The Commission has set up a new unit in DG Trade, that coordinates intra-European communication and carries out the bulk of the work that forms the basis of the Commission’s opinions on particular transactions. We could also see situations where Member States exert pressure on other Member States.
In typical EU fashion, the best screening practices from the most advanced Member States are progressively diffused to the rest of Europe, thanks to the pivotal role of the Commission. At the end of May 2021, 18 Member States had notified the Commission about their screening mechanisms, in line with the regulation requirements. The Czech Republic and Slovakia are the latest countries to have adopted screening legislation in early 2021. The Commission expects 23 EU Member States to have investment screening systems in place by 2022 - Belgium, Estonia, Greece, Ireland and Sweden are next on the list. Others have amended their regulations to tighten their screening procedures, sometimes to better mirror the EU terminology regarding security and public order risks. Germany, for example, has added mandatory screening for satellite systems, artificial intelligence, robots, autonomous driving/unmanned aircrafts, quantum mechanics, and critical raw materials, during a May 2021 amendment of its Foreign Trade and Payments Ordinance.
Progress is real, but uneven across the EU. Some deals may well fall through the cracks of the system. Not all Member States have a screening mechanism in place yet, and there are variations in scope and in criteria between legislations across Europe. Some states with new legislation and administrative capacities in place face a lack of well-trained human resources - due diligence can be an extremely challenging task. But overall, screening is becoming a natural reflex in Europe. The French Treasury recently announced that it had screened 275 transactions in 2020, a 27% increase compared to 2019 and 50% compared to 2018. Germany (159 in transaction in 2020) and Italy (69 in 2020) are also screening on a regular basis.
In March 2021, the Italian Council of Ministers blocked the sale of 70% of Milan-based LPE to the Chinese company Shenzhen Investment Holdings Co. LPE produces epitaxy reactors for the semiconductor industry. The decision highlights three elements of the EU investment screening system. First, it is a reminder that the Commission is under no legal obligation to publish its opinions. Its opinions are for the use of Member States only and have to remain confidential. If someone in Italy had not leaked the case to the media, it would most likely have gone under the radar. Thankfully for the Commission, its particular opinion of the case was not leaked.
Add new comment