European Commission calls on Member States to review outbound investments in critical technologies
At the same time as Foreign Direct Investment (FDI) regimes have proliferated globally in recent years, concerns have been growing about the potential parallel security risks that could be created by outbound investments, particularly within certain critical technologies, i.e, that key technologies and knowhow may fall into the wrong hands.
The EU is increasingly concerned about the security risks associated with outbound investments. With the aim of enabling the European Commission to assess the risks related to such outbound investments and potentially form future policy, the European Commission has issued a recommendation calling on the Member States to review certain types of outbound investments.
The recommendation builds on a White Paper and subsequent public consultation last year, which confirmed the need to assess potential risks to the EU's security related to outbound investments. The ultimate objective is to prevent outbound investments from negatively impacting the security of the EU.
Scope of review
The review is targeted at outbound investments within three critical technologies areas, which are considered to be of strategic importance and critical for the economic security of the EU. The three technologies are: semiconductors, artificial intelligence and quantum technologies.
The types of investments subject to review are broad and cover both acquisitions, mergers, asset transfers (both tangible and intangible), greenfield investments, joint ventures and venture capital investments. Indirect investments made through third-country entities used as investment vehicles or existing subsidiaries are also included.
The review should be "country-neutral", which means that it should cover investments into any non-EU countries, including EEA member states, the United States and other Western countries.
The review should cover relevant investments completed after 1 January 2021. It may, however, also cover investments prior to that date, if the Member States identify investments of particular concern.
What's next
The Member States have 15 months to carry out a review of outbound investments falling within the scope of the recommendation and submit a report to the European Commission on their findings.
As part of the review, the Member States may request information from investors. Investors having engaged in outbound investments in semiconductors, artificial intelligence and quantum technologies after 1 January 2021 should therefore be prepared to receive requests for information about their investments.
Depending on the outcome of the Member States' review, the European Commission will decide whether further action is needed to protect the EU against risks associated with outbound investments.