direct investment involving at least two member states or the EU as a whole. The Commission submitted its new proposal for its strengthening in January 2024.
English version by the Translation Service of Withub
