I INTRODUCTION

This chapter provides an overview of the EU framework for the screening of foreign direct investment (FDI) into the EU, set out in Regulation (EU) 2019/4522 guidance by the European Commission on the protection of Europe's strategic assets during the covid-19 outbreak (the Guidance), the latest legislative developments in this respect and the importance of this framework for foreign investors and companies involved in merger and acquisition (M&A) processes in the EU.

The Framework Regulation aims at addressing the growing concerns in the EU stemming from the rising number of acquisitions of EU companies operating in sensitive and strategic sectors by non-EU investors, in particular Chinese companies. The covid-19 crisis emphasised the importance of building resilience in the health sector and the need to protect EU strategic assets. FDI screening is one of the priorities of the revision of the EU trade policy, launched on 16 June 2020.

Since the controversial acquisition in 2016 of KUKA AG, a German robotics engineering company, by Midea, a Chinese company, there have been various acquisitions by Chinese corporations in the EU that have raised concerns and been subject to scrutiny. Chinese FDI into the EU (and globally) has been declining in the past couple of years, from €37 billion in 2016 to €12 billion in 2019.3 However, these numbers would be higher if deals resulting in stakes of less than 10 per cent were included in the statistics.4 Transactions that fall below the 10 per cent threshold do not formally qualify as FDI.5

Further, serious concerns remain with respect to the sectors in which Chinese companies invest.6 In 2019, 80 per cent of Chinese FDI in the EU was concentrated in four sectors: consumer products and services; information and communication technologies; automotive products and services; and transport, utilities and infrastructure.7 Other sectors seeing inflows of Chinese FDI in the EU include industrial machinery and equipment, energy, aviation, health and biotechnologies. These sectors are seen as highly sensitive, as they are often linked to the defence industry or concern strategic assets, such as EU technologies and know-how. Hence they raise national security considerations.

Additionally, concerns are now being raised with respect to non-equity investments, such as joint research and development (R&D) activities or university partnerships between Chinese and EU entities for technological collaboration.8 By way of example, China's participation in the EU Galileo satellite system allowed Chinese aerospace manufacturers to obtain technology know-how and, consequently, helped China to build its own satellite navigation system, BeiDou, which incorporates dual-use technologies.9

The Framework Regulation was adopted in April 2019, providing Member States with an enabling framework for reviewing FDI on grounds of security and public policy and increasing cooperation between them and with the European Commission (the Commission). It will become fully applicable on 11 October 2020.

II FOREIGN INVESTMENT REGIME

The Framework Regulation creates a legal framework to allow greater coordination in screening FDI in the EU, without establishing a mandatory screening mechanism at EU level. To date, 14 Member States and the United Kingdom have adopted different policies for securing their vital national security interests against FDI, ranging from screening procedures to partial or total prohibition of FDI in specific sectors, notably defence.10 Currently, a number of Member States are in the process of adopting national FDI screening regimes. By mid 2021 most if not all Member States will have a screening mechanism in place.

The legal basis for such mechanisms is the Treaty on the Functioning of the European Union (TFEU), which allows Member States to 'take such measures as [they] consider necessary for the protection of the essential interests of [their] security that are connected with the production of or trade in arms, munitions and war material', on the condition that the measures do not 'adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes'.11

Article 63 TFEU prohibits all restrictions on the freedom of movement of capital and payments between Member States or between Member States and third countries.12 Article 65 TFEU provides for derogation from this prohibition, allowing Member States to take measures that are justified on grounds of public policy or public security.13 The invocation of public policy and public security reasons must not constitute 'a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63'.14

According to the case law of the Court of Justice of the European Union (CJEU), national measures may be justified on the grounds set out in Article 65(1)(b) TFEU, namely public policy or public security15 or by overriding reasons in the general interest 'to the extent that there are no [EU] harmonising measures providing for measures necessary to ensure the protection of those interests'.16 Such overriding interests have been held to include environmental protection, town and country planning and consumer protection,17 and exclude purely economic objectives.18

However, national measures must respect the limits provided by the TFEU and observe the principle of proportionality, in that restrictive measures must be appropriate to secure the objective that they pursue and not go beyond what is necessary to achieve it.19

The CJEU has also ruled that the scope of the public security exception must be interpreted strictly and cannot be unilaterally determined by the Member States without any control by the EU institutions.20 Member States may rely on this exception only in the presence of a 'genuine and sufficiently serious threat to a fundamental interest of society'.21 Moreover, derogations of this kind must not be applied for purely economic purposes,22 while persons affected by such restrictive measures must have access to legal remedies.23

Finally, Council Regulation 139/2004 on the control of concentrations between undertakings (Merger Regulation)24 aims at establishing whether appraisals of M&As within the EU are compatible with the common market and do not pose impediments to effective competition therein. For transactions with an EU dimension, the Merger Regulation affords the Commission with exclusive competence to make decisions.25 Once the Commission has taken jurisdiction over a transaction, Member States' domestic legislation does not apply.26 However, Article 21(4) of the Merger Regulation explicitly provides that Member States 'may take appropriate measures to protect legitimate interests other than those taken into consideration by this Regulation and compatible with the general principles and other provisions of Community law'.27 Public security is listed as a legitimate interest in this regard.

III REVIEW PROCEDURE

The Framework Regulation establishes a common basis for the screening of FDI into the EU on grounds of security or public order. It also aims at enhancing cooperation between Member State authorities and sets out the compliance requirements for national mechanisms. Importantly, it does not create a mandatory screening mechanism at EU-level, nor does it impose an obligation upon Member States to adopt FDI vetting procedures. FDI screening remains within the competence of Member States. Further, the Framework Regulation sets out a mechanism for cooperation between Member States, and between Member States and the Commission, which aims at facilitating the exchange of information concerning potential investments that might have an impact on other Member States' national security, other strategic areas or projects and programmes of EU interest.

The Framework Regulation applies to FDI, which is defined in accordance with the CJEU opinion on the EU–Singapore free trade agreement (FTA),28 thus excluding certain forms of investment such as portfolio investment. Consequently, it covers investments of any kind that aim to establish or to maintain lasting and direct links between the foreign investor and the acquired company to carry on an economic activity in a Member State, including investments that enable effective participation in the management or control of a company carrying out an economic activity.29

i Member States' screening mechanisms

Member States are solely responsible for protecting their essential security interests.30 As a result, they may maintain any existing mechanisms for the screening of FDI into their territory on security or public order grounds.31 The Framework Regulation sets out certain common principles by which any such mechanism must abide:

  1. procedures and rules, including time frames, must be transparent;32
  2. relevant rules must set out the conditions for initiating an FDI review, the grounds for screening and the applicable procedural rules on a non-discriminatory manner between third countries;33
  3. applicable time frames for the review must take into consideration potential comments by other Member States or Commission opinions, in accordance with the Regulation34 (see Section III.iii below);
  4. foreign investors must be able to have recourse to judicial review of the authorities' decisions;35
  5. any confidential information (including commercially sensitive information) made available to the Member State concerned in the context of its review must be protected;36 and
  6. Member States must provide for measures allowing the identification and prevention of circumvention of applicable screening mechanisms and decisions.37

Any existing or newly adopted screening mechanisms must be notified to the Commission, which is responsible for maintaining an updated list of all mechanisms in the EU.38 Further, Member States must submit an annual report to the Commission, in which they include information about any FDI that took place in their territory in the preceding year, the operation of their screening mechanism, as well as any requests received by other Member States in the context of the cooperation mechanism (see Section III.iii below).39 On that basis, the Commission will submit an annual report to the Parliament and the Council concerning the implementation of the Framework Regulation.40

ii Screening factors

The Framework Regulation provides for an illustrative list of factors and criteria that Member States (or the Commission) may consider in determining whether a particular FDI may affect their security or public order. These factors include the potential effects of an FDI on the areas of:

  1. critical infrastructure, physical or virtual (such as energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, sensitive facilities, as well as land and real estate crucial for the use of such infrastructure);
  2. critical technologies and dual-use items (such as artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy, storage, quantum and nuclear technologies, nanotechnologies and biotechnologies);
  3. supply of critical inputs (such as energy, raw materials or food security);
  4. access to sensitive information (such as personal data or the ability to control such information); and
  5. freedom and pluralism of media.41

Additional criteria that may be taken into account include whether:

  1. the foreign investor is controlled by a third country government, state bodies or armed forces (through ownership or significant funding);
  2. the foreign investor has been involved in activities affecting security or public order of another Member State; or
  3. there is a serious risk that the foreign investor engages in illegal or criminal activities.42

iii Cooperation mechanism43

The Framework Regulation establishes a mechanism for cooperation between Member States and between Member States and the Commission, aiming at the exchange of information about FDI in a Member State that may affect security of public order in other Member States. The cooperation mechanism will work via contact points established in each Member State and the Commission respectively.44 It applies both to FDI already undergoing screening in a Member State45 and to FDI in a Member State not yet subject to screening,46 with different nuances in each process.

The Member State conducting screening of FDI must notify the other Member States and the Commission of the FDI47 and may request that they provide comments or an opinion, respectively.48 It must also provide information about the FDI, including, among others things, the ownership structure of the foreign investor; the value of the FDI; the products, services and business operations of the foreign investor; other Member States where the foreign investor conducts relevant business operations; the funding of the FDI and its source; and the date of (expected) completion of the FDI.49 The information is protected as confidential.50 The other Member States and the Commission may, within 15 calendar days of receiving the above information, request more information and notify the Member State reviewing the FDI about their intention to provide comments.51

If any other Member State, or the Commission, considers that the FDI at issue is likely to affect security and public order in another Member State, it can provide comments, or an opinion respectively,52 within a 'reasonable period of time', and in any event within a maximum of 35 calendar days of receiving the relevant information from the Member State concerned.53 The deadline can be extended by 20 calendar days if additional information is requested from the Member State concerned.54 The Member State conducting the screening may make a decision earlier in exceptional circumstances requiring immediate action.55

A similar process is followed with respect to FDI not undergoing screening. The process is triggered if a Member State considers that a planned or completed FDI in another Member State is likely to affect its own security or public order. The Commission may also initiate the process if it considers that the FDI concerned might affect security or public order in another Member State. In these cases, Member States or the Commission may provide comments or an opinion, respectively.56 Before issuing their comments, the other Member States and the Commission can request information about the FDI at issue.57 The general time frame for submitting comments is the same (i.e., 35 calendar days from the receipt of relevant information), but the Commission has another 15 calendar days to issue its opinion.58 However, in this case, Member State comments and the Commission opinion can be submitted up to 15 months after the FDI has been completed.59

In both types of the cooperation mechanism (i.e., for FDI undergoing screening and FDI not undergoing screening), the Member State in which an FDI is planned or completed must give 'due consideration' to other Member States' comments and to the Commission's opinion.60 However, it is not bound by these comments or opinion in its final screening decision.

iv Projects or programmes of Union interest

An interesting element of the Framework Regulation concerns the review of FDI that is likely to affect projects or programmes of Union interest on grounds of security or public order. Projects or programmes of Union interest are defined as those 'involving a substantial amount or a significant share of Union funding, or [. . .] covered by Union law regarding critical infrastructure, critical technologies or critical inputs which are essential for security or public order'.61 Such projects and programmes are listed in an Annex to the Framework Regulation (the Annex).62

Where a project or programme of EU interest is likely to be affected by an FDI, the Commission can issue an opinion addressed to the Member State concerned. The Commission must send its opinion to the other Member States (and not only to the Member State where the FDI is taking place). The Member State concerned must take 'utmost account' of the Commission's opinion and provide explanations to the Commission if it does not follow the opinion.63

The Annex currently lists eight EU projects and programmes, such as the Horizon 2020, Galileo and the Trans-European Networks for Telecommunications and may be amended to include more programmes.64 To this end, on 13 July 2020, the Commission adopted a delegated regulation amending the Annex as follows: Horizon 2020 will include also R&D programmes and joint undertakings; the Permanent Structured Cooperation will also cover security and defence projects; and three new programmes will be added: (1) the Preparatory Action on Preparing the new EU Governmental Satellite Communications programme; (2) the Preparatory Action on Defence Research; and (3) the European Joint Undertaking for International Thermonuclear Experimental Reactor project.65 "The amendments came into force on 19 September 2020."

v Other provisions

The Framework Regulation maintains the group of Member States' experts on FDI screening (the Group) established in 2017 to provide advice and expertise to the Commission. The purpose of the Group is to share best practices and exchange views on current issues and common concerns pertaining to FDI. The Commission would also seek advice of the Group on systemic issues relating to the implementation of the Framework Regulation. The discussions of the Group are confidential.66

The Framework Regulation also allows for cooperation between Member States and the Commission with the competent authorities in third countries with respect to issues of FDI screening on security and public order grounds.67

The Framework Regulation entered into force in 10 April 2019 and will become fully applicable on 11 October 2020. In the meantime, Member States cooperate at EU level with each other and with the Commission, in accordance with the Framework Regulation.

IV FOREIGN INVESTMENT PROTECTION

The EU investment policy aims at securing a level playing field and an open and transparent environment for investing in the EU on the basis of reciprocity. In the past few years, the EU has been negotiating and concluding FDI protection rules in FTAs68 or self-standing investment agreements.69 These agreements cover issues such as market access and non-discrimination between EU and non-EU investors, create a favourable regulatory framework for foreign investors and protect established FDI in the EU, including through both substantive rules and investor-state dispute settlement mechanisms.

Article 207 TFEU sets out the Common Commercial Policy, for which the EU has exclusive competence by virtue of Article 3(1)(e) TFEU. This means that the EU is exclusively competent to legislate and adopt legally binding acts, whereas Member States may do so only if they are empowered by the EU or for the implementation of such acts.70 The CJEU confirmed that FDI falls within the EU exclusive competence in its 2017 opinion on the EU–Singapore FTA.71 The CJEU distinguished between FDI and other forms of investment (e.g., portfolio investment) and held that only FDI falls within the exclusive competence of the EU.72 The criteria used by the CJEU to define FDI now forms part of the definition of FDI in the Framework Regulation.73

On that basis, Member States cannot, in principle, conclude investment agreements with third countries on their own (or amend existing ones), unless authorised by the Commission.74

V OTHER STRATEGIC CONSIDERATIONS

The key objective of the Framework Regulation is to ensure reciprocity in the acquisition of EU companies by non-EU investors and to introduce criteria of fair competition for such acquisitions, based on market rules. At the same time, it aims to strike a balance between maintaining an open environment to FDI in the EU, on the one hand, and the varying interests of its Member States on the other. Notably, many Member States have recently been tightening their FDI review mechanisms, also in response to the covid-19 health crisis. The Framework Regulation does not aim at replacing existing Member States' mechanisms, but only at harmonising national mechanisms to streamline the scrutiny of FDI into the EU. For that reason, foreign investors must observe national requirements in the Member States in which they intend to invest (which may vary significantly) and engage with domestic authorities.

EU Trade Commissioner Phil Hogan has recently emphasised the importance of protecting EU strategic assets, including healthcare capabilities, as well as addressing the current economic vulnerability due to the covid-19 pandemic, which could potentially result in a sell-off of critical EU infrastructure or technologies. The EU needs to strike a balance between its openness to FDI and appropriate screening tools.75

At the same time, the Framework Regulation would be likely to affect both the applicable time frames in national reviews and the substantive assessment of a reported FDI. On the one hand, applicable deadlines would have to take into account the time frame for Member States' comments and the Commission opinion in accordance with the requirements of the cooperation mechanism. On the other hand, Member States will need to take into account the views expressed by other Member States or the Commission in their decision-making process.

Finally, the Framework Regulation complements the existing framework for M&As in the EU76 and does not seek to replace it. As part of the cooperation mechanism for FDI already undergoing screening, the Member State concerned should indicate whether the FDI at issue is likely to fall within the scope of the Merger Regulation.77 While the Commission's role is merely coordination, it would be a relevant actor in the whole vetting process. As a result, companies engaged in M&A transactions would need to conduct a more thorough analysis of potential cross-border security issues to identify the EU Member States in which they would be required to make a filing.

VI CURRENT DEVELOPMENTS

i Tightening of Member State FDI screening mechanisms

Following the outbreak of the covid-19 pandemic, on 25 March 2020 the Commission issued guidance on the protection of Europe's strategic assets during the outbreak,78 identifying the healthcare sector as particularly vulnerable to FDI. The Commission urged Member States to make full use of their existing FDI screening mechanisms and take full account of the risks to critical health infrastructures and supply of critical resources. It also urged those Member States without a screening mechanism, or those that do not cover all relevant transactions, to set up a fully fledged screening mechanism. In response to the guidance, various Member States without an FDI screening mechanism are now bracing to adopt one (e.g., Belgium and Greece). By mid 2021, most if not all Member States are expected to have a fully fledged vetting procedure in place.

Additionally, certain Member States, including France, Germany, Hungary, Italy and Spain, tightened their screening mechanism to allow more stringent vetting of transactions in the health sector, either on a permanent or temporary basis:

  1. In France, biotechnologies have been added to the list of 'critical technologies' subject to screening and, until the end of 2020, the threshold of controls will be lowered from 25 per cent to 10 per cent for acquisition of shares in a French company by non-EU or non-EEA investors.79
  2. In Germany, cross-sectoral reviews have been expanded to personal protective equipment, pharmaceuticals, medical devices and in vitro medical devices, while the threshold for acquisitions by non-EU investors of 10 per cent now also applies to the health sector.80 Biotechnologies are also expected to be included in the list of critical technologies.
  3. In Hungary, the list of strategic sectors has expanded to cover, among others, health (human healthcare, residential non-hospital care, social work activities without accommodation and the manufacture of medical devices).81
  4. In Italy, the health sector was added to the list of sectors with 'minimal strategic importance' subject to controls and, until the end of 2020, FDI screening will apply also to acquisitions by EU investors resulting in an acquisition of control over the target company.82
  5. In Spain, the health sector has been added to the list of strategic sectors subject to review under 'critical infrastructure', and the list of sectors subject to review can now also be expanded on grounds of public health.83

These changes form part of a broader trend in the EU for stricter FDI screening procedures, which had already been under way before the pandemic (e.g., in Germany). At the same time, they demonstrate the strategic importance of the health sector, which now forms part of the EU 'open strategic autonomy' vision for the revised EU trade and investment policy. In this context, the EU is aiming at strengthening its capacity to pursue its own interests independently, including self-sufficiency in producing critical health products, while also continuing its global cooperation with other trade partners.84 The Framework Regulation is one of the main EU tools in this process and its importance is likely to increase in the near future.85

ii EU industrial policy

In 2019, France and Germany were at the forefront of discussions about reforming the current EU merger rules to shape a European industrial policy, calling for a modernised competition policy to address the challenges of the 21st century economy by 2030.86 A year later, the Commission has published its vision of a new industrial strategy for Europe,87 aiming to strengthen the EU's competitiveness and strategic autonomy through the digital economy and the EU's green transformation. The Commission's vision identifies certain key priorities driving the EU's industrial transformation:

  1. an intellectual property action plan to uphold technological sovereignty;
  2. ongoing review of the EU competition rules;
  3. addressing the distorting effects of foreign subsidies in the Single Market;
  4. modernisation of energy-intensive industries, and support for sustainable and smart mobility industries;
  5. enhancing the EU's industrial and strategic autonomy by securing supply of critical raw materials, and a new pharmaceutical strategy;
  6. green public procurement; and
  7. a renewed focus on innovation and investment.

These drivers demonstrate the EU priorities for the years to come. Bound together with the vision for strategic autonomy, they establish the framework in which all critical M&A transactions will be assessed. The discussion around the protection of EU security and strategic assets is therefore more topical than ever before, and an increased focus on the effect of foreign acquisitions is expected.

iii 5G networks

Another debate in the EU concerns the roll-out of 5G networks. 5G networks are crucial for the maintenance and development of several critical sectors in the EU, including energy, transport, banking and health, as well as industrial systems transmitting sensitive information or electoral systems. They are also a powerful tool for the EU to compete in global markets. In this light, 5G networks have paramount strategic importance for the EU as a whole and for Member States individually, to ensure they are secure from espionage or cyberattacks. 5G standards also constitute one of the priority areas for the EU's digital strategy. Because of the interconnected nature of 5G networks, a cyberattack in one Member State would be likely to affect the whole EU.

The roll-out process is within the responsibility of Member States, which are currently working with operators to prepare it. Spectrum auctions of 5G mobile telecoms networks have been planned in 17 Member States in 2019 and 202088 and the ongoing debate revolves around, among other things, the access of third-country companies (notably, Chinese companies) in the auction process for establishing 5G networks in the EU. While other countries worldwide have imposed bans and restrictions on Chinese companies' access to 5G networks, the EU seems to be taking a different approach, moving away from bans and towards measures to mitigate security risks (this may also reflect certain Member States' heavy reliance on Chinese telecommunications parts and equipment).

A Commission recommendation of March 2019 provided a road map for a coordinated EU risk assessment (based on Member States' individual risk assessments, which in turn may be based on technical or 'other' factors) and for a common set of risk mitigating measures.89 Based on Member States' national risk assessments, a report on the 'EU coordinated risk assessment of the cybersecurity of 5G networks' was published in October 2019, identifying main threats, vulnerabilities and associated risks. In December 2019, the Council called on Member States, the Commission and the EU Agency for Cybersecurity (known as Enisa) to take all necessary steps to ensure security and integrity of telecommunications and 5G networks.90 In January 2020, the EU published a toolbox for cybersecurity of 5G networks.91 The 5G toolbox identifies a common set of measures that can mitigate the main cybersecurity risks of 5G networks and provides guidance on mitigation plans at national and EU level. A report on Member States' progress in implementing the EU toolbox on 5G cybersecurity was published in July 2020.92

The framework for FDI screening is one of the various tools of which the EU could avail itself to protect future 5G networks in an effective and coordinated manner where there are risks for national security and other strategic areas in the EU. Among the strategic measures identified in the EU toolbox is the strengthening of FDI monitoring across the 5G value chain to allow better detection of potential threats to security or public order in the EU Member States. However, according to the Member States' implementation report, it is still too early to assess whether the cybersecurity considerations identified in the toolbox are adequately covered by national FDI screening mechanisms.93


Footnotes

1 Lourdes Catrain is a partner and Eleni Theodoropoulou is an associate at Hogan Lovells International LLP.

2 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, OJ L 79l, 21.3.2019, pp. 1–14.

3 Mercator Institute for China Studies, Chinese FDI in Europe: 2019 Update, 8 April 2020.

4 For example, BAIC's US$3 billion acquisition of a 5 per cent stake in Daimler, making it the biggest shareholder in the company, see Reuters, 'China's BAIC raising Daimler stake to unseat Geely as top shareholder', 15 December 2019.

5 See Rhodium Group, CrossBorder Monitor, People's Republic of China – European Union Direct Investment, 4Q 2019 and Full Year 2019 Update, 29 January 2020.

6 China's strategic ambition of becoming a major participant in the technological sector is reflected in (1) China's 13th five-year plan for innovation-driven, green and inclusive growth, which sets out the country's 'strategic intentions and defines its major objectives, tasks and measures for economic and social development', and (2) China Manufacturing 2025, which aims to raise the competitiveness of its industry by increasing the levels of local content in Chinese manufacturing by 70 per cent by 2025, and to create 'national champions' in 10 high-tech manufacturing sectors.

7 Mercator Institute for China Studies, Chinese FDI in Europe: 2019 Update, 8 April 2020.

8 ibid.

9 ibid.

10 European Parliament Briefing, EU Framework for FDI Screening, January 2018, at p. 3; see also list of screening mechanisms notified by Member States, last updated on 1 July 2020, available at: http://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157946.pdf (last accessed on 9 July 2020).

11 Article 346(1)(b) of the Treaty on the Functioning of the European Union (TFEU).

12 Article 63 TFEU states: (1) within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited; and (2) within the framework of the provisions set out in this Chapter, all restrictions on payments between Member States and between Member States and third countries shall be prohibited.

13 Article 65(1)(b) TFEU states: '(1) The provisions of Article 63 shall be without prejudice to the right of Member States: [. . .] (2) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security.'

14 Article 65(3) TFEU.

15 Public security grounds for derogating from the freedom of movement of capital and payments has also been held to include the objective of ensuring a minimum supply of petroleum products at all times (Judgment of 4 June 2002, Commission v. France, C-483/99, ECLI:EU:C:2002:327, paragraph 47), and the safeguarding of energy supplier in the event of a crisis (Judgment of 4 June 2002, Commission v. Belgium, C-503/99, ECLI:EU:C:2002:328, Paragraph 45).

16 Judgment of 23 October 2007, Commission v. Germany, C-112/05, ECLI:EU:C:2007:623, paragraph 72.

17 Judgment of 24 March 2011, Commission v. .Spain, C-400/08, ECLI:EU:C:2011:172, paragraph 74.

18 ibid.

19 Case C-112/05, op.cit., paragraph 73; Judgment of 14 March 2000, Église de scientologie, C-54/99, ECLI:EU:C:2000:124, paragraph 18; Case C-483/99, op.cit., paragraph 45; Case C-503/99, op.cit., paragraph 45.

20 Case C-54/99, op.cit., paragraph 17; Case C-483/99, op.cit., paragraph 48; Case C-503/99, op.cit., paragraph 47; Judgment of 13 May 2003, Commission v. Spain, C-463/00, ECLI:EU:C:2003:272, paragraph 72.

21 ibid.

22 Case C-54/99, op.cit., paragraph 17; Case C-400/08, op.cit., paragraph 74.

23 ibid.

24 Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings, OJ L 24, 29.1.2004, pp. 1–22.

25 id., Article 1 and Article 21(2).

26 id., Article 21(3).

27 id., Article 21(4).

28 Opinion 2/15 of the Court of 16 May 2017, ECLI:EU:C:2017:376, paras. 80–84.

29 Article 2(1) of the Framework Regulation.

30 Article 1(3) of the Framework Regulation; see also Article 4(2) TEU and Article 346 TFEU.

31 Article 3(1) of the Framework Regulation.

32 Article 3(2) of the Framework Regulation.

33 ibid.

34 Article 3(3) of the Framework Regulation.

35 Article 3(5) of the Framework Regulation.

36 Article 3(4) of the Framework Regulation.

37 Article 3(6) of the Framework Regulation.

38 Article 3(7) and (8) of the Framework Regulation. The latest list of Member States' notified FDI screening mechanisms can be found at: http://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157946.pdf (last accessed on 9 July 2020).

39 Article 5(1) and (2) of the Framework Regulation.

40 Article 5(3) of the Framework Regulation.

41 Article 4(1) of the Framework Regulation.

42 Article 4(2) of the Framework Regulation.

43 The European Commission graph, 'Factsheet on the EU investment screening Regulation', available at http://trade.ec.europa.eu/doclib/docs/2019/february/tradoc_157683.pdf, provides an overview of the cooperation mechanism procedure.

44 Articles 6(10) and 11 of the Framework Regulation.

45 Article 6 of the Framework Regulation.

46 Article 7 of the Framework Regulation.

47 Article 6(1) of the Framework Regulation.

48 Article 6(4) of the Framework Regulation.

49 Article 9(1) and (2) of the Framework Regulation. In exceptional circumstances where it is not possible to obtain this information, the Member State concerned must explain its inability to provide this information to the Commission and the other Member States (see Article 9(5) of the Framework Regulation).

50 Article 10(1) of the Framework Regulation.

51 Article 6(6) of the Framework Regulation.

52 Article 6(2) and (5) of the Framework Regulation.

53 Article 6(7) of the Framework Regulation.

54 ibid.

55 In that case, other Member States and the Commission must make an effort to issue their comments or opinion expeditiously (see Article 6(8) of the Framework Regulation).

56 Article 7(1) and (2) of the Framework Regulation. Comments by other Member States and the Commission's opinion are mandatory if at least one third of the Member States consider that the FDI at issue is likely to affect their security or public order.

57 Article 7(5) of the Framework Regulation. Requested information must be duly justified, limited to information necessary to issue comments or an opinion and not unduly burdensome for the Member State where the FDI has been planned or completed.

58 Article 7(6) of the Framework Regulation. Comments cannot be provided after 15 months since the completion of the FDI in another Member State (see Article 7(8) of the Framework Regulation).

59 Article 7(8) of the Framework Regulation.

60 Articles 6(9) and 7(7) of the Framework Regulation.

61 Article 8(3) of the Framework Regulation.

62 Articles 8(3) and (4), and 16 of the Framework Regulation.

63 Article 8(1) and (2) of the Framework Regulation.

64 Annex to the Regulation. The full list of EU projects and programmes consists of: the European GNSS programmes (Galileo and EGNOS); Copernicus; Horizon 2020; the Trans-European Networks for Transport (TEN-T); the Trans-European Networks for Energy (TEN-E); the Trans-European Networks for Telecommunications; the European Defence Industrial Development Programme; and the Permanent structured cooperation (PESCO).

65 Commission Delegated Regulation (EU) 2020/1298 of 13 July 2020 amending the Annex to Regulation (EU) 2019/452 of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into the Union, OJ L 304, 18.9.2020, pp. 1-4.

66 Article 12 of the Framework Regulation.

67 Article 13 of the Framework Regulation.

68 See for example Chapter 8 in the EU–Canada Comprehensive Economic and Trade Agreement (CETA).

69 See for example the EU–Vietnam Investment Protection Agreement.

70 Article 2(1) TFEU.

71 Opinion 2/15 of the Court (Full Court) of 16 May 2017, ECLI:EU:C:2017:376, para. 80.

72 id., paras. 80 and 227.

73 ibid; Article 2(1) of the Framework Regulation.

74 Regulation (EU) No. 1219/2012 of 12 December 2012 of the European Parliament and of the Council of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries, OJ L 351, 20.12.2012, pp. 40–46.

75 See the introductory statement by Commissioner Phil Hogan at the informal meeting of EU trade ministers on 16 April 2020.

76 Merger Regulation, op.cit.

77 Article 6(1) of the Framework Regulation.

78 See Communication from the Commission, Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe's strategic assets, ahead of the application of Regulation (EU) 2019/452 (FDI Screening Regulation), C(2020) 1981 final, 25.3.2020.

79 Arrêté du 27 avril 2020 relatif aux investissements étrangers en France, JORF No. 0105 of 30 April 2020, text No. 22, Article 1; and announcement by the Ministry of Economic and Finance of 27 April 2020, 'COVID-19 – Update of the foreign direct investment screening procedure in France'.

80 Verordnung der Bundesregierung, Fünfzehnte Verordnung zur Änderung der Außenwirtschaftsverord-nung, adopted on 18 June 2020.

81 Government Decree 227/2020 (v.25) on the measures necessary for the economic protection of companies established in Hungary in order to prevent a human epidemic causing a mass illness endangering the safety of life and property and to remedy its consequences.

82 Decreto-Legge 8 aprile 2020, n. 23, 'Misure urgenti in materia di accesso al credito e di adempimenti fiscali per le imprese, di poteri speciali nei settori strategici, nonché interventi in materia di salute e lavoro, di proroga di termini amministrativi e processuali' (20G00043), Art. 15-16.

83 Real Decreto-ley 8/2020, de 17 de marzo, de medidas urgentes extraordinarias para hacer frente al impacto económico y social del COVID-19; and Real Decreto-ley 11/2020, de 31 de marzo, por el que se adoptan medidas urgentes complementarias en el ámbito social y económico para hacer frente al COVID-19.

84 See European Commission Consultation Note, 'A renewed trade policy for a stronger Europe', 16 June 2020.

85 ibid.

86 See Franco-German Manifesto for a European Industrial Policy Fit for the 21st Century, 19 February 2019.

87 See Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions: A New Industrial Strategy for Europe, COM(2020) 102 final, 10.3.2020.

88 European Parliament, 5G in the EU and Chinese Telecoms Suppliers, April 2019.

89 Commission Recommendation (EU) 2019/534 of 26 March 2019 – Cybersecurity of 5G networks C/2019/2335, OJ L 88, 29.3.2019, pp. 42–47; see also Commission Fact Sheet, Questions and Answers – Commission recommends common EU approach to the security of 5G networks, 26 March 2019.

90 Council conclusions on the significance of 5G to the European economy and the need to mitigate security risks linked to 5G, 14517/19, 3 December 2019, available at: https://www.consilium.europa.eu/media/41595/st14517-en19.pdf.

91 NIS Cooperation Group, Cybersecurity of 5G networks – EU Toolbox of risk mitigating measures, CG Publication, 01/2020, available at: https://ec.europa.eu/digital-single-market/en/news/cybersecurity-5g-
networks-eu-toolbox-risk-mitigating-measures.

92 Report on Member States' progress in implementing the EU Toolbox on 5G cybersecurity, NIS Cooperation Group, July 2020.

93 ibid., p. 24.