FDI contributes to the EU’s growth by enhancing its competitiveness, creating jobs and economies of scale, bringing in capital, technologies, innovation, expertise, and by opening new markets for the EU’s exports. The EU has thus felt the need to address and introduce measure to guard against the risks to its security and public order. There is currently no comprehensive framework at EU level for the screening of FDIs on the grounds of security or public order, while the EU’s major trading partners have already developed such frameworks.
On the 19th of March 2019, the European Parliament and Council adopted Regulation (EU) 2019/452 (the “Regulation”) establishing a comprehensive framework for the screening of FDI into the EU on the grounds of security or public order. Essentially, the screening process requires each Member State to check whether qualifying FDI will have implications on the security and public order of that Member State, other Member States or even the EU.
The Regulation establishes a mechanism for cooperation between EU Member States and between Member States and the EU Commission. It also allows for the EC itself to issue opinions on any FDI.
The Regulation does not stipulate the actual rules and procedures for the screening mechanism to be used by Member States. It leaves it up to each and every Member State to adopt its rules and procedures and to notify them to the EC. The screening mechanism of each and every FDI should be transparent and one which will not discriminate between different third countries.
FDI is defines by the regulation as an investment of any kind made by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign and the entrepreneur in order to carry on an economic activity in a Member State. This includes investments that enable effective participation in the management or control of a company carrying out an economic activity.
In determining whether an FDI is likely to impact the security or public order of a Member State, the Regulation provides a non-exhaustive list of critical industrial, infrastructural, technological, supply and data sectors which Member States and the European Commission may consider when making such a determination.
Our understanding is that Malta will establish a Screening Office to screen FDI in Malta, which fall within the scope of the said regulation and that such an office would be required to grant its authorization prior to the setting up of new companies or share transfers effected.