FDI screening regulation comes into force

The Regulation of the European Parliament and of the Council on establishing a framework for the screening of foreign direct investments into the Union entered into force on Wednesday.

The Regulation establishes a framework for the screening of foreign direct investments in Member States on the grounds of security or public order and create a cooperation mechanism between the Member States and the Commission, said a government press release.

The Regulation’s scope of application covers direct foreign investments related to security and public order. It is based on the European Council’s policy from summer 2017, the purpose of which was to instate measures for investments aimed at the strategic sector. The law will be applied in its full scope from 10 October 2020, which will be preceded by an 18-month implementation period.

The Member States and Commission will exchange information on direct foreign investments regardless of whether they are being screened in the country they were aimed at. A point of contact must be established in every Member State and at the Commission for the coordination and implementation of regulation-related matters. The decision to establish a screening mechanism or screening a certain direct foreign investment will be left up to the discretion of the Member State in question.

The Regulation requires that foreign investors and companies involved in investments that fall within the scope of the Regulation submit information on, amongst other things, the investor’s ownership structure, the origin of the funding for the investment and its estimated value, as well as on possible operations in other EU Member States. The time spent on information exchange at the EU level is not expected to significantly affect the processing times concerning approval of screened foreign corporate acquisitions in Finland except under special circumstances.

When screening direct foreign investments, Member States can take into account the effects of investments on things such as critical infrastructure, technology, security of supply and access to critical data as well as on the freedom and plurality of media.