EU Lawmakers Demand Tougher Screening for Foreign Direct Investment

Trade MEPs are strengthening the European Union’s financial defences amidst extensive foreign acquisition in the bloc and changing dynamics with overseas markets.

The International Trade Committee (INTA) of the European Parliament recently approved a framework to investigate foreign direct investment (FDI) more thoroughly, including tools that will protect strategic infrastructure, technologies, and media independence. As more FDI pours into Europe’s borders, increased regulation is necessary to ensure sound investments are being made while Union’s best interests remain safe.  Bernd Lange, chair of the INTA, expressed that screening foreign investments is one of his team’s main priorities as industries become more interconnected.

“Without falling into protectionism, it is time to show that Europe is no longer taking a naive stance on globalisation,” said Frank Proust, a French MEP who coordinated the proposal. Amendments focus on screening deals from more angles and requiring EU countries to cooperate as a unified entity to protect bloc interests. Ideally, in the near future, member states and the Commission will be able to screen investments in a transparent, predictable and non-discriminatory manner.

External Threats & Critical Sectors

FDI has long been an important factor for economic growth and social development in the EU. This move is not meant to hurt free trade, but rather protect EU interests amid the rise of China, threats of trade wars with the US, increased sanctions with Iran, etc. The largest concerns come from investors that are part of a state-owned enterprise. A large influx of investment in the bloc’s single market on the part of foreign companies has the potential to leave Europe’s leading markets vulnerable. A lack of regulation on who, what, and how much is being invested into the region can allow the EU’s industries and technologies to be overpowered by outside actors.

The Commission noted that the phenomenon of increased FDI coming from a handful of notable countries is influenced by the fact that a substantial portion of EU investors often do not enjoy the same rights to invest in the countries from which they originate. Copyright: Miriam Doerr Martin Frommherz/

An overwhelming majority of Parliament members voted to lengthen the list of fields that require increased scrutinisation, signaling strength against what may be politically motivated investments. These industries include: energy, transport, communications, data storage, space, and financial infrastructure as well as critical technologies like AI, robotics, biomedicine, nuclear tech, and cybersecurity. The Commission also called for increased control on election infrastructure and access or control of sensitive information.

EU Cooperation

12 of the 28 member states already have screening mechanisms in place to examine FDI opportunities, but the design and scope of these systems vary widely – as does the implementation.

Without requiring uniform efforts, the INTA’s approved framework calls for enhanced cooperation among member states and the Commission when it comes to FDI activity. EU Member States will inform one another about their respective potential foreign direct investment activities and dialogue about the effects of varying offers among all bloc countries. The Commission will also have the ability to perform their own screening of FDI proposals that are likely to affect projects or programmes of EU interest or those receiving EU funding.

Though cooperation is mandated, opinions provided by both other member states and the Commission itself will be non-binding, although thorough explanation shall be required if a state chooses to go against the grain of the collective group. While those nations with FDI screening mechanisms already in place may be more resistant to external considerations, an increased filter could provide much-needed oversight throughout the Union.

These changes are part of the trade and investment package announced by the EU Commission in September. The INTA hopes to start talks with the Commission and European Council of Member States next month. Free trade proponents like Netherlands, Sweden and Denmark are expected to challenge the framework, as well as those countries with strong ties to large investment partners hailing from China and the Middle East. Nations like France, on the other hand, are openly proponents of the framework, hoping to create a unified front to safeguard national financial interest and bloc security.

The ideal goal is to pass unanimously supported legislation before the end of 2018, or before the 2019 European elections at the latest. The proposal is currently under review by the European Parliament and representatives of each member state.

Parliament emphasizes that they aren’t aiming to spread investment controls in the EU, but rather maintain security and public order throughout the bloc. Though deals with foreign companies may take longer to go through regulatory approvals once the framework is enacted, a consistent, EU-wide set of rules will streamline the process in a way that safely promotes FDI and stimulates key sectors.

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Elizabeth Smith

Elizabeth is a freelance writer and editor who has lived in America, Czechia, Spain, and the UK. She holds a media studies and journalism degree from New York University. Her clips can be found on NBC News, Business Insider, and Huffington Post among others. She is currently based in northern England.

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