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Broadening the “Foreign (Direct) Investment” Concept: A Second Chance for an Effective FDI Screening in the EU?

Mlynarcikova, Ema LU (2024) JAEM03 20241
Department of Law
Faculty of Law
Abstract
This research presents a quest for the definition of “foreign direct investment” under the EU framework for FDI screening by the Member States, established by Regulation 2019/452 based on public policy and security. This Thesis argues that the scope of the current Regulation, excluding “indirect” FDI made by foreign investors via an EU subsidiary, coupled with the lenient, non-compulsory nature of the Regulation, undermines the effectiveness of FDI control in the EU. As a result, the screening system creates legal uncertainties for the investors. After the confirmation that the Regulation’s scope is limited to investments made directly by the foreign investor into the EU target, thereby excluding FDI made via an EU subsidiary in the... (More)
This research presents a quest for the definition of “foreign direct investment” under the EU framework for FDI screening by the Member States, established by Regulation 2019/452 based on public policy and security. This Thesis argues that the scope of the current Regulation, excluding “indirect” FDI made by foreign investors via an EU subsidiary, coupled with the lenient, non-compulsory nature of the Regulation, undermines the effectiveness of FDI control in the EU. As a result, the screening system creates legal uncertainties for the investors. After the confirmation that the Regulation’s scope is limited to investments made directly by the foreign investor into the EU target, thereby excluding FDI made via an EU subsidiary in the C-106/22 Xella judgment, the discussions revealed that most Member States that have a mechanism in place, screen the latter category as well. Some of the implications include a partial halt to the cooperation mechanism under the Regulation or, paradoxically, limited recourse to provisions EU subsidiary can rely upon when challenging the restriction. AG Ćapeta warns that it could overburden the fundamental freedoms instruments, ultimately undermining the relevance of Regulation 2019/452. Increasing security concerns and inefficiencies decrease the EU’s attractiveness to inward investment. In January 2024, the Commission proposed a new regulation intended to repeal the existing Regulation 2019/452. Apart from gaining a compulsory nature, the new regulation should also cover the FDI made via an EU subsidiary. The final part of this Thesis explores the level of harmonization of the scope of FDI control in the EU and the possibility of the harmonized concept of FDI throughout the Union. (Less)
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author
Mlynarcikova, Ema LU
supervisor
organization
course
JAEM03 20241
year
type
H2 - Master's Degree (Two Years)
subject
language
English
id
9154752
date added to LUP
2024-09-12 09:56:29
date last changed
2024-09-12 09:56:29
@misc{9154752,
  abstract     = {{This research presents a quest for the definition of “foreign direct investment” under the EU framework for FDI screening by the Member States, established by Regulation 2019/452 based on public policy and security. This Thesis argues that the scope of the current Regulation, excluding “indirect” FDI made by foreign investors via an EU subsidiary, coupled with the lenient, non-compulsory nature of the Regulation, undermines the effectiveness of FDI control in the EU. As a result, the screening system creates legal uncertainties for the investors. After the confirmation that the Regulation’s scope is limited to investments made directly by the foreign investor into the EU target, thereby excluding FDI made via an EU subsidiary in the C-106/22 Xella judgment, the discussions revealed that most Member States that have a mechanism in place, screen the latter category as well. Some of the implications include a partial halt to the cooperation mechanism under the Regulation or, paradoxically, limited recourse to provisions EU subsidiary can rely upon when challenging the restriction. AG Ćapeta warns that it could overburden the fundamental freedoms instruments, ultimately undermining the relevance of Regulation 2019/452. Increasing security concerns and inefficiencies decrease the EU’s attractiveness to inward investment. In January 2024, the Commission proposed a new regulation intended to repeal the existing Regulation 2019/452. Apart from gaining a compulsory nature, the new regulation should also cover the FDI made via an EU subsidiary. The final part of this Thesis explores the level of harmonization of the scope of FDI control in the EU and the possibility of the harmonized concept of FDI throughout the Union.}},
  author       = {{Mlynarcikova, Ema}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Broadening the “Foreign (Direct) Investment” Concept: A Second Chance for an Effective FDI Screening in the EU?}},
  year         = {{2024}},
}