Investment Screening: The Return of Protectionism? A Political Account
The new EU regulation raises the question whether we are witnessing a fundamental shift in the approach to foreign direct investment on the EU level. For several years, public and political debate has pushed toward a stronger protection of European econom
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Contents 1 Introduction 2 Calls for a More Restrictive Approach to FDI 3 Calls for a Liberal Approach to FDIs 4 Contextualisation of the EU Screening Regulation 5 Conclusion References
Abstract The new EU regulation raises the question whether we are witnessing a fundamental shift in the approach to foreign direct investment on the EU level. For several years, public and political debate has pushed toward a stronger protection of European economies against foreign direct investment. At the same time, many Member States and interest groups from the economic sector are defending the existing liberal framework, stressing the macro-economic importance of foreign investment. A closer look at the design of the new regulation offers insight into the underlying political developments.
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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, OJ L 79I, 21.3.2019, pp. 1–14, (hereinafter the EU Screening Regulation). 2 Hindelang and Hagemeyer (2017), p. 882; Jones and Davies (2014), p. 10; Koenig (2018), p. 221; Pandey et al. (2019), p. 56; Schuelken (2018), p. 577. 3 Moran (27 March 2017). S. Simon (*) Phillipps University, Marburg, Germany e-mail: [email protected] © Springer Nature Switzerland AG 2020 YSEC Yearbook of Socio-Economic Constitutions 2020, YSEC Yearbook of Socio-Economic Constitutions 2020, https://doi.org/10.1007/16495_2020_29
S. Simon
1 Introduction The adoption of an EU regulation1 concerning the screening of foreign direct investments (FDIs) did not come as a surprise. For several years, the increased inflow of FDIs has sparked public and academic debate about measures to strengthen control over foreign direct investments.2 Acquisitions, such as the one of Kuka in 2016—a leading robotics manufacturer in Germany—by the Chinese company Midea, have generated political calls for a regulatory response to prevent acquisitions from transferring cutting-edge technological know-how out of Europe.3 During the COVID-19 pandemic, these calls have been further emphasized when the Commission issued a guidance urging Member States to make “full use already now of its FDI screening mechanisms to take fully into account the risks to critical health infrastructures”.4 Such technology transfers are possible since FDIs aim at obtaining a lasting interest by an investor in one economy in an enterprise resident in another economy. It implies that the investor has a significant influence on the way the enterprise is managed. Once an investment is made, it is often protected by a bilateral investment treaty (BIT) between the home country of the investor and the host country. However, the question whether a foreign investor has access to another market is usually not a subject of an international treaty but remains a national decision. Amongst the EU Member States, there are 15 countries that require a foreign investor to get prior admission; in other Member States, investments are not subjected to ex
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