COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Welcoming Foreign Direct Investment while Protecting Essential Interests
Date: 2017-09-13
Institutions: European Commission, Secretariat-General
Subjects: European security, common commercial policy, direct investment, economic growth, foreign investment, investment policy, job creation, public order, restriction on competition, third country

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 13.9.2017  COM(2017) 494 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Welcoming Foreign Direct Investment while Protecting Essential Interests  
 
 
1.  Introduction 

On  10  May  2017,  the  European  Commission  issued  the  reflection  paper  on  Harnessing 
Globalisation1 opening  a  debate  on  how  to  shape  globalisation  so  that  it  benefits  all.  The 
paper  underlined  the  steadfast  commitment  of  the  European  Union  (EU)  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. 

The  European  Council  welcomed  the  Commission's  initiative  to  harness  globalisation  and 
specifically to analyse investments from third countries in strategic sectors.2 For its part, the 
European Parliament called on the Commission, together with the Member States,  "to screen 
third  country  foreign  direct  investments  in  the  EU  in  strategic  industries,  infrastructure  and 
key  future  technologies,  or  other  assets  that  are  important  in  the  interests  of  security  and 
protection of access to them".3   

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. 4  It 
accompanies  a  proposal  for  a  Regulation  establishing  a  framework  to  screen  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. 

1 COM(2017) 240 of 10 May 2017 "Reflection Paper on Harnessing Globalisation" 
2 June 2017 European Council Conclusions 
3 European Parliament Resolution of 5 July 2017 on building an ambitious EU industrial strategy as a strategic 
priority for growth, employment and innovation in the EU. Moreover, a proposal for a Union Act on the 
Screening of Foreign Investment in Strategic Sectors is currently under discussion in the European Parliament's 
Committee International Trade (European Parliament 2014-2019, B[8-0000/2017] of 20.03.2017). 
4This Communication concerns only foreign direct investment from non-EU countries and does not cover 
portfolio investment. 

2 

 
 
 
 
 
 
 
 
                                                 
2.  The EU is open to foreign investment… 

The EU has one of the most open investment regimes in the world.5 Openness to foreign 
investment  is  enshrined  in  the  EU  Treaties 6.  The  EU  is  the  world's  leading  source  and 
destination of foreign direct investment. At the end of 2015, the stock of inward foreign direct 
investment in the EU stood at over EUR 5.7 trillion while it reached EUR 5.1 trillion in the 
US and EUR  1.1 trillion in China. At the same time, EU investors held  EUR 6.9 trillion in 
foreign direct investment in third countries.7  

Foreign direct investment flows into the EU have recovered from the lower figures observed 
during  and  in  the  aftermath  of  the  financial  crisis,  in  particular  between  2008  and  2010.  In 
2015,  inward  foreign  direct  investment  reached  almost  EUR  470  billion  –  more  than  the 
highest  level  before  the  crisis  recorded  in  2007.8   The  recovery  has  been  supported  by  an 
increase in both the number and value of international cross-border mergers and acquisitions, 
which continue to represent the bulk of foreign direct investment inflows. 

At  the  same  time,  new  investment  trends  are  appearing  with  some  emerging  economies 
playing an increasing role as providers of foreign direct investment. The US remains, by 
far, the largest foreign investor in the EU but its share in the foreign direct investment stock in 
the EU fell from 51.3 per cent in 1995 to 41.4 per cent in 2015. Japan’s share also declined 
from  7.7  per  cent  to  below  3  per  cent  in  the  same  period.  At  the  same  time,  the  shares  of 
Brazil and China have increased significantly from respectively 0.2 and 0.3 per cent in 1995 
to 2.2 and 2 per cent in 2015,9 making these two countries the fifth and sixth largest foreign 
investors in the EU (see charts below). 

Chart  1:  Composition  of  EU  inward  and  outward  foreign  direct  investment  stock  by 
international partner, end of 2015  

Source: Eurostat 

5 See for instance the OECD FDI regulatory restrictiveness index: 
http://www.oecd.org/investment/fdiindex.htm 
6 Articles 63 and 206 TFEU. 
7 Eurostat 
8 Eurostat 
9 Eurostat 

3 

 
 
 
 
 
                                                 
Chart  2:  Evolution  of  shares  of  the  ten  largest  investors  in  EU  inward  foreign  direct 
investment stock10  

Shares of EU inward FDI stock 
(1995 = 100) 

1200,0%

1000,0%

800,0%

600,0%

400,0%

200,0%

0,0%

1995

2005

2015

Source: Eurostat  

United States

Switzerland

Canada

Japan

Brazil

China, incl. Hong Kong

Norway

Russia

Singapore

Israel

The EU welcomes foreign investments because of the substantial benefits they bring for 
our economy and society at large. Foreign direct investment is a source of growth and jobs. 
It  links  EU  companies  with  global  value  chains  that  drive  the  modern  economy.  It  boosts 
productivity  and  makes  our  companies  more  competitive  by  improving  resource  allocation, 
bringing 
increasing  competition,  stimulating 
innovation, and opening new markets for EU's exports. Furthermore, it supports the objectives 
of the Investment Plan for Europe, and other EU projects and programmes. Outward foreign 
direct investment generates similar gains as inward flows, including for the implementation of 
the 2030 Agenda for Sustainable Development. For all those reasons, the EU will continue to 
support liberalisation and protection of investments worldwide. 

technologies  and  expertise, 

in  capital, 

While  only  0.4  per  cent  of  EU  companies  are  controlled  by  non-EU  investors,  these 
companies are on average much larger than companies owned by EU investors. As a result, 
they represent about 13 per cent of total turnover, 11 per cent of value added and 6 per cent of 
total employment in the EU.11 

10 Data excludes investment through Special Purpose Entities. 
11 Eurostat 

4 

 
 
 
 
                                                 
3.  …but as foreign investment patterns change, security and public order must be 

ensured 

EU  openness  to  foreign  investment  is  not  going  to  change.  However,  it  has  to  be 
accompanied by vigorous and appropriate policies to, first, open markets for EU companies in 
third countries, ensure that everyone plays by the same rules and protect EU investments in 
third  countries,  and,  second,  to  protect  assets  in  the  EU  against  takeovers  that  could  be 
detrimental to the essential interests of the EU or its Member States. 

Foreign  investors  are  increasingly  focused  on  seeking  new  markets  and  strategic  assets  and 
State-Owned Enterprises play a growing role in the global economy.12 In some economies 
State-owned Enterprisesundertake a significant share of outward foreign direct investment, in 
some  cases  as  part  of  a  declared  government  strategy.13 Beyond  direct  state  ownership  in 
enterprises,  we  also  witness  situations  whereby  certain  companies  are  directly  or  indirectly 
influenced by the state through various means, or where the state facilitates foreign take-overs 
by national companies, notably through facilitating access to financing below market rates.  

In this context, there is a risk that in individual cases foreign investors may seek to acquire 
control of or influence in European undertakings whose activities have repercussions on 
critical  technologies,  infrastructure,  inputs,  or  sensitive  information.  This  risk  arises 
especially  but  not  only  when  foreign  investors  are  state  owned  or  controlled,  including 
through  financing  or  other  means  of  direction.  Such  acquisitions  may  allow  the  States  in 
question to use these assets to the detriment not only of the EU's technological edge but also 
its security and public order.  

Several  of  the  EU's  key  international  partners  have  established  and  operate  foreign 
direct investment screening mechanisms, in order to address these types of concerns. These 
include Australia, Canada, China, India, Japan and the United States. 

Examples of foreign direct investment screenings  

United States 
Since 1975, the Committee on Foreign Investment in the US (CFIUS) monitors and screens 
transactions  that  could  result  in  control  of  a  US  business  by  a  foreign  person  in  order  to 
determine  the  effect  of  such  transactions  on  national  security.  As  an  inter-agency  service, 
CFIUS  has  the  authority  to  formally  review  foreign  direct  investments,  while  the  Foreign 
Investment  and  National  Security  Act  of  2007  also  requires  heightened  scrutiny  of  foreign 
government-controlled transactions. Between 2009 and 2014, CFIUS received 627 notices of 
proposed acquisitions of US companies by foreign firms, formally investigating around 40% 
of this total: of these 244 investigated transactions, 47 (or around 7% of screened deals) were 
cancelled  by  the  companies involved  during  the  investigation  period  and  one  was  cancelled 
by Presidential decision after the CFIUS investigation. 
Source: www.treasury.gov/resource-center/international/Pages/Committee-on-Foreign-Investment-in-US.aspx 

Australia 
Under  the  1975  Foreign  Acquisitions  and  Take-Over  Act  certain  proposed  foreign 
investments  have  to  be  notified  and  must  receive  an  approval  (a  no-objections  notification) 

12 UNCTAD "World Investment Report 2017: Investment and the Digital Economy" 
13 Idem. 

5 

 
 
 
 
 
 
                                                 
before they can proceed. The screening, conducted by the Treasurer (Minister responsible for 
government  expenditure)  advised  by  the  Foreign  Investment  Review  Board,  is  based  on  a 
national  interest  test.  Sectors  identified  as  sensitive  in  this  context  include  media,  telecom, 
transport, defence related industries, and the extraction of uranium and plutonium as well as 
nuclear facilities. Notification requirements vary depending on, inter alia, the sector, the type 
and  value  of  the  acquisition,  free  trade  agreements  and  whether  the  investor  is  private  or 
government.   
Source: firb.gov.au 

4.  EU trade and investment policy as a driver for an open and fair investment order 

Many  countries  still  maintain  significant  barriers  to  foreign  investment  and  do  not  offer 
comparable  investment  conditions  to  EU  operators.  While  progress  has  been  made  in 
liberalising investment, the number of new restrictive measures has recently risen again.14  

The  establishment  of  a  level  playing  field  with  third  countries  with  regard  to  investment 
conditions is paramount. The EU's trade and investment policy15 is the most appropriate 
tool  to  ensure  that  third  countries  offer  a  level  of  openness  for  foreign  investment 
equivalent to that of the EU and to promote a level playing field for EU operators.  

The  EU  is  pursuing  bilateral  or  regional  agreements  encompassing  binding  rules  and 
commitments  on  foreign  investment, notably foreign direct investment, with a wide range 
of partners.16 These agreements ensure in particular that EU investors benefit from a clearer 
legal  framework  and  better  access  to  foreign  markets.  Moreover,  the  Commission  seeks 
provisions  to  safeguard  intellectual  property,  increase  transparency  and  limit  particularly 
trade-distortive  subsidisation,  and  discipline  the  behaviour  of  state-owned  enterprises.  The 
key  achievements  in  ensuring  a  more  open,  fair  and  rules-based  trade  and  investment 
environment are highlighted in the Commission's Communication "A Modern Trade Policy to 
Harness Globalisation" and a Report on the implementation of the EU trade strategy "Trade 
for All" which were adopted alongside the present Communication.  

Also in this context, the EU attaches utmost importance to multilateral cooperation and rule 
making. The World Trade Organisation's General Agreement on Trade in Services (GATS) 
contains  detailed  rules  on  the  establishment  of  foreign  services  providers,  covering  market 
access  as well  as  non-discrimination commitments,  and rules on the  liberalisation of  capital 
movements exist under the Code of Liberalisation of Capital Movements of the Organisation 
for Economic Cooperation and Development (OECD). 

It is important to note that these international trade and investment agreements concluded by 
the  EU  and  its  Member  States  provide  for  exceptions  from  the  national  treatment  and 
market  access  obligations  allowing  signatories  to  take  measures  to  protect  security 

14 COM(2017) 338 final " REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL on Trade and Investment Barriers, 1 January 2016 - 31 December 2016" 
15Communication COM(2015)497 of 14 October 2015 "Trade for All: Towards a more responsible trade and 
investment policy" 
16  Free trade agreements are at various stages of discussions with Australia, Canada, Chile, India, Indonesia, 
Japan, Mercosur, Mexico, Morocco, New Zealand, Philippines, Singapore, Vietnam, and Turkey. The EU is also 
negotiating stand-alone investment agreements with China and Myanmar.  

6 

 
 
 
 
 
                                                 
interests  or  public  order,  provided  those  measures  do  not  constitute  an  arbitrary  or 
unjustifiable discrimination or a disguised restriction on trade.  

The G20 adopted, in 2016, Guiding Principles for Global Investment Policymaking17, which 
call  for  open,  non-discriminatory,  transparent  and  predictable  conditions  for  investment.  In 
2017,  G20  members  again  underlined  the  importance  of  reciprocal  trade  and  investment 
frameworks and their commitment to work towards a level playing field.  

The EU will continue its efforts at bilateral and multilateral level to ensure that third countries 
offer a level of openness for foreign investment equivalent to that of the EU and maintain a 
level  playing  field  for  EU  operators.  The  EU  also  supports  discussions  in  the  World  Trade 
Organisation on investment facilitation.  

5.  Screening Foreign Direct Investment 

5.1. Existing screening mechanisms in EU Member States  

Nearly half of EU Member States have in place mechanisms for screening foreign direct 
investments.  This  is  the  case  for  Austria,  Denmark,  Germany,  Finland,  France,  Latvia, 
Lithuania, Italy, Poland, Portugal, Spain, and the United Kingdom.   

Member  States  follow  different  approaches  as  regards  the exact scope and design of the 
screening procedures.  

As regards the scope, most existing screening mechanisms apply to both intra-EU and extra-
EU investments, while some apply to investments from third countries only but may include 
anti-circumvention  provisions  to  prevent  abuse.  In  some  cases,  the  screening  mechanisms 
cover  investments  in  specific  sectors  considered  strategic  (e.g.  energy,  telecommunication, 
transport) while in others there is no limitation to specific sectors. Investments covered by the 
screening mechanisms are normally qualified by qualitative criteria (e.g. gaining control over 
the target company) and/or quantitative thresholds (i.e. percentage of shares or voting rights). 
In  terms  of  the  grounds  for  screening,  some  screening  mechanisms  are  limited  to  the 
protection of essential interest of national security, especially production of or trade in arms, 
munitions,  military  equipment,  war  material,  etc.  However,  most  go  beyond  the  defence 
sector and are mainly related to the protection of public security and public policy or public 
order. 

As regards the design  of  the  screening procedures, there are two  main types of mechanism: 
those requiring investors to notify an investment covered before it is made and providing for a 
prior authorisation system and those providing for an ex-post control of investments already 
completed, with the possibility for investors to voluntarily submit the investment to screening 
before it is finalised.   

The  national  screening  mechanisms  represent  a  restriction  to  free  movement  of  capital  or 
freedom  of  establishment,  in  particular  as  regards  intra-EU  investments. 18  However,  the 
Treaty allows Member States to take measures restricting these freedoms provided that they 
are non-discriminatory on grounds of nationality, and can bejustified in particular on public 

17 G20 Trade Ministers Meeting Statement, Annex III, 9-10 July 2016, Shanghai  
18 Articles 63 and 49 TFEU. 

7 

 
 
 
 
 
                                                 
security  or  public  policy  grounds  or  for  other  overriding  reasons  in  the  general  interest  as 
defined by the Court of Justice, and comply with  the  principles of proportionality and legal 
certainty.  

5.2. Relevant existing policies and instruments at EU level 

A  number  of  EU  policies  contribute  to  ensuring  the  benefits  of  foreign  investment  while 
limiting the associated risks.   

First and foremost, it is a fundamental obligation that all foreign investors in the EU comply 
with  applicable  EU  and  national  laws.  This  includes  the  EU  competition  rules,  which 
include  the  control  of  mergers  and  acquisitions.  When  a  proposed  investment,  whatever  its 
source  or  origin,  falls  within  the  scope  of  the  EU  Merger  Regulation19,  it  cannot  go  ahead 
without prior review and approval by the European Commission.  The aim of this  procedure 
is  to  prevent  concentrations  that  would  significantly  impede  effective  competition  in  the 
internal  market.  The  assessment  of  the  compatibility  of  a  notified  concentration  carried  out 
under the EU Merger Regulation focuses solely on competition and does not take into account 
security or public order concerns.  

Other  relevant  rules  are  enshrined  in  EU  legislation  addressing  the  security  of  critical 
infrastructures  and  essential  services.  In  certain  cases,  these  rules  address  the  impact  of 
foreign ownership. The following examples can be mentioned:  

  A number of assets have been identified as critical at the European level: Galileo, 
Copernicus,  Eurocontrol,  the  European  electricity  and  gas  transmission  networks.20 
Specific  attention  must  be  given  to  the  security,  integrity  and  ownership  of  these 
infrastructures  and  the  need  to  ensure  their  continuous  operation.  In  addition,  EU 
legislation  on cybersecurity21 establishes a  list of sectors providing essential services 
where operators must be defended against cyber-attacks.22 

  Some  EU  legislation  directly  addresses  the  impact  of  foreign  ownership. 
Legislation  regarding  foreign  control  over  certain  European  assets  already  exists  in 
very specific instances, in particular where the EU defines criteria for authorisation of 
operators based, inter alia, on the nationality of ownership. For instance, an air carrier 
cannot be licensed in the EU if 50 per cent or more of its shares are owned by non-EU 
persons,  unless  an  agreement  exists  with  its  home  country.23 In  the  same  vein,  in 
accordance  with  EU  energy  rules,  a  gas  or  electricity  transmission  system  operator 
controlled by a third country cannot operate in the EU unless it has been demonstrated 
in the process of certification that it will not put at risk the security of energy supply to 
the  Member  State  in  which  it  would  operate  or  to  the  Union.24Another  example  are 

19 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between 
undertakings (OJ L 24, 29.1.2004, p. 1).  
20 Commission Staff Working Document (2013)318  
21 Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures 
for a high common level of security of network and information systems across the Union 
22 These sectors are energy, transport, banking and financial markets infrastructure, health sector, drinking 
water supply, and digital infrastructure and service providers. 
23 Regulation (EC) No 1008/2008  on common rules for the operation of air services in the Community 
24 Directive 2009/73 on common rules for the internal market in natural gas and Directive 2009/72 on common 
rules for the internal market in electricity ( 

8 

 
 
 
 
                                                 
EU  rules  for  granting  and  using  authorisations  for  the  prospection,  exploration  and 
production of hydrocarbons25 which provide that Member States may, on grounds of 
national security, refuse to allow access to and exercise of these activities to any entity 
which is effectively controlled by third countries or third country nationals.  

  The  Commission's  2014  European  Energy  Security  Strategy26 envisaged  launching  a 
wider  debate  on  the  control  of  strategic  infrastructures  in  the  energy  sector  by 
non-EU  entities,  notably  state-owned  enterprises,  national banks  or  sovereign  funds 
from key supplier countries that aim at penetrating the EU market and where there is a 
risk  that  they  hamper  diversification  of  supplies  and  the  development  of  the  EU 
network  and  infrastructure.  As  a  first  step,  the  Commission  has  tabled  legislative 
proposals  regarding  the  security  of  gas  and  electricity  supply  that  would  require 
Member  States  to  assess  the  risks  posed  by  foreign  control  or  ownership  of  gas  and 
electricity infrastructures, and to adopt measures they deem necessary and which are 
subject to review by the Commission and/or by an experts group.27 

However,  in  spite  of  these  sectorial  initiatives,  there  is,  so  far,  no  comprehensive  legal 
framework  at  the  EU  level  which  addresses  the  security  and  public  order  risks  that  certain 
foreign direct investment from third countries may pose. 

6.  Towards  an  EU  framework  to  screen  foreign  direct  investment  on  security  or 

public order grounds 

6.1. The case for action 

The  Commission  fully  acknowledges  the  need  to  maintain  the  necessary  flexibility  for 
Member  States  to  screen  foreign  direct  investments,  taking  into  account  their  individual 
legitimate  interests,  different  situations  and  national  circumstances.  At  the  same  time,  the 
European dimension of foreign direct investment is obvious, which is why it falls under the 
EU's Common Commercial Policy.28 Within the Internal Market, EU companies increasingly 
make  use  of  the  freedom  of  establishment  and  to  provide  services  as  well  as  of  the  free 
circulation of goods and capital, spreading their activities and their supply chains over several 
Member States, rather than operating in just one. Third country investors also wish to reap the 
benefits  of  the  Internal  Market  by  investing  in  EU  companies,  which  affords  them 
considerable economies of scale and access to the Internal Market. Moreover, a foreign direct 
investment  in  one  Member  State  may  have  implications  for  the  security  or  public  order  of 
another Member State or for the EU as a whole. Such cross-border impact cannot always be 
fully  considered  and  assessed  within  national  mechanisms.  Moreover,  there  is  a  need  to 
ensure  a  framework  that  protects  assets  that  have  a  significant  European  dimension  given 
their  links  to  programmes  or  projects  of  Union  interest  such  as,  for  instance,  the  European 
global satellite-based navigation system (Galileo).  

25 Directive 94/22/EC of 30 May 1994 on the conditions for granting and using authorization for the 
prospection, exploration and production of hydrocarbons 
26 COM(2014) 330 
27 The new Regulation repealing Regulation (EU°) No 994/2010 is currently in the adoption process and is 
expected to enter into force in autumn 2017. For electricity, COM (2016)862 Proposal for a Regulation of the 
European Parliament and the Council  on risk-preparedness in the electricity sector repealing Directive 
2005/89). 
28 Art. 207 TFEU. 

9 

 
 
 
                                                 
The  Commission  considers  that  closer  cooperation  and  better  coordination  between 
Member States is essential to respond to the changing investment landscape and to enhance 
synergies  between  the  respective  prerogatives  of  the  EU  and  Member  States.  The 
Commission  therefore  suggests  taking  further  measures  as  regards  those  investments 
from third countries that may raise security and public order concerns. 

In this context, the specific objectives to be achieved are the following: 

•  provide  a  coherent  framework  to  screen  foreign  direct  investment  in  the  EU  on 
grounds  of  security  or  public  order,  without  impinging  on  Member  States'  national 
prerogatives; 

•  facilitate  close  and  systematic  cooperation  among  Member  States  and  between 
Member  States  and  the  Commission  with  regard  to  the  screening  of  certain  foreign 
direct  investment  when  these  raise  security  or  public  order  concerns,  including 
strengthened exchange of information; 

•  increase  transparency  of  foreign  direct  investment  that  may  have  an  impact  on 

security or public order; 

•  effectively address cases of foreign direct investment raising security or public order 

concerns in relation to projects or programmes of Union interest; 

•  prevent circumvention of national foreign direct investment screening mechanisms. 

Such  action  will  be  taken  in  full  respect  of  obligations  arising  from  the  EU  Treaties  and 
international agreements and arrangements to which the EU and Member States are party. In 
this  regard,  where  the  EU  or  Member  States  have  assumed  international  commitments  on 
investment, the scope for action is already  framed  by the corresponding  security and public 
order exceptions. 

Furthermore, the Commission proposes measures that are proportionate and transparent while 
minimising  the  administrative  burden  on  governments  and  investors.  The  proposal  also 
ensures  a  rules-based,  predictable,  non-discriminatory  investment  regime  between  different 
third  countries  in  line  with  the  principles  set  out  in  the  relevant  case  law  of  the  Court  of 
Justice of the European Union.29 

6.2.  Proposed measures 

a.  Proposal for a Regulation 

In  parallel  to  this  Communication,  the  Commission,  in  light  of  the  above  and  acting  on  the 
basis of Article  207 TFEU, is putting forward a  proposal  for  a  Regulation  establishing  a 
framework to screen foreign direct investments in the EU. 

The proposal establishes a framework for the screening of foreign direct investments into 
the  EU  on  grounds  of  security  or  public  order,  while  providing  a  non-exhaustive  list  of 
factors that may be taken into account in determining whether a foreign direct investment may 
impact security or public order. It establishes essential elements of the procedural framework 
for the screening of such foreign direct investments by Member States, including transparency 
obligations and the obligation to ensure adequate redress possibilities with regard to decisions 

29 ln  particular  Case  C-483/99,  Commission  v  France,  Case  C-463/00,  Commission  v  Spain,  Case  C-326/07, 
Commission v Italy,  Case C-212/09 Commission v Portugal, and Case C-244/11 Commission v Greece. 

10 

 
 
 
 
                                                 
 
adopted  under  these  screening  mechanisms.  At  the  same  time,  the  proposal  maintains  the 
necessary  flexibility  for  Member  States  in  screening  foreign  direct  investments,  allowing 
them to adapt to changing circumstances and their national specific context. 

The draft Regulation also establishes a mechanism for cooperation between Member States, 
notably  for  the  cases  where  foreign  direct  investment  in  one  or  more  Member  States  may 
affect the security or public order of another Member State. 
Finally, the draft Regulation provides the Commission with the means to screen foreign direct 
investments that may affect projects or programmes of Union interest on grounds of security 
and  public  order.  The  proposed  Regulation  sets  out  criteria  for  the  identification  of  such 
projects  or  programmes,  examples  of  which  include  Horizon  2020,  Galileo  and  European 
Geostationary  Navigation  Overlay  Service  (EGNOS),    Copernicus,  and  the  Trans-European 
Networks for Transport (TEN-T), Energy (TEN-E) and Telecommunications.  

b.  Complementary measures 

In parallel to the adoption of the proposal for a Regulation establishing a framework to screen 
foreign direct investments in the  EU, which  is  subject to the ordinary legislative procedure, 
the Commission will immediately proceed with the following measures: 

1. Carry  out  by  the  end  of  2018  further  in-depth  analysis  of  foreign  direct  investment 
flows into the EU, especially in strategic sectors (e.g. energy, space, transport) or assets 
(technologies  and  inputs  linked  to  strategic  sectors,  critical  infrastructures  across 
sectors,  sensitive  data)  that  may  raise  concerns  in  the  areas  of  security,  public  order 
and/or control of critical assets, in particular when the investor is owned or controlled by 
a  third  country,  or  benefits  from  significant  state  subsidies.  This  will  include,  in 
cooperation  with  Member  States,  data  collection  at  the  most  granular  level  available, 
analysis  of  trends,  and  assessment  of  impact,  including  through  case  studies.  As 
necessary,  it will  encompass  a further study to identifycritical assets. The  role of state 
support in facilitating acquisitions will also be assessed. 

2. Set up  a coordination  group  dedicated to inward foreign direct investment, including 
all issues within the scope of the proposed Regulation. The group will be chaired by the 
Commission  and  composed  of  representatives  of  Member  States.  It  could  be  active  in 
particular in the following areas: 

•  identify  sectors  and  assets  that  have  strategic  implications  from  a  security, 
public  order  and/or  control  of  critical  assets  point  of  view  at  national  level, 
cross-border  level  (e.g.  assets  situated  in  one  Member  State  that  may  have 
strategic implications on another Member State) or at EU level (building on the 
list of projects or programmes of Union interest); 

•  exchange  information  and  analysis  on  foreign  direct  investments,  including 
motives for investment, geographic origin and sources of financing (public or 
private);  

•  discuss issues of common concern, including level playing field issues such as 
third  countries  facilitating  strategic 
subsidies  and  other  practices  by 
acquisitions,  and  reasons  preventing  European  investors  from  acquiring  and 
maintaining critical European technologies and inputs; 

•  share  best  practices  and  lessons  learned  among  Member  States  for  screening 

foreign direct investment; 

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•  discuss the opportunity of cooperation with third countries with shared interests 
and shared challenges in respect of the impact of foreign direct investment on 
security and public order; 

•  promote convergence in policies, while respecting Member States' autonomy in 

choosing whether to screen foreign direct investment or not;  

•  further  reflect  on  the  means  to  protect  European  strategic  assets,  including 

through an EU-level screening mechanism; 

•  following  the  entry  into  force  of  the  proposed  Regulation,  consider  any 

question relating to its application. 

7. 

Conclusion 

The  Commission  remains  convinced  of  the  benefits  of  foreign  direct  investment  and  the 
decisive  contribution  such  investments  have  made  to  higher  growth  levels  and  creation  of 
quality jobs in the EU. The Commission also believes that an open investment environment 
contributes  to  sustainable  development  worldwide.  The  EU  will  therefore  remain  the 
staunchest  defender  and  promoter  of  an  open  and  rules-based  international  investment 
environment. Through its trade and investment policy, the EU will continue to insist that third 
countries  offer  a  level  of  openness  for  foreign  investment  equivalent  to  that  of  the  EU  and 
maintain a level playing field for EU operators.  

However,  it  is  also  clear  that  the  EU  and  its  Member  States  must  be  in  a  position  to  take 
determined  and  swift  action  where  foreign  direct  investment  may  affect  security  or  public 
order.  For  this  reason,  the  Commission  is  presenting  a  legislative  proposal  alongside  this 
Communication.  The  evolving  international  context  calls  for  action  by  the  European 
Parliament and the Council in order to ensure a rapid legislative process.  

In  parallel  to  the  negotiation  of  the  Regulation,  the  Commission  will,  within  the  existing 
framework and  in line with section 6.2.b of this Communication, pay particular attention to 
foreign direct investments that may threaten security or public order and examine the situation 
in close cooperation with the Member States. Member States are invited to contribute actively 
to  this  cooperation  and  to  the  tasks  of  the  coordination  group  that  the  Commission  will 
establish in this respect. 

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