The dramatic increase in Chinese foreign direct investment (FDI) in Europe has heightened EU security concerns. Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 is a response to those concerns. The Regulation is a framework for the coordination of and communication between Member States on the issue of FDI screening. While the Regulation does not require that Member States adopt FDI screening mechanisms or amend existing mechanisms, it enjoins Member States to keep the Union apprised of incoming FDI and provides other Member States and the Commission with the opportunity to raise their concerns regarding specific FDI transactions that may threaten security or public order in the Union. The premise underlying the Regulation is that greater awareness of the security risks in certain incoming FDI will prompt Member States to react—by blocking the incoming FDI and,in the longer term, bolstering their own domestic screening legislation.
This paper provides an overview of the Regulation and its proposed cooperation mechanisms. It further provides a comparison between the Regulation and the CFIUS framework in the United States. Finally, this paper considers the effectiveness of the Regulation in light of the changed security and economic context brought about by the Covid-19 pandemic.