“If we want Europe to emerge from this crisis as strong as we entered it, then we must take precautionary measures now.”
The European Commission has warned that it will “screen” foreign direct investment (FDI) to avoid “harmful impact on the EU’s capacity” to provide healthcare.
The warning follows the revelation by German publication Die Welt that the American government tried to secure exclusive rights to a COVID-19 vaccine from the German pharmaceutical company CureVac. The firm has denied it was offered cash for vaccine rights. The German Minister for Health, however, said he was aware of the deal and that Germany was offering the firm financial incentives to remain in Germany..
The EC said: “The current economic shock is an increased potential risk to strategic industries, in particular but by no means limited to healthcare-related industries.
The resilience of these industries and their capacity to continue to respond to the needs of citizens should be at the forefront of European efforts.”
Europe has taken a broadly liberal approach to FDI into core industries, including technology; the move suggests the protectionist instincts of trading blocks and indeed nation states are broadly on the rise again. The extent to which this looks set to reverberate across the broader technology market remains unclear at this stage.
In its guidelines the EU has strongly warned that its businesses are facing “increased risk of attempts to acquire healthcare capacities (for example for the productions of medical or protective equipment) or related industries such as research establishments (for instance developing vaccines) via foreign direct investment.”
The EU says it is still open to foreign investment, but that its openness is not ‘unconditional’ and it is urging member states to avoid selling off EU assets as they struggle with the economic impact of the COVID-19 outbreak.
At the moment the responsibility for screening foreign direct investment lies with each member state, but the EU is warning that what happens to one member state has a corresponding impact on the wellbeing of all EU citizens.
EU Commissioner for Trade Phil Hogan stated that: “In the current circumstances, we need to temper this openness with appropriate controls. We need to know who invests and for what purpose. The EU and its Member States have the right legal tools for that.”
EU Foreign Direct Investments Screening
EU member states already have significant powers to examine foreign direct investment under security or public order grounds. If a member state believes that a foreign investment would be detrimental to public health then it can stop foreign firms from gaining full control of an EU company.
The EU’s foreign direct investments regulation was officially adopted in March of 2019, creating an EU system for evaluating and if required mitigating the risk of lost EU assets. Currently only 14 member states have national foreign direct investments screening programs in place and the EU is calling upon the remaining member states to establish their own screening mechanisms. For those that do have these systems in place the EU is advising that they make full use of the tools at their disposal.
President of the European Commission Ursula von der Leyen commented that: “If we want Europe to emerge from this crisis as strong as we entered it, then we must take precautionary measures now. As in any crisis, when our industrial and corporate assets can be under stress, we need to protect our security and economic sovereignty. We have the tools to deal with this situation under European and national law and I want to urge Member States to make full use of them. The EU is and will remain an open market for foreign direct investment. But this openness is not unconditional.”