CELIS Update on Investment Screening – October 2024
European Union – European Commission releases Fourth Annual Report on the screening of foreign direct investments into the Union
On 17 October 2024, the European Commission (“EC”) released the Fourth Annual Report on the screening of foreign direct investments into the Union (“Report”) for the year 2023. The Report is divided into 4 chapters and based on reports by the 27 states.
The European Union saw an increase in net FDI inflows, despite a global decline in net FDI inflows. There is a continuous upward trend in the total number of foreign transactions from 2015 to 2023. Top Origin countries for investments remain constant, while certain Offshore Financial Centers recorded a 26% increase in M&A activity.
Member States underwent significant legislative developments in 2023. Ten Member states amended their existing screening mechanism, while eight other states adopted a new screening mechanism and three states conducted a consultative process. However, there are noticeable divergences, notably regarding notification requirements, sector coverage and timelines.
Member States handled a total of 1808 authorization requests, 56% of them were officially screened. 86% of the screened requests were approved without any conditions, 10% were approved with conditions, 4% of the cases were withdrawn and 1% of the cases were blocked. A total of 488 notifications were submitted by 18 Member states, of which 92% of the cases were closed within 15 days of notification. The sectors which primarily required security risk assessments were manufacturing, ICT, professional activities and wholesale and retail.
The legislative proposal published by the EC aims to mitigate the challenges by ensuring consistency in screening mechanisms in Members states, identifying sectors where all Member states must screen investments, examining beneficial ownership of EU investors, as well as procedural improvements.
The Fourth Annual Report on the screening of foreign direct investments into the Union can be accessed here.
Belgium – First Annual Report on Belgian foreign direct investment screening published on 30 September 2024
Belgium introduced its FDI screening mechanism on 1 July 2023. The first Annual Report 2023-2024 on Screening of Foreign Direct Investment (“Report”) provides an overview of the implementation of the Belgian investment screening mechanism until the 30th of June 2024.
The Interfederal Screening Committee, the body established to oversee the implementation of the investment screening mechanism in Belgium, handled 68 cases in its first year. 53 cases have been approved, while 15 cases are still pending. Only five procedures have moved to Phase II, i.e., the screening procedure.
The Report identifies data, health, digital infrastructure, transport and electronic communication as the top most impacted sectors. Investors from the United States resulted in 43.4% of the deals, followed by the United Kingdom and Switzerland.
The Federal Public Service Economy forecasts estimate a 1.2% growth of Belgian economy, likely leading to a slight increase in the number of notifications.
The First Annual Report on the screening of foreign direct investments in Belgium can be accessed here.
United States –U.S. Department issues regulations to implement Executive Order addressing U.S. investments in certain national security technologies and products in countries of concern
On 28 October 2024, the U.S. Department of the Treasury has issued a final rule to implement President Biden’s Executive Order 14105 of 9 August 2023 aimed at addressing national security risks related to American investments in certain technologies and products.
The regulations focus on U.S. investments in industries and sectors in countries of concern that may pose threats to U.S. national security. These new rules specifically target investments in areas such as artificial intelligence, quantum computing, and advanced semiconductors, which could potentially enhance the military or intelligence capabilities of adversarial nations. The Treasury Department will review and potentially block investments in entities linked to these high-risk sectors.
The regulations are part of broader efforts to prevent the flow of U.S. capital into technologies that may undermine national security. The rule implementation follows an extensive public comment period and aims to ensure a balanced approach to protecting U.S. interests while supporting economic engagement. The Treasury has highlighted that the regulations are designed to safeguard U.S. national security while still allowing for innovation and economic growth.
The Final Rule will become effective on 2 January 2025 and can be accessed here.
The Executive Order 14105 of 9 August 2023 can be accessed here.
Czech Republic & Korea – Electricite de France SA files complaint to the European Union competition regulator over Czech’s decision to pick a Korean state-owned group for the construction of two nuclear reactors
The French state-owned company Electricite de France SA (EDF) has raised concerns with the European Union over a nuclear deal between the Czech government and South Korea’s Korea Electric Power Corporation (KEPCO). The deal, valued at approximately €7 billion, involves KEPCO building a new nuclear power unit in the Czech Republic.
EDF argues that the contract undermines fair competition, as it was awarded without a proper bidding process and with state subsidies that potentially violate EU competition rules. EDF also claims the deal could limit opportunities for European companies to participate in the nuclear energy sector, particularly in the EU.
The European Commission is expected to review the complaint, which could prompt an investigation into the legality of the deal under EU law.
