EU Commission gets a say on FDIs affecting space programmes and other critical infrastructure

The regulation (EU) 2019/452 of the European Parliament and of the Council, establishing a framework for screening of foreign direct investments into the European Union, was published on 21 March 2019 in the official journal. While leaving the decision on whether to set up a screening mechanism and to screen a particular foreign direct investment to the sole responsibility of each Member State, it establishes for the first time a European framework and legal certainty for screening mechanisms on the grounds of security and public order.

The non-exhaustive list of factors, that may be taken into consideration in the screening process, include the potential effects on:

• Critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
• Critical technologies and dual use items, as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies;
• Supply of critical inputs, including energy or raw materials, as well as food security;
• Access to sensitive information, including personal data, or the ability to control such information; or
• The freedom and pluralism of the media.

The characteristics of a foreign investor could also be of particular relevance. Especially foreign investors who are directly or indirectly controlled by a third country (= a country that is not a Member State of the EU) might face scrutiny.

The regulation provides for a cooperation mechanism between the Member States and the Commission. Where a foreign direct investment is undergoing screening by a Member State, such cooperation consists of information sharing, comments from other Member States, which are likely affected or have relevant information, as well as opinions from the Commission. Despite the Member State undertaking, the screening must give “due consideration” to those comments and opinions, the final screening decision on whether a particular foreign direct investment affects security or public order remains the responsibility of the respective Member State. Foreign direct investments planned or completed (after 9 April 2019) in a Member State where they are not (yet) undergoing screening, may also be subject to comments from other Member States and opinions from the Commission.

Foreign direct investments, which are likely to affect projects or programmes of Union interest, will be subject to special scrutiny by the Commission. Projects and programmes of Union interest are those, which either involve significant funding from the EU or are covered by EU law on critical infrastructure, critical technologies or critical inputs, which are essential for security or public order. The current list includes:

• European GNSS programmes (Galileo & EGNOS);
• Copernicus Programme (Earth Observation);
• Horizon 2020 including actions therein relating to Key Enabling Technologies such as artificial intelligence, robotics, semiconductors and cybersecurity;
• Trans-European Networks for Transport (TEN-T);
• Trans-European Networks for Energy (TEN-E);
• Trans-European Networks for Telecommunications;
• European Defence Industrial Development Programme;
• Permanent structured cooperation (PESCO).

The Member State, where such foreign direct investment is planned or has been completed, shall “take utmost account“ of the opinion of the Commission.

Regulation 2019/452/EU is applicable as of 11 October 2020.