​EU states should coordinate vetting of foreign takeovers, draft proposal says

10 September 2017. By Joanna Sopinska and Lewis Crofts.

Governments in the European Union should better coordinate their reviews of foreign takeovers that endanger security or public order, according to draft proposals seen by MLex.

The European Commission suggests establishing a "framework" for overseeing problematic acquisitions as well as the right to review a transaction itself if EU funds are at stake.

It could affect acquisitions in industries as broad as communications, data storage, energy and transport infrastructure, artificial intelligence and robotics, all of which are mentioned in the draft.

On Wednesday, commission president Jean-Claude Juncker is expected to set out a more cautious approach to foreign investment in a set-piece speech before the European Parliament.

The commission's plans involve a regulation that would create a new mechanism for "closer cooperation and better coordination" between European governments when reviewing foreign investments, as well as a "communication" — Brussels language for a broader policy document.

That text raises concerns about the openness of Europe's economy in the face of state-backed enterprises with aggressive investment strategies, according to one draft.

Alongside the new framework, the commission is also planning to set up a "coordination group" to assess the bloc's critical assets, analyze inward investments and their financing, and discuss the use of state funds in helping companies acquire assets in Europe.

Vetting

Around half of the EU's member states already have a vetting system that enables them to intervene in transactions that they believe put their national interests at risk. These are usually narrowly defined as endangering security, public health or the plurality of the media.

While the draft law stops short of ordering every government to set up such a mechanism, it does aim to better harness the existing review panels, which often have differing powers and procedures.

It wants to ensure "any such review mechanisms meet some basic requirements, such as the possibility of a judicial review of decisions, nondiscrimination between different third countries and transparency."

It also proposes a system so national governments can raise concerns with each other about problematic investments.

If an investment concerns EU funds, such as for the bloc's space or research programs, the commission wants to be able to carry out its own review into the impact on security and public order.

The draft regulation itself spells out a list of industries that could be caught by such reviews. These include infrastructure, technology, cybersecurity, nuclear and the financial sector.

It also raises the vaguer prospect of intervening to ensure the "security of supply of critical inputs" and "access to sensitive information," without giving further details.

The proposed "framework" would allow the commission to oversee information exchanges between member states, and issue its own "opinion" on the investment under review.

The system would be assessed again in three years, under the terms of the draft. And the new law would also be fast-tracked, bypassing the impact assessment process that is standard for new legislation.

The commission also warns that while this law is under discussion with the other EU institutions and hasn't yet entered into force, EU officials will be particularly vigilant about foreign investments endangering national security.