Foreign investment screening and export control play an essential role in safeguarding European security and public order. This is the result of two reports adopted yesterday by the European Commission: the report on the screening of foreign direct investments (FDI) and the report on the regulation on export controls.
In 2021, the Commission analyzed more than 400 foreign direct investments in the Union to ensure that none of these investments threaten the security or public order of EU countries. All but two EU Member States now have filtering mechanisms in place or are in the process of putting them in place. Meanwhile, under the EU export control regime, Member States examined in the same year around 40,000 applications for the export of goods for potential military use to third countries for a value of 38.4 billion euros, blocking these exports in just over 550 cases.
Executive Vice President and Commissioner of Commerce, Valdis Dombrovskysaid: “At a time of mounting security challenges, in particular Russia’s unprovoked war of aggression in Ukraine, it is crucial that our strategic trade and investment control instruments are operational. In cooperation with our international partners, the EU has deployed export controls to sanction Russia for its devastating war in Ukraine. The EU remains open to foreign investment, but this openness is not unconditional. It must be balanced. We must continue to improve our ability to achieve this balance.
This is the second annual report on FDI screening, and the first to cover an entire calendar year, as the EU FDI screening regulation entered into force in October 2020. Since the establishment of the Cooperation Mechanism , the Commission filtered more than 740 FDI transactions.
The second annual report shows that the use of the mechanism has expanded in 2021. Its main findings highlight that:
- The vast majority of FDIs pose no security/public order issues and are approved quickly (both at Member State level and under the Regulation).
- The Commission completed the assessment of FDI transactions notified by Member States very quickly: 86% were assessed in just 15 calendar days
- The EU mechanism does not hinder the opening of the EU to FDI. With less than 3% of transactions resulting in a Commission opinion, the focus remains on security and public order
- The report gives the EU a much better picture of investment patterns. It shows that the top five ultimate investor countries notified in 2021 were the US, UK, China, Cayman Islands and Canada. Russian FDI represented less than 1.5% of cases and Belarus 0.2%
- FDI covers a wide range of sectors, but most reported cases were in manufacturing (44%) – covering a diverse set of industries including defence, aerospace, energy, healthcare and equipment semiconductors, and information and communications technology (32%).
Overall, the FDI regulations worked quickly and efficiently, providing a range of useful information and preventing investments presenting security risks, while not restricting the flow of foreign investments.
This is the second report on export controls under the enhanced export control regulations that came into force on September 9, 2021, covering the year 2020.
The report covers dual-use exports, i.e. items that can be used for both civilian and military purposes. It shows that the total authorized exports of these items amounted to around 31 billion euros in 2020.
The new set of EU rules has strengthened export controls by introducing a new dimension of “human security”, simplifying procedures and making the export control system more agile and transparent. Expert work is being developed under the Cyber Surveillance and Emerging Technologies Regulation, with a particular focus on the application and implementation of controls by Member States. The new rules also allow the EU to work more closely with partner countries to strengthen global security and promote a level playing field.
Overall, the export control regulations have made the export control framework more efficient, flexible and forward-looking, while facilitating international security cooperation.