CEE ramps up screening of foreign direct investments (FDI)

In its Communication of 13 March 2020, Coordinated Response to the COVID-19 outbreak (COM(2020) 112 final; ec.europa.eu/info/sites/info/files/communication-coordinated-economic-response-covid19-march-2020_en.pdf), the European Commission (EC) warned that the current economic shock due to the COVID-19 crisis poses an increased potential risk to strategic industries in the European Union. It urged Member States "to be vigilant and use tools available to avoid that the current crisis leads to a loss of critical assets and technology" as a result of buyouts from foreign (i.e. non-EU/non-EEA) investors.

In its subsequent Communication of 25 March 2020, Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of the EU FDI Screening Regulation (C(2020) 1981 final; trade.ec.europa.eu/doclib/docs/2020/march/tradoc_158676.pdf), the EC specifically addressed the increased risk of attempts by foreign investors to acquire healthcare capacities. In light of this, the EC encouraged Member States to a) make full use already now of its existing FDI screening mechanisms or, where such screening mechanisms are not available or inadequate, b) to set up a full-fledged screening mechanism.

Now that the EU FDI Screening Regulation must be transposed into national law (see here), national legislators in Central Eastern Europe have heard the wakeup call. In the last few weeks, Member States across CEE have tightened or enacted new measures or initiated legislative processes to do so. These measures are largely shaped by the EU FDI Screening Regulation.

Thus, going forward many foreign investments in critical sectors will have to undergo a vetting process.

Read here about the latest developments:

Austria: Austrian government proposes new FDI screening act

Hungary: New foreign investments screening rules in Hungary

Poland: New foreign investments screening rules in Poland

Slovenia: Slovenia introduces foreign investments screening rules

Further screening tools are in the pipeline in the Czech Republic (a new law is slated to undergo the parliamentary process in June 2020) and Croatia.

Authors: Kinga Hetényi, Paweł Kułak, Adrian Menczelesz, Krzysztof Pawlak, Eva Škufca, Volker Weiss, Constantin Fladerer