In October 2020, a new
EU regulation will become effective that enables member states and the
Commission to exchange information regarding the screening of specific
investments. Its objective is to better equip the European Union (EU) with
means to identify and assess risks for security or public order.
The EU has one of the
world’s most open investment regimes. There is also the fact that many
high-tech companies have offices located in the EU. This makes the economic and
political union a very attractive destination for Foreign Domestic Investment
The goal of the new regulation is to implement an EU-wide framework to protect its companies, workers and citizens. Because member states are highly integrated, foreign investment in one member state could present risks to security or public order in other member states. According to the European Commission, increasing information sharing and cooperation between states in the EU is necessary to identify new challenges and to react accordingly.
In a study on foreign
ownership of EU firms carried out by the Commission, the importance of foreign
investment in the EU economy becomes clear. Foreign ownership has risen
constantly in the last ten years. This increase is largely due to acquisitions
of increasingly large, listed companies.
In the study, only 3
per cent of European companies in the sample were owned or controlled by non-EU
investors. However, they represent more than 35 per cent of total assets and
account for roughly 16 million jobs.
The data shows that advanced
economies such as the US, Switzerland, Norway, Canada, Australia and Japan remain
well ahead and still control more than 80 per cent of all foreign-owned assets.
These economies have invested for years now and kept their acquisition rates
However, there is also a surge of new investors. There is a larger variety of countries of origin, with China standing out amongst them.
Even though foreign ownership
is spread across all sectors, there are some crucial ones at the heart of the
economy in which foreign ownership is high:
Electronic and optical products
*per cent of foreign-owned assets of the sector
The risk involved with
FDI could result from a number of factors. For example, when a foreign investor
seeks to acquire control of a European business whose activities affect
critical technologies, infrastructure, inputs or sensitive information. In some cases, the risk may be aggravated by
the fact that investors are owned or controlled by the state of a third
The EU framework for
screening investments gives member states and the Commission the possibility to
cooperate on incoming foreign direct investment affecting security and public
*Length of the procedure takes approximately 35 days