Foreign Direct Investments Into the European Union: The Effect of Regulation (EU) 2019/452 on Foreign Investors
(2020) JURM02 20202Department of Law
Faculty of Law
- Abstract
- Foreign direct investments into the EU creates jobs and brings in capital and expertise from all over the world. However, foreign direct investments are not without risks as they can also cause threats to public policy or security in the Union. To mitigate these risks, the EU regulation 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union was implemented (‘Regulation’). The Regulation enables Member States to adopt, amend and maintain mechanisms for screening of foreign direct investments within their territory based on the grounds of public order or security. Thus, the Regulation implements a completely new area of EU law which naturally raises questions regarding how the... (More)
- Foreign direct investments into the EU creates jobs and brings in capital and expertise from all over the world. However, foreign direct investments are not without risks as they can also cause threats to public policy or security in the Union. To mitigate these risks, the EU regulation 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union was implemented (‘Regulation’). The Regulation enables Member States to adopt, amend and maintain mechanisms for screening of foreign direct investments within their territory based on the grounds of public order or security. Thus, the Regulation implements a completely new area of EU law which naturally raises questions regarding how the Regulation will affect actors in the area.
To clarify the existing legal framework, this thesis has examined which investments are within the scope of the Regulation and what challenges the Regulation may present for foreign investors active in M&A. It is contended that the scope of the Regulation includes direct investments by third-country nationals or companies registered in a third country. Likewise, the Regulation also enables Member States to screen investments by companies incorporated in the EU or nationals of the EU if certain requirements are met.
Furthermore, regarding potential challenges for foreign investors this thesis concludes that it is uncertain what investments may cause threats against public order or security as the grounds have not been clearly defined in the legal framework. Additionally, more guidance is needed regarding the factors which the Member States are encouraged to consider or to take into account when determining if a foreign investment is likely to affect public order or security. To summarize, further guidance is needed from the Commission, the Member States and the CJEU.
This thesis concludes that the cooperating mechanism, which follows from the Regulation, can affect foreign investors as national authorities of Member States may feel obligated to act in accordance with comments from other Member States or opinions by the Commission. Moreover, due to the cooperation mechanism, sensitive information may become available to up to 28 contact points which can give rise to concern for the protection of such information.
In conclusion, this thesis finds that the questions that remain regarding the legal framework increases uncertainty for foreign investors which decreases transaction certainty.
In addition, this thesis has also examined if Chinese investors are particularly exposed to the challenges presented by the Regulation. The conclusion of this thesis is that such is the case, for instance due to the close ties between the Chinese government and Chinese companies and the political challenges facing Chinese investors in the EU. Therefore, M&A-deals with Chinese investors may contain more closing conditions which decreases transaction certainty further. As transaction certainty can influence what offers are accepted, this circumstance may put Chinese investors at a disadvantage during bidding. (Less) - Abstract (Swedish)
- Utländska direktinvesteringar i EU skapar arbetstillfällen och för med sig kapital samt expertis från hela världen. Utländska direktinvesteringar är dock inte helt utan risk då de även kan ge upphov till hot mot säkerheten eller allmänna ordningen i unionen. I syfte att hantera dessa risker antogs förordning (EU) 2019/452 av den 19 mars 2019 om upprättande av en ram för granskning av utländska direktinvesteringar i unionen. Förordningen möjliggör för medlemsstaterna att anta, ändra eller behålla system för granskning av utländska direktinvesteringar inom medlemsstaternas territorium med hänsyn till allmän ordning eller säkerhet. Därigenom skapar förordningen ett nytt rättsområde inom EU-rätten vilket naturligtvis väcker frågor om hur... (More)
- Utländska direktinvesteringar i EU skapar arbetstillfällen och för med sig kapital samt expertis från hela världen. Utländska direktinvesteringar är dock inte helt utan risk då de även kan ge upphov till hot mot säkerheten eller allmänna ordningen i unionen. I syfte att hantera dessa risker antogs förordning (EU) 2019/452 av den 19 mars 2019 om upprättande av en ram för granskning av utländska direktinvesteringar i unionen. Förordningen möjliggör för medlemsstaterna att anta, ändra eller behålla system för granskning av utländska direktinvesteringar inom medlemsstaternas territorium med hänsyn till allmän ordning eller säkerhet. Därigenom skapar förordningen ett nytt rättsområde inom EU-rätten vilket naturligtvis väcker frågor om hur förordningen kommer påverka aktörer verksamma inom området.
I syfte att klargöra rättsläget har uppsatsen undersökt vilka investeringar som faller inom förordningens tillämplighetsområde samt om förordningen kan ge upphov till utmaningar för utländska investerare aktiva inom företagsförvärv.
Uppsatsens slutsats är att förordningens tillämplighetsområde
inkluderar direktinvesteringar av tredjelandsmedborgare eller företag
registrerade i ett tredjeland. Vidare inkluderar förordningens
tillämplighetsområde även direktinvesteringar av medborgare i EU eller
företag registrerade i EU, om särskilda förutsättningar är uppfyllda. Gällande frågan om förordningen ger upphov till utmaningar för utländska investerare har uppsatsen funnit följande. Det är osäkert vilka transaktioner som kan ge upphov till hot mot den allmänna ordningen eller säkerheten eftersom dessa begrepp inte är klart definierade inom rättsområdet. Vidare krävs mer vägledning rörande de faktorer som medlemsstaterna uppmuntras överväga eller beakta vid fastställandet av om en utländsk direktinvestering kan påverka den allmänna ordningen eller säkerheten. Sammanfattningsvis finns ett behov av vägledning från EU-kommissionen, medlemsstaterna och EU-domstolen.
Därutöver har uppsatsen funnit att samarbetsstrukturen som följer av
förordningen kan påverka utländska investerare då medlemsstaterna kan
känna sig förpliktigade att följa synpunkter från andra medlemsstater eller yttranden från kommissionen. Vidare följer av samarbetsstrukturen att känslig information kan bli tillgänglig för upp till 28 kontaktpunkter vilket kan ge upphov till oro över skyddet av sådan information.
Sammanfattningsvis finner uppsatsen att de frågor som kvarstår om
rättsläget leder till en ökad osäkerhet för utländska investerare vilket minskar transaktionssäkerheten för dem.
Vidare har uppsatsen undersökt om kinesiska investerare är särskilt
utsatta för de utmaningar som förordningen kan ge upphov till. Slutsatsen är att så är fallet, bland annat på grund de starka banden mellan den kinesiska staten och kinesiska företag samt de politiska utmaningar som kinesiska investeringar möter i EU. Därav kan M&A-affärer med kinesiska investerare komma att inkludera fler villkor i avtalen vilket minskar transaktionssäkerheten. Eftersom transaktionssäkerheten kan påverka vilka bud som accepteras kan denna omständighet sätta kinesiska investerare i underläge vid budgivning. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9034585
- author
- Ekegren Franzetti, Elfie LU
- supervisor
- organization
- course
- JURM02 20202
- year
- 2020
- type
- H3 - Professional qualifications (4 Years - )
- subject
- keywords
- Jurisprudence, EU law, investment law, civil and criminal procedure, Foreign direct investment screening mechanisms, FDI
- language
- English
- id
- 9034585
- date added to LUP
- 2021-01-30 14:08:46
- date last changed
- 2021-01-30 14:08:46
@misc{9034585,
abstract = {{Foreign direct investments into the EU creates jobs and brings in capital and expertise from all over the world. However, foreign direct investments are not without risks as they can also cause threats to public policy or security in the Union. To mitigate these risks, the EU regulation 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union was implemented (‘Regulation’). The Regulation enables Member States to adopt, amend and maintain mechanisms for screening of foreign direct investments within their territory based on the grounds of public order or security. Thus, the Regulation implements a completely new area of EU law which naturally raises questions regarding how the Regulation will affect actors in the area.
To clarify the existing legal framework, this thesis has examined which investments are within the scope of the Regulation and what challenges the Regulation may present for foreign investors active in M&A. It is contended that the scope of the Regulation includes direct investments by third-country nationals or companies registered in a third country. Likewise, the Regulation also enables Member States to screen investments by companies incorporated in the EU or nationals of the EU if certain requirements are met.
Furthermore, regarding potential challenges for foreign investors this thesis concludes that it is uncertain what investments may cause threats against public order or security as the grounds have not been clearly defined in the legal framework. Additionally, more guidance is needed regarding the factors which the Member States are encouraged to consider or to take into account when determining if a foreign investment is likely to affect public order or security. To summarize, further guidance is needed from the Commission, the Member States and the CJEU.
This thesis concludes that the cooperating mechanism, which follows from the Regulation, can affect foreign investors as national authorities of Member States may feel obligated to act in accordance with comments from other Member States or opinions by the Commission. Moreover, due to the cooperation mechanism, sensitive information may become available to up to 28 contact points which can give rise to concern for the protection of such information.
In conclusion, this thesis finds that the questions that remain regarding the legal framework increases uncertainty for foreign investors which decreases transaction certainty.
In addition, this thesis has also examined if Chinese investors are particularly exposed to the challenges presented by the Regulation. The conclusion of this thesis is that such is the case, for instance due to the close ties between the Chinese government and Chinese companies and the political challenges facing Chinese investors in the EU. Therefore, M&A-deals with Chinese investors may contain more closing conditions which decreases transaction certainty further. As transaction certainty can influence what offers are accepted, this circumstance may put Chinese investors at a disadvantage during bidding.}},
author = {{Ekegren Franzetti, Elfie}},
language = {{eng}},
note = {{Student Paper}},
title = {{Foreign Direct Investments Into the European Union: The Effect of Regulation (EU) 2019/452 on Foreign Investors}},
year = {{2020}},
}