Annexes to COM(2024)464 - - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2024)464 - . |
|---|---|
| document | COM(2024)464 |
| date | October 17, 2024 |
- Extending EU screening to investments by EU investors that are ultimately controlled by individuals or businesses from a non-EU country.
- Procedural improvements to the cooperation mechanism, as well as increasing the accountability of the screening Member State vis-à-vis the Commission and other Member States.
Furthermore, the proposal takes into account geopolitical developments that have happened since the current Regulation entered into force. For example, following Russia’s military aggression against Ukraine and ensuing comprehensive set of sanctions against Russia aiming to weaken its economic base and deprive of critical technologies, the effectiveness of the sanctions is measured only by their successful implementation and non-circumvention. Therefore, to close any potential loopholes in the implementation of sanctions also in the context of the FDI screening and for greater vigilance towards potentially risky investments from sanctioned persons or entities into and within the Single Market, all Member States would be required to assess whether the foreign investor is owned or controlled by, or acting on behalf of, a sanctioned person or entity, or whether the foreign investor is likely to facilitate the development of a third country’s military capabilities.
While these changes would significantly improve the screening of foreign investments in the EU, including the transparency and predictability of screening mechanisms and procedures for businesses, the key principles of investment screening in the EU would remain unchanged. Firstly, the grounds for screening will remain risks to security and public order, thus investment screening will remain a limited and targeted tool for exceptional cases where a foreign investment poses risks to our security or public order. It does not change nor undermine the EU’s openness to foreign investments. Secondly, the proposal does not change the current division of responsibilities whereby the Member State where the transaction takes place investigates and decides on the transaction, and the Commission and the other Member States can flag concerns. Thirdly, the main purposes of the cooperation mechanism between Member States and the Commission will remain the protection of EU strategic assets and the identification of security or public order risks likely to negatively affect more than one Member State.
The Council started technical discussions on the proposal in January 2024 and significant work has been done under the Belgian Presidency to clarify its key aspects. Following the elections in June 2024, the incoming European Parliament will now start its deliberations on the proposal. The European Economic and Social Committee (EESC) and the Committee of the Regions (CoR) were consulted on the proposal. EESC adopted its opinion on 10th July 202437, while the CoR is expected to adopt its opinion in Q4 2024.
1 Alternative indicators of FDI activity which are not based on flows, which can present a lot of fluctuations, are provided in the Staff Working Document accompanying this Annual Report.
2 The 2023 EU27 result was primarily driven by decreases of inward FDI in the Netherlands and again in Luxembourg, see OECD, FDI IN FIGURES, April 2024 –available at: https://www.oecd.org/investment/investment-policy/FDI-in-Figures-April-2024.pdf. Negative values of FDI inflows are largely explained by significant disinvestments (due to negative equity and debt components involving holding companies) that took place in these two countries in 2023. The Netherlands (recording EUR -135 billion FDI inflows in 2023) contributed to this EU27 negative net inflow in particular, since some multinationals relocated their conduit activities to other countries in Q4 of 2023.
3 Note that compared to last year the data was slightly revised by the OECD.
4 Foreign direct investment can take two different forms: greenfield, and mergers and acquisitions (M&As). International greenfield investments typically involve the creation of a new company or establishment of facilities abroad, while an international merger or acquisition amounts to transferring the ownership of existing assets relating to an economic activity to an owner abroad.
5 Approximated as the cumulated number of foreign transactions, starting from 2015 i.e. the 2015 data is a flow.
6 Russia’s war of aggression against Ukraine entered its third year in February 2024. Geopolitical tensions and the broadening of the Middle East conflict are additional sources of risk.
7 The main offshores by number of transactions in 2023 are (in alphabetical order): Bermuda, British Virgins Islands, Cayman Islands, Liechtenstein and Monaco. For the full list of Offshore Financial Centres, see e.g., Commission Staff Working Document - Following up on the Commission Communication “Welcoming Foreign Direct Investment while Protecting Essential Interests” – SWD(2019) 108 final – 13 March 2019.
8 The categories used refer to the NACE Rev. 2 Broad Structure, see: https://ec.europa.eu/eurostat/web/nace
9 European Commission (2023), Joint communication to the European Parliament, the European Council and the council on “European economic security strategy”, JOIN(2023) 20 final.
10 For more details, please see the accompanying Commission Staff Working Document.
11 The list of screening mechanisms notified by Member States (dated 28 February 2024) is available under: https://circabc.europa.eu/rest/download/7e72cdb4-65d4-4eb1-910b-bed119c45d47.
12 Member States have different screening procedures. So, the cases reported depend on the domestic procedures (scope, eligibility check upfront or later, etc.). For instance, some Member States declared cases ineligible before a formal screening procedure is carried out, while others first formally screened cases and then declared them ineligible. The graphs and numbers reported in this chapter aim at depicting the average behaviour of Member States’ screening activities and it is based on the reporting of Member States data.
13 In the same period, the Commission also made use of the cooperation mechanism on FDI not undergoing screening (Article 7), which is not reflected in the statistics below.
14 See https://ec.europa.eu/transparency/documents-register/detail?ref=COM(2023)590&lang=en.
15 In 2022 this share stood at 66%, in 2021 at 70% and in 2020 at 86%.
16 According to mainstream approach, the primary sector of activity was selected as the leading indicator. This is also aligned with the information contained in all sectoral charts in the SWD accompanying this annual report.
17 Manufacturing encompasses activities by companies which are involved in the transformation of materials into new products. For example, this encompasses the manufacturing of: electrical equipment and motors, industrial machinery and equipment, weapons and ammunitions, and pharmaceuticals, etc.
18 ICT stands for Information and Communication Technologies. It encompasses activities by companies providing essential infrastructures and tools for knowledge creation, sharing and diffusion. For example, this encompasses computer programming, software publishing, data processing and hosting, wireless telecommunication activities, etc.
19 Wholesale and Retail includes wholesale and retail activities relating to pharmaceutical goods, chemical products, electronic and telecom equipment and supplies, computers, computer peripheral equipment and software, metals and metal ores, etc.
20 Financial activities encompass activities by holdings, funds or similar actors in the financial sector which aim at acquiring a specific (equity) stake or control in a target company. For example, this encompasses fund management activities, activities of holding companies, financial services, insurance activities, etc.
21 Professional activities include activities by law and accounting firms, as well as consultancy and engineering activities. For example, this encompasses activities of head offices, market research and public opinion polling, consultancy, research & experimental development on biotechnology, etc.
22 Note that results are not directly comparable as last year all sectors were counted with equal importance which led to higher number of sectors than transactions.
23 The category ‘other’ encompasses all other sectors below 5%, notably: transport, administrative activities, health, real estate etc.
24 The value, where available, relates to the total value of the transaction of which the notified transaction was part.
25 N/A includes blanks, not available/not disclosed and not applicable.
26 The notification form: request for information from an investor for the purposes of notifications pursuant to Article 6 of the Regulation serves to ensure some degree of uniformity and a minimum level of information about the transaction, the investor and the target company provided in the notification under the Regulation. The form is available at https://policy.trade.ec.europa.eu/enforcement-and-protection/investment-screening_en.
27 Please note that several countries can issue a comment about the same transaction; this was the case for several transactions.
28 These factors are provided in Article 4 of the FDI Screening Regulation. Note that for one transaction there can be several factors used to assess the criticality of a given FDI for security and public order.
29 Note: when looking into transactions involving investors from China (without Hong Kong), their share remained unchanged compared to 2022 with 5% of total transactions.
30 Countries with non-negligible share among others consist of Cayman Islands, Singapore and Switzerland with a share of 2% each. FDI from Russia and Belarus notified to the cooperation mechanism accounted for 1.6% of the total remaining at previous year’s levels.
31 “Multi-jurisdiction FDI transactions” refers in this context to FDI transactions where the target company is a corporate group with a presence in more than one Member States (and possibly also third countries), e.g., by way of subsidiaries in more than one Member State. Such deals may be notified by more than one Member State if the transaction falls under the scope of their screening mechanism and they initiate its formal screening.
32 https://ec.europa.eu/commission/presscorner/detail/en/ip_24_363
33 https://www.oecd.org/en/publications/framework-for-screening-foreign-direct-investment-into-the-eu_f75ec890-en.html
34 https://ec.europa.eu/transparency/documents-register/detail?ref=SWD(2024)23&lang=en
35 https://policy.trade.ec.europa.eu/enforcement-and-protection/investment-screening_en
36 https://policy.trade.ec.europa.eu/enforcement-and-protection/investment-screening_en
37 https://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/screening-foreign-investments-union
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