COVID-19: The European Commission issues Guidance on the use of the FDI Screening Regulation

30th Apr 2020

The Commission has for some time now been focusing on acquisitions of EU companies active in critical industries, especially those that are State-owned, by non-EU companies. In order to control them, it has adopted a foreign direct investment (“FDI”) screening coordination mechanism by virtue of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 (“FDI Screening Regulation”). The FDI Screening Regulation establishes a framework for the screening of foreign direct investments into the Union and it shall enter into effect as of 11 October 2020

In anticipation of the full implementation of the FDI Screening Regulation and due to the outbreak of the COVID-19 pandemic, which the Commission believes may be taken advantage of by parties from outside the EU, including foreign national governments, the Commission adopted the Guidance for Member States concerning FDI and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of Regulation (EU) 2019/452 (“Guidance”), on 25 March 2020. Given that companies and critical assets in the EU may be currently undervalued, the main purpose of the Guidance is to streamline a pan-European response to the monitoring of foreign direct investment, particularly within the context of the current public health crisis and to safeguard essential capital, technology and assets from any prospective hostile takeovers by companies from third countries.

The Guidance itself highlights the increased possibility of takeover of critical enterprises in, including, but not limited to, healthcare-related industries, by non-EU companies, within the context of the present economic circumstances, such as attempts to acquire healthcare capacities in the production of medical or protective equipment or research establishments. Therefore, it effectively shifts the attention under the FDI Screening Regulation towards critical healthcare infrastructure and the supply of crucial commodities, rather than to acquisitions of European industries in the utilities sector and the area of technology, such as robotics, cyber security and artificial intelligence, which have received the most attention to date.

The Guidance largely seeks to clarify the matter of FDI screening, its scope and its importance in emergency situations, such as the current one, and at the same time urges national Member State governments to increase such screening, but also take action to secure such EU enterprises and help in the EU’s economic turnaround. In light of the above, the Commission makes specific reference to new FDI screening mechanisms, as well as restrictions on free movement of capital.

Currently, only 14 Member States have FDI screening mechanisms in place, whereas the remaining Member States, including Cyprus, are either in the process of implementing or expanding their national screening programmes.

On this basis, the Commission urges Member States to make “full use already now” of their FDI screening mechanisms and for Member States that have no such mechanisms to establish pertinent mechanisms and “use all other available options”, such as compulsory licenses on medical patents or retention of ‘golden shares’ by Member States to block or limit specific types of investment, on the grounds that “[t]he resilience of these industries and their capacity to continue to respond to the needs of EU citizens should be at the forefront of the combined efforts both at European Union and at Member States level.”

We finally note that in cases of FDI made prior to 11 October 2020 which do not go through a screening process, national governments and the Commission may still submit opinions as of 11 October 2020 and within 15 months after completion of the FDI. Such opinions may lead to prohibition of the FDI or undertaking of ‘necessary mitigating measures’, such as commitments to meet vital needs within the Member State or the EU, at the discretion of the Member State, provided national law permits it.



Talk to us

Our website will provide you with an overview of our services and the advice we provide. If you would like further information about how we can assist you, please contact us.

Call: +357 22 777000   |   Email: [email protected]

Portfolio close
Title Type CV Email

Remove All


Click here to email this list.