Skip to main content
Top

2024 | OriginalPaper | Chapter

Screening Authorities in the EU: Considerations on Governance, Powers, and Accountability

Authors : Jacques Bourgeois, Alessandra Moroni

Published in: Weaponising Investments

Publisher: Springer Nature Switzerland

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Investment screening regimes have proliferated over the past few years across the European Union, following the adoption of the EU Screening Regulation, as well as due to a geopolitical context that favoured the adoption of measures for protecting EU strategic assets. In the EU, investment screening regimes remain at the Member State level, hence creating a patchwork of rules and procedures, each administered and applied by national screening authorities. This article aims to investigate how screening authorities across the EU are designed and operate, and how their setup may impact the administration and implementation of screening regimes. It starts by identifying the key governance models to which Member States have resorted in designing competent screening authorities, and then examines how the adopted governance model may influence the substantive and procedural powers conferred upon screening authorities, their competence and efficiency in carrying out their tasks, the transparency of relevant processes, as well as the authorities’ accountability. It concludes by suggesting that a compromise to ensure efficient and accountable investment screening reviews may be to delegate certain functions and tasks to administrative (expert) bodies, while maintaining government involvement and oversight, especially at the decision-making stage.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Appendix
Available only for authorised users
Footnotes
1
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 079I 21.3.2019, p. 1 (as amended).
 
2
See, e.g., European Commission, Proposal for a regulation establishing a framework for screening of foreign direct investments into the European Union, COM(2017) 487 final, 13 September 2017; European 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 March 2022. For additional considerations on the rationale underpinning the EU Screening Regulation, see Schill (2020), pp. 57–75; Warchol (2020).
 
3
See Bourgeois (2020), Hindelang and Moberg (2020), Berin (2019) and Esplugues (2018).
 
4
See Kovacic and Hyman (2012), pp. 527–538.
 
5
Pursuant to Article 3(8) of the EU Screening Regulation, the Commission makes available a list of the screening regimes maintained by Member States. The list is regularly updated and is available at: https://​circabc.​europa.​eu/​ui/​group/​be8b568f-73f3-409c-b4a4-30acfcec5283/​library/​7e72cdb4-65d4-4eb1-910b-bed119c45d47/​details?​download=​true. The list published on 22 July 2019, shortly following the adoption of the EU Screening Regulation, reported a total of 14 Member States with screening regimes in place, including cross-sectorial and narrower, sector-specific regimes.
 
6
This is the case, for instance, of the longstanding, cross-sectorial regimes in place in France, Germany, and Italy, as well as the Dutch sector-specific regimes.
 
7
For instance, Italy comprehensively reformed its regimes between 2020 and 2022 to expand beyond the traditional defence, energy, transportation, telecom coverage and include new ‘sensitive’ sectors identified in Article 4 of the EU Screening Regulation; Germany adopted various amendments to its regimes between 2019 and 2021 clarifying certain procedural aspects of its screening mechanisms but also increasingly expanding the sectors subject to screening.
 
8
This is the total number of Member States with a screening regime reporting in the list last published by the Commission on 10 May 2022.
 
9
Among others, Belgium, Cyprus, Ireland, and Sweden are expected to adopt new regimes, and the Netherlands, which currently has only certain sector-specific rules, is expected to adopt a comprehensive cross-sectorial screening regime.
 
10
See Bryant (2018), p. 1; Shapiro (2001), p. 371.
 
11
See Sect. 2.2 below.
 
12
See Appendix.
 
13
A thorough analysis of independent agencies is provided by Tucker (2018). See also OECD, Distributed Public Governance, 22 November 2002.
 
14
See Kovacic and Hyman (2012), p. 529.
 
15
See Maggetti (2010), pp. 1–2.
 
16
See Gilardi (2005), pp. 84–101; Papadopoulos (2003).
 
17
The topic of what interests may be covered by national security and public order deserves an in-depth investigation that escapes the scope of this paper. For a discussion, see de Jong and Zwartkruis (2020) and Allen (2016).
 
18
See, e.g., Article L. 151-3 and R. 151-8 of the French Monetary and Financial Code (Code Monétaire et Financier); Articles 1-2 of the Italian Decree-Law No. 12/2012 (Decreto-Legge No. 12 del 15 marzo 2012 convertito con modificazioni dalla Legge No. 56 del 11 maggio 2012), as integrated by, e.g., Article 2 of Decree of the President of the Council of Ministers No. 179/2020 (Decreto del Presidente del Consiglio dei Ministri No. 179 del 18 dicembre 2020, convertito, con modificazioni, dalla Legge No. 56 del 11 maggio 2012); Article 3 of the Austrian Investment Control Act (Bundesgesetz über die Kontrolle von ausländischen Direktinvestitionen—Investitionskontrollgesetz).
 
19
Draft bill amending the Code of Business Law as regard the establishment of a mechanism for screening foreign direct investments affecting security interests and strategic sectors (Proposition de loi modifiant le Code de droit économique, en ce qui concerne la mise en place d’un mécanisme de filtrage des investissements directs étrangers affectant nos intérêts en matière de sécurité et nos secteurs stratégiques).
 
20
Article 19 of Law No. IX-1132 of 10 October 2002 (as amended) on the protection of objects of importance to ensuring national security (Lietuvos Respublikos nacionaliniam saugumui užtikrinti svarbių objektų apsaugos įstatymas); see also Resolution No. 1540 of 25 November 2009 (as amended) on the work procedure of the Commission for the protection of objects of importance to ensuring national security (Nutarimas dėl nacionaliniam saugumui užtikrinti svarbių objektų apsaugos koordinavimo komisijos darbo tvarkos aprašo patvirtinimo).
 
21
Article 7 of Emergency Ordinance No. 46 of 14 April 2022 on measures implementing Regulation (EU) 2019/452, and amending and supplementing the Competition Law No. 21/1996 (Ordonanță de urgență Nr. 46 Din 14 aprilie 2022 privind măsurile de punere în aplicare a Regulamentului (UE) 2019/452, precum și pentru modificarea și completarea Legii concurenței nr. 21/1996).
 
22
Section 5 of Act No. LX of 18 December 2020 (ATT Nru LX tal-2020, 18 ta’ Diċembru 2020).
 
23
Draft bill on investments, mergers and acquisitions security screening (Wet veiligheidstoets investeringen, fusies en overnames).
 
24
Section 32 Act No. 842 of 10 May 2021 on screening of certain foreign direct investments, etc. in Denmark (Lov om screening af visse udenlandske direkte investeringer m.v. i Danmark—investeringsscreeningsloven).
 
25
See Sect. 3 below.
 
26
Articles 7–8 of the EU Screening Regulation. For a commentary, see de Jong and Zwartkruis (2020), pp. 447–474; Kao (2019), pp. 173–184.
 
27
See Maggetti (2010), p. 5; Eberlein and Newman (2008), pp. 25–52; Coen and Thatcher (2008), pp. 49–71; Eberlein and Grande (2005), pp. 89–112; Kohler-Koch (2002).
 
28
Most Member State investment screening regimes require mandatory filing before completion of reviewable investments. In some Member States, screening authorities have also the power to call in for review investments that do not meet the definitions of notifiable investments but may still give rise to national security or public concerns (e.g., Section 14a of the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz—AWG)).
 
29
See, e.g., Section 14a(2) of the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz—AWG); Articles 1(4, 5), 1-bis(3), 2(4, 6), and 2-bis(2) of the Italian Decree-Law No. 12/2012 (Decreto-Legge No. 12 del 15 marzo 2012 convertito con modificazioni dalla Legge No. 56 del 11 maggio 2012).
 
30
See Sect. 2.1 above.
 
31
See Sect. 2.3 above.
 
32
See also Sect. 3.4 below on accountability.
 
33
See Sect. 2.2 above.
 
34
See Bergman and Fredén (2022).
 
35
Some countries have started publishing guidelines to clarify certain aspects of their regimes. For instance, France, recently published a guidance on certain procedural aspects of its investment screening rules (Lignes directrices relatives au controle des investissements etrangers en France). Looking outside of the EU, the UK is a country that has been actively issuing guidance on its new investment screening regimes, including guidance on the sectors requiring mandatory approval (Guidance on National Security and Investment Act: Details of the 17 types of notifiable acquisitions, as last updated on 20 July 2022) and a statement identifying the criteria and risk factors that would inform the authority decision to call in a transaction for review (Statement on the use of the call-in power, published on 2 November 2021).
 
36
According to the Court of Justice of the EU, when derogating from EU law on the basis of an exception, Member States have to provide for effective judicial review: judgment of 15 May 1986, Case C-222/84, Johnston v Chief Constable of the Royal Ulster Constabulary, ECLI:EU:C:1986:206, para. 18. On the right of effective judicial review, see Tridimas (2006), pp. 443–456.
 
37
See also Sect. 3.4 below.
 
38
For instance, in Germany violations of applicable investment screening rules are subject to fines or criminal liability up to 5 years or fines, and transactions carried out without required approval deemed null and void (see Sections 15, 18 and 19 of the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz—AWG)). Similarly, in Italy, violations are subject to fines of up to double the value of the transaction and no less than 1% of the cumulative annual turnover of the companies concerned, and transactions carried out without required approval are deemed null and void (see Articles 1 and 2 of the Italian Decree-Law No. 12/2012 (Decreto-Legge No. 12 del 15 marzo 2012 convertito con modificazioni dalla Legge No. 56 del 11 maggio 2012).
 
39
In 2021, out of the 1563 total filings and call-in actions, Member State authorities screened only about 29% of the transactions; the remaining 71% of cases were deemed ineligible or did not require screening given the evident lack of impact on national security and public order. See European Commission, Second Annual Report on the screening of foreign direct investments into the Union, COM(2022) 433 final, 1 September 2022, p. 11.
 
40
See Gilardi (2005), pp. 84–101; Papadopoulos (2003).
 
41
See Sect. 2 above.
 
42
See Maggetti (2010), p. 5.
 
43
Member State legislation generally provides for screening review timeline. However, relevant rules may allow for extensions and suspensions that may cause for unwarranted delays. In Germany, the authority, after gaining knowledge of a transaction, has 2 months to open an in-depth review which could stretch up to 4 months; the review could be extended up to additional 3 or 4 months depending on the complexity of the case and the sectors at stake and further delayed if the authorities requires additional information from the parties or negotiates commitments with the parties (see Section 14a of the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz—AWG)). In Italy, an investment screening reviews typically lasts 45 days following completion of the EU cooperation mechanisms; the review could be extended of up to about 30 days to gather information from the parties to the transaction and interested third parties (see Articles 1 and 2 of the Italian Decree-Law No. 12/2012 (Decreto-Legge No. 12 del 15 marzo 2012 convertito con modificazioni dalla Legge No. 56 del 11 maggio 2012)).
 
44
Maintaining clear and regulated government involvement would avoid de facto government interferences in the works of an alleged independent body, which would further rather than solve transparency and accountability concerns.
 
45
See Sect. 3.1 above.
 
46
The OECD Secretariat has for instance noted that “[the l]imited circumstantial information on the interpretation or application of [screening] criteria and a typically low number of cases that could serve as reference points may limit investors’ understanding of the application of rules to their case”, and that “[i]nformation on practice and past decisions only provides limited additional information, at least to outsiders, as most decisions and the reasons for these decisions are not publicly available” (see OECD Secretariat, Transparency, predictability and accountability for investment screening mechanisms, 27 May 2021, pp. 23–24).
 
47
See, e.g., Article 12(7) of Malta Act No. LX/2020 providing that screening decision “shall include a simple reasoned justification.”
 
48
See, e.g., Article 30 of the Act on screening of certain foreign direct investments, etc. in Denmark which provides that the Danish Business Authority may publish the results of a review. Various authorities have started to publish some summary reports with high level information of notifications received and reviews conducted: see, e.g., the report published in March 2022 by the French Ministry of the Economy about investment screening in France during 2021 (Le contrôle des investissements étrangers en France en 2021); and the report published in February 2022 by the Austrian Federal Ministry of Digitalization on trends between July 2020 and July 2021 (Erster Tätigkeitsbericht der Investitionskontrolle).
 
49
See European Commission, Second Annual Report on the screening of foreign direct investments into the Union, COM(2022) 433 final, 1 September 2022, p. 1, where the Commission itself suggests that, given the security interests at stake, “transparency regarding individual transactions is neither possible nor appropriate.”
 
50
Depending on applicable legal requirement, investors may be in fact required to either keep certain information confidential (e.g., information relating to state secrets) or, to the contrary, inform the public of relevant investment plans (e.g., reporting requirements for listed entities).
 
51
Article 5 EU Screening Regulation.
 
52
See Maggetti (2010).
 
53
See Bovens (2007) and Castiglione (2006).
 
54
See Strom et al. (2003).
 
55
See Vibert (2007).
 
56
See Sect. 2.2 above.
 
57
See Sect. 2.3 above.
 
58
See Maggetti (2010), p. 4; Gilardi (2005); Papadopoulos (2003).
 
59
See Sect. 3.3 above.
 
60
Member States may provide for different type of recourse, before courts, administrative tribunal, or internal within the hierarchy of the authority.
 
61
See, e.g., the recent case in Germany, GlobalWafers, 4 L 111/22, Administrative Court of Berlin, 27 January 2022, and appeal, GlovbalWafers, 1 S 10/22, Higher Administrative Court of Berlin-Brandenburg, 21 January 2022; see also certain recent cases in Italy, including Syngenta Crop Protection Ag, decision no. n. 4488/2022, T.A.R. Lazio, 13 April 2022, and Reti Telematiche Italiane S.p.A., decision no. 8742/2020, T.A.R. Lazio, 27 April 2020.
 
62
See Willems and Moroni (2020).
 
63
See Maggetti (2010) and Majone (2000).
 
64
See Maggetti (2010) and Hood (2009).
 
65
This Appendix is based on the list of screening mechanisms notified by Member States published by the Commission on 10 May 2022, and publicly available information about certain upcoming reforms as of 15 September 2022.
 
Literature
go back to reference Allen C (2016) Contemporary security studies. Oxford University Press, Oxford Allen C (2016) Contemporary security studies. Oxford University Press, Oxford
go back to reference Berin AJ (2019) CFIUS or Sisyphus: toward a European Framework for foreign direct investment review. George Wash Int Law Rev 51:701–727 Berin AJ (2019) CFIUS or Sisyphus: toward a European Framework for foreign direct investment review. George Wash Int Law Rev 51:701–727
go back to reference Bourgeois J (ed) (2020) EU Framework for foreign direct investment control. Wolters Kluwer, the Netherlands Bourgeois J (ed) (2020) EU Framework for foreign direct investment control. Wolters Kluwer, the Netherlands
go back to reference Bovens M (2007) Analysing and assessing accountability: a conceptual framework. Eur Law J 13(4):447–468CrossRef Bovens M (2007) Analysing and assessing accountability: a conceptual framework. Eur Law J 13(4):447–468CrossRef
go back to reference Coen D, Thatcher M (2008) Network governance and multi-level delegation: European networks of regulatory agencies. J Public Policy 28(1):49–71CrossRef Coen D, Thatcher M (2008) Network governance and multi-level delegation: European networks of regulatory agencies. J Public Policy 28(1):49–71CrossRef
go back to reference de Jong B, Zwartkruis W (2020) The EU regulation on screening of foreign direct investment: a game changer? Eur Bus Law Rev 31(3):447–474CrossRef de Jong B, Zwartkruis W (2020) The EU regulation on screening of foreign direct investment: a game changer? Eur Bus Law Rev 31(3):447–474CrossRef
go back to reference Eberlein B, Grande E (2005) Beyond delegation: transnational regulatory regimes and the EU regulatory state. J Eur Public Policy 12:89–112CrossRef Eberlein B, Grande E (2005) Beyond delegation: transnational regulatory regimes and the EU regulatory state. J Eur Public Policy 12:89–112CrossRef
go back to reference Eberlein B, Newman AL (2008) Escaping the international governance dilemma? Incorporated transgovernmental networks in the European Union. Governance 21:25–52CrossRef Eberlein B, Newman AL (2008) Escaping the international governance dilemma? Incorporated transgovernmental networks in the European Union. Governance 21:25–52CrossRef
go back to reference Esplugues MC (2018) A more targeted approach to foreign direct investment: the establishment of screening systems on national security groups. Braz J Int Law 15(2):440–466 Esplugues MC (2018) A more targeted approach to foreign direct investment: the establishment of screening systems on national security groups. Braz J Int Law 15(2):440–466
go back to reference Gilardi F (2005) The institutional foundations of regulatory capitalism: the diffusion of independent regulatory agencies in western Europe. Annals, AAPSS 598:84–101CrossRef Gilardi F (2005) The institutional foundations of regulatory capitalism: the diffusion of independent regulatory agencies in western Europe. Annals, AAPSS 598:84–101CrossRef
go back to reference Hindelang S, Moberg A (2020) The art of casting political dissent in law: the EU’s Framework for screening of foreign direct investment. Common Mark Law Rev 57(5):1427–1460CrossRef Hindelang S, Moberg A (2020) The art of casting political dissent in law: the EU’s Framework for screening of foreign direct investment. Common Mark Law Rev 57(5):1427–1460CrossRef
go back to reference Hood C (2009) Control over bureaucracy: cultural theory and institutional variety. J Public Policy 15:207–230CrossRef Hood C (2009) Control over bureaucracy: cultural theory and institutional variety. J Public Policy 15:207–230CrossRef
go back to reference Kao CC (2019) The EU’s FDI screening proposal: can it really work? Eur Rev 28(2):173–184CrossRef Kao CC (2019) The EU’s FDI screening proposal: can it really work? Eur Rev 28(2):173–184CrossRef
go back to reference Kovacic WE, Hyman DA (2012) Competition agency design: what’s on the Menu? Eur Competition J 8(3):527–538CrossRef Kovacic WE, Hyman DA (2012) Competition agency design: what’s on the Menu? Eur Competition J 8(3):527–538CrossRef
go back to reference Maggetti M (2010) Legitimacy and accountability of independent regulatory agencies: a critical review. Living Rev Democr 2:1–9 Maggetti M (2010) Legitimacy and accountability of independent regulatory agencies: a critical review. Living Rev Democr 2:1–9
go back to reference Majone G (2000) The credibility crisis of community regulation. J Common Mark Stud 38:273–302CrossRef Majone G (2000) The credibility crisis of community regulation. J Common Mark Stud 38:273–302CrossRef
go back to reference Papadopoulos Y (2003) Cooperative forms of governance: problems of democratic accountability in complex environments. Eur J Polit Res 43:473–501CrossRef Papadopoulos Y (2003) Cooperative forms of governance: problems of democratic accountability in complex environments. Eur J Polit Res 43:473–501CrossRef
go back to reference Schill S (2020) Foreign direct investment control in the European Union: rising protectionism or instrument for further investment liberalization? In: Bourgeois B (eds) EU Framework for foreign direct investment control. Wolters Kluwer, the Netherlands, pp 57–75 Schill S (2020) Foreign direct investment control in the European Union: rising protectionism or instrument for further investment liberalization? In: Bourgeois B (eds) EU Framework for foreign direct investment control. Wolters Kluwer, the Netherlands, pp 57–75
go back to reference Shapiro M (2001) Administrative law unbounded: reflections on government and governance. Indiana J Glob Leg Stud 8(2):369–378 Shapiro M (2001) Administrative law unbounded: reflections on government and governance. Indiana J Glob Leg Stud 8(2):369–378
go back to reference Strom K, Bergman T, Muller W (2003) Delegation and accountability in parliamentary democracies. Oxford University Press, OxfordCrossRef Strom K, Bergman T, Muller W (2003) Delegation and accountability in parliamentary democracies. Oxford University Press, OxfordCrossRef
go back to reference Tridimas T (2006) The general principles of EU law. Oxford University Press, OxfordCrossRef Tridimas T (2006) The general principles of EU law. Oxford University Press, OxfordCrossRef
go back to reference Tucker P (2018) Unelected power: the quest for legitimacy in central banking and the regulatory state. Princeton University Press, PrincetonCrossRef Tucker P (2018) Unelected power: the quest for legitimacy in central banking and the regulatory state. Princeton University Press, PrincetonCrossRef
go back to reference Vibert F (2007) The rise of the unelected: democracy and the new separation of power. Cambridge University Press, CambridgeCrossRef Vibert F (2007) The rise of the unelected: democracy and the new separation of power. Cambridge University Press, CambridgeCrossRef
go back to reference Warchol J (2020) The birth of the EU screening regulation. In: Hinderlang S, Moberg A (eds) A common European law on investment screening. YSEC yearbook of socio-economic constitutions, pp 53–75 Warchol J (2020) The birth of the EU screening regulation. In: Hinderlang S, Moberg A (eds) A common European law on investment screening. YSEC yearbook of socio-economic constitutions, pp 53–75
go back to reference Willems A, Moroni A (2020) Defeating economic sanctions in the EU: a strategic analysis of litigation options. Int Trade Law Regul 1:39–55 Willems A, Moroni A (2020) Defeating economic sanctions in the EU: a strategic analysis of litigation options. Int Trade Law Regul 1:39–55
Metadata
Title
Screening Authorities in the EU: Considerations on Governance, Powers, and Accountability
Authors
Jacques Bourgeois
Alessandra Moroni
Copyright Year
2024
DOI
https://doi.org/10.1007/17280_2023_18

Premium Partner