Competition Litigation

News Update Competition

Guidance for the screening of FDI into the EU
3 April 2020
3 April 2020

On 25 March 2020, the European Commission (the "Commission") published its Guidance concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets (2020/C99 I/01) (the "Guidance"). Examples of strategic assets are assets in the areas of healthcare, medical research, biotechnology and infrastructure, or assets that are otherwise essential to European security and public order.

Assessing foreign direct investments ("FDI") is a hot topic within the European Union ("EU"). In March 2019, the EU Regulation establishing a framework for the screening of FDI into the Union (2019/452) (the FDI "Regulation") was adopted. The FDI Regulation introduced a regulatory framework for screening FDI by entities from non-EU Member States at EU level. This FDI Regulation will only enter into force on 11 October 2020, but due to the current coronavirus (COVID-19) crisis, its de facto implementation seems to have been sped up somewhat through publishing the Guidance.


In recent years, we have seen countries object to and prohibit acquisitions in industries that are considered critical. This has been seen in the telecommunications sector (e.g. the takeover of Inmarsat plc by a private equity consortium in the UK, which was approved after the consortium offered undertakings to address national security concerns) as well as the aerospace and nuclear sectors (e.g. the German government prohibiting the takeover of Leifeld Metal Spring, a German producer of sophisticated, seamless pipe-formed metal parts by a Chinese investor).

The present crisis has exacerbated the need for regulation and guidance. The Commission believes that parties from outside the EU  including foreign national governments – might consider it an opportune moment to take over companies and critical assets in the EU at 'undervalued' prices given the EU's current economic vulnerability.

This can further be illustrated by the (alleged) attempt by the US government to acquire CureVac. CureVac is a German biotechnology company that might play an important role in finding a COVID-19 vaccine. This alleged attempt to acquire CureVac, as well as its employees, technology and know-how, was criticised by several European governments as opportunistic.

The content of the Guidance

The FDI Regulation leaves the responsibility for FDI screening with Member States, but provides a mechanism to coordinate any such screening. The Commission may issue an opinion if it considers that the investment is “likely to affect security or public order in more than one Member State”, With the Guidance, the Commission wants to shape the way in which the Member States carry out their various screenings. They are called upon to make full use of the instruments available to them under EU law, and also to use those possibly already available under national law. In addition, the Commission is calling on Member States that do not yet have a fully-fledged review mechanism to set one up– and in the meantime to make use of EU legislation.

If a particular FDI may have an adverse effect on the EU's internal market, the Guidance also encourages cooperation between Member States. Presently, foreign acquisitions are already covered by the FDI Regulation and can therefore be discussed under its cooperation mechanism by the impacted Member States, the Commission and the responsible authorities of like-minded third countries.

The Guidance reminds Member States of the fact that actual screening can also be achieved by instruments other than the FDI Regulation, and FDI mechanisms in general. For example, compulsory licenses on medical patents. Member States can also opt to retain 'golden shares' to block or limit specific types of investment.

National measures

Fourteen Member States – Austria, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal, Spain (and the United Kingdom) – currently have national mechanisms in place to screen FDI. The Netherlands does not have a formal FDI screening procedure in place. A bill to introduce FDI screening in the telecommunications sector is pending. The banking and insurance sectors have been singled out for possible future sectoral FDI screening.

Only Spain has taken specific measures in view of the crisis. As per 17 March 2020, prior authorisation will be required for any investment made by non-EU or non-EFTA nationals, as soon as an investor could potentially gain control, a seat in management or even only 10% or more of the share capital of a Spanish company.

Areas of tension and future developments

Finally, it should be noted that the Commission remains a supporter of free trade. As mentioned by Ursula von der Leyen, President of the Commission: "If we want Europe to emerge from this crisis as strongly as it did before, we must take precautions now. (…)The EU is and will remain a market open to foreign direct investment. But this openness is not unconditional."

It will be important to follow the developments in this area. FDI screening will be an significant and politicised instrument not only with respect to the current coronavirus pandemic, but even more so for structural developments such as Brexit-related flows of capital, trade agreements like CETA, and the installation of 5G networks by Chinese company Huawei.
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