Stricter information requirements for foreign investors under the EU FDI Regulation

A key feature of Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the EU (the EU FDI Regulation), which fully entered into force in October 2020, is the creation of channels for communication and collaboration between EU Member States and the European Commission (the Commission).  This aims to facilitate the sharing of information about planned or completed foreign direct investment in the territory of one or several Member States.  Through such channels, Member States are able to ask questions and comment on investments taking place in other Member States that may affect their security or public order.  Further, the Commission may itself ask questions and issue an opinion on an investment that may affect the security or public order of more than one Member State.  Whilst the final decision on the appropriate response to any particular foreign direct investment rests exclusively with the specific Member States in which the investment is planned or completed, they must give due consideration to the comments or opinion received (and in limited cases take ‘utmost account’ of the Commission’s opinion).

The EU FDI Regulation sets out the type of information that Member States should provide to other Member States and the Commission for the purpose of the cooperation mechanism.  The obligation to notify under the EU FDI Regulation is indeed incumbent on the Member States undertaking the screening under their national rules – not the foreign investors.  

In an effort to further improve the process, and drawing from the experience of the first six months of operation of the cooperation mechanism, the Commission published on 19 April 2021 a template notification form (the Commission’s form) that Member States should use to compile the required information.  It noted that the Commission’s form should enhance the quality of information submitted by Member States, thereby enabling a swift review by other Member States and the Commission and eventually speeding up the decision-making process in the reviewing Member States.  

One particular point of attention for foreign investors is that the Commission’s form is more comprehensive than the information requirements set out in the EU FDI Regulation – and indeed than many Member State FDI notification forms.  For instance, the Commission’s form requires information on the investor’s business strategy and its financial ability to ensure the continuity and proper operation of the target company.  The Commission’s form also requires detailed information on the target (including information on any expected changes in range of products and services it offers or in its business operations, on its main competitors, and on the IP rights that it owns) that the EU FDI Regulation does not explicitly require.

The practical consequence is that foreign investors should expect that national FDI notification forms will soon be expanded to capture the detailed information requested in the Commission’s form – and in any event be prepared to provide that information.  Failure to do so may result in protracted reviews since the clock for the cooperation mechanism stops every time other Member States or the Commission ask additional questions to the reviewing Member States.

The Commission’s form can be found here.