The European Commission is set to adopt new controls on foreign investment in strategic assets after proposals were introduced last week.
Announcing the proposed framework, EC President Jean-Claude Juncker said, “we are not naive free-traders” as he outlined laws for enhanced scrutiny of acquisitions from outside the European Union in critical technologies, infrastructure, inputs or sensitive information.
“If a foreign, state-owned company wants to purchase a European harbour, part of our energy infrastructure or a defence technology firm, this should only happen in transparency, with scrutiny and debate,” Juncker added. “It is a political responsibility to know what is going on in our own backyard so that we can protect our collective security if needed.”
The EC stressed that the new laws would not seek to single-out specific countries and would provide equal treatment to potential investors, regardless of their country of origin. This will form part of the Europe-wide framework suggested by the EC which will also provide adequate redress measures if a potential investment becomes concerning.
The EC said screening measures will build on those already installed in 12 of the bloc’s 28 member states, including the UK, France, Italy and most recently Germany, which in July extended its existing Foreign Trade Regulation Act to cover critical infrastructure sectors. It said at the time that it had joined forces with France and Italy to push for similar Europe-wide changes.
The screening will be carried out at a central level by the EC, which will then pass on its judgment to member states. While its view is not binding, the proposed framework urges member states to “take utmost account of the Commission’s opinion” and provide an explanation if its ruling is not followed.
For the purpose of the new European laws, infrastructure will cover energy, transport, communications, data storage, space or financial infrastructure.
The EC noted that European investors in 2015 still provided the bulk of inward investment, plugging €5.7 trillion. The next largest sources of investment came from the US (€5.1 trillion) and China (€1.5 trillion), while significant growth has also been seen from Brazil and Russia. However, it said “third-country investors are still small in number in the EU, but they have a significant economic impact because of their larger-than-average size”, as well as the sectors they seek to invest in.
The Chinese Chamber of Commerce in Germany said in response to the legislation that “Europe and Germany are increasingly losing sight of the opportunities associated with investment from China” and that changes to the system could create “sustained damage”.