The growing involvement of the European Union in the control of foreign investment in its territory

Extract

[...] The involvement of the CJEU in the control of FDI. The Court of Justice of the European Union (CJEU) is essential in interpreting EU legislation and its relationship with national law. The CJEU's decisions ensure that EU legislation is correctly applied by national courts, strengthening legal certainty for FDI and enabling fair competition among investors. Overall, the CJEU protects FDI by ensuring the correct and uniform application of EU law, as well as international agreements, and by ensuring fair competition for investors. [...]

[...] This threatens a state's sovereignty, as it potentially allows investors to challenge government decisions and regulations they disagree with. Another criticism of ISDS is that the proceedings can be costly and complex, often leading to an uneven playing field between investors and states. The costs of arbitration proceedings can be prohibitively high for some countries, leading to a situation where only wealthy investors can pursue claims. Furthermore, the lack of transparency in ISDS proceedings is a primary concern. Critics argue that the arbitration panels which decide these cases are often made up of private lawyers interested in preserving the system and that the proceedings are subject to different levels of transparency and accountability from national courts. [...]

[...] The European Union has consistently regulated and controlled foreign direct investment (FDI) in member states. First, as mentioned above, the EU has established a regulatory framework for controlling foreign investment in sensitive sectors. In March 2019, the EU adopted a regulation to screen foreign direct investments, which came into force in October 2020. This regulation aimed to strengthen cooperation, and the exchange of information, between Member States in the sphere of assessing foreign investment. It also provided a compulsory notification procedure for foreign investment in key sectors such as defence, energy, information and communication technologies, critical infrastructure, and health. [...]

[...] This plurality of definition is explained in particular by the fact that the nature of foreign investment is complex. Foreign investments can take different forms, such as direct investment, investment portfolios, loans and guarantees. In addition, the distinction between direct and portfolio investment is often blurred because investors can acquire a minority stake in a company and exercise some influence over it without being considered direct investors. Moreover, it is noted that economic globalisation and trade liberalisation have led to an increase in cross-border investment flows and a diversification of investment patterns, which makes it difficult to distinguish between domestic and foreign investment. [...]

[...] This is because the EU is an open economy and attractive to foreign investment. As a result, foreign companies invest heavily in the EU, especially in strategic sectors such as advanced technologies, health and security. However, these investments can also threaten the EU's economic, financial and strategic security. This can pose risks for the EU if third countries seek to acquire strategic technologies or skills for political, military, or economic reasons rather than commercial ones. Indeed, geopolitical, rather than commercial, interests could motivate some foreign investment. [...]