European Commission Offers Guidance on Foreign Direct Investment and Protection of Europe’s Healthcare Capacities
On 25 March 2020, the European Commission (the Commission) published guidance to the Member States of the EU concerning the limitation of foreign direct investment (“FDI”) and free movement of capital from third countries in order to protect Europe’s strategic assets, especially its healthcare capacities (see, attachment).
The Commission considers that, in the context of the COVID-19 pandemic, there could be “an increased risk of attempts from non-EU investors to acquire healthcare capacities (for example for the production of medical or protective equipment) or related industries such as research establishments (for instance developing vaccines) via foreign direct investment”. According to the Commission, if left unchecked, FDI could hamper the EU’s capacity to cover the health needs of its citizens.
Since the responsibility for screening FDI lies with EU Member States, the Commission calls upon them to (i) make full use of their screening mechanisms “to take fully into account the risks to critical health infrastructures, supply of critical inputs, and other critical sectors”; and (ii) to set up a screening mechanism if they do not yet have one “and in the meantime to use all other available options”. EU Member States should thus avert FDI liable to “create a risk to security or public order in the EU, including a risk to critical health infrastructures and supply of critical inputs”.
The Commission also refers to Regulation (EU) 2019/452 establishing a framework for the screening of FDI into the Union (FDI Screening Regulation), which will apply as of 11 October 2020. The FDI Screening Regulation lists critical health infrastructure among the factors which may be taken into consideration in determining whether FDI is likely to affect security or public order. The FDI Screening Regulation also sets up a cooperation mechanism between the Commission and Member States in order to tackle FDI that creates risks in several Member States. Finally, the Commission provides guidance on the possible justifications for restricting capital movements.