The FDI Screening Mechanisms and the Draft EU Foreign Subsidy Regulation – Potential Conflicts of Interests and in Application

Abstract

Separate legal frameworks form part of the European Commission’s new strategic trade policy aiming at maintaining and contributing to the EU’s “open strategic autonomy”, while preserving an open economy within the Union. Investment screening mechanisms implemented on the grounds of security and public order will apply in parallel to the proposed EU Regulation on foreign subsidies aiming at addressing economic distortions caused by foreign subsidies to ensure a level playing field within the internal market. Even if both are implemented side-by-side, the legal frameworks will overlap. The following text illustrates scenarios where questions of regulatory interplay and overlap may arise and analyses the potential consequences thereof. It identifies specific difficulties in streamlining legal frameworks where legal areas are partly shared and separated between the Member States’ and the Union’s competences. It concludes that an ambition to preserve an open economy within the Union, attract investments and minimise unpredictability in transactions requires that possibly conflicting interests are addressed. It also illustrates the need for foreign and Union investors to consider and try to identify layers of risks and exchange information on ownership, ties and funding by foreign states early on in a transaction.