Communication – Welcoming foreign direct investment while protecting essential interests

On 10 May 2017, the European Commission issued a Reflection Paper on Harnessing Globalisation, opening a debate on how to shape globalisation so that it benefits all. The paper underlined the steadfast commitment of the European Union to build an open, sustainable, fair and rules-based global trade order through international cooperation. However, the EU would not hesitate to act in order to protect its citizens and its industry when foreign countries or companies engage in unfair practices or raise concerns for security and public order.

These principles apply fully to foreign direct investment from third countries, which forms part of the EU's common commercial policy. Foreign direct investment is an important source of growth, jobs and innovation. It has brought significant benefits to the EU as to the rest of the world. This is why the EU wants to maintain an open investment environment. At the same time, the Reflection Paper on Harnessing Globalisation recognised increasing concerns about strategic acquisitions of European companies with key technologies by foreign investors, especially state-owned enterprises. These concerns called into question the capacity of the current regulatory framework to address them.

In order to address the potential impact of cross-border takeovers on security and public order, nearly half of EU Member States currently maintain foreign direct investment screening mechanisms and reserve the power to restrict investments that pose a threat to their essential interests. However, despite a clear European dimension to foreign direct investment, there is neither systematic cooperation among Member States nor an EU-wide approach to these issues.

This Communication therefore suggests further concrete steps for Member States and, where relevant, the Commission to screen certain foreign direct investments into the EU. It accompanies a Proposal for a Regulation establishing a framework for screening foreign direct investments from third countries on grounds of security and public order in the EU, together with a cooperation mechanism among Member States as well as a framework for screening at the EU level.