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The European Commission recently (23 November 2021) presented key findings related to defending EU interests when it comes to export controls and foreign investments in the EU. The Commission screened 400 foreign investments since the new Foreign Direct Investment (FDI) screening legislation entered into force. While only in place since a year, there has been an impressive take-up of this mechanism, meaning that EU interests will be better protected going forward. At the same time, over 30,000 requests for the export of goods with potential military use were reviewed by Member States under the EU Export Control regime, with 603 of these exports blocked. These are some of the highlights announced at the occasion of publication of the first reports on FDI screening and on export controls.

Executive Vice-President and Commissioner for Trade Valdis Dombrovskis recently said:

“The EU remains open to trade and foreign investment – this is a pillar of our job creation and economic growth. But our openness is not unconditional and it needs to be balanced by appropriate tools to safeguard our security and public order. Foreign investment screening and control of exports of dual use goods help keep the EU safe, while protecting human rights. They are key elements of our open, sustainable, and assertive trade policy. These two reports highlight how these tools can help the Commission and competent Member State authorities to act decisively when the situation demands, defending our interests while promoting our values.”

FDI Screening

This report on FDI screening is the first to be published since the new EU FDI screening regulation came into force a year ago. Under this regulation, Member States and the Commission work closely together to ensure that any foreign direct investment which can pose a security risk to EU Member States or EU critical assets is effectively screened.

In terms of key findings, the report highlights:

• The Commission screened 265 transactions notified by Member States under the report until end of June 2021 (now the teller is above 400);
• 80% of the transactions did not justify further investigation and were thus assessed by the Commission in just 15 days;
• Most notifications for screening from Member States concerned the manufacturing sector, ICT, wholesale and retail;
• The top five countries of origin of investors among notified FDI cases were companies located in: the United States, the United Kingdom, China, Canada and the United Arab Emirates;
• The Commission issued an opinion in less than 3% out of 265 screened cases.

The report confirms that the EU remains open for foreign investment, while ensuring the protection of EU security and public order. The FDI screening cooperation mechanism works effectively and does not create unnecessary delays for transactions. A growing number of Member States have adopted their own screening mechanism – 18 now have a mechanism in place.  The European Commission expects all Member States to adopt national screening mechanisms. This will further enhance the effectiveness of the screening system and ensure a comprehensive EU approach to tackle risks related to security or public order.

Export Controls

This is the last report on export controls before the entry into force of the upgraded Export Controls Regulation.

The report shows that dual-use exports represent about 2.3% of total EU exports. Out of a total number of 30.292 applications for and notifications of exports under licences, 603 transactions (exports) were denied (in 2019) representing about 0.02% of total exports. This would put the value of dual-use trade at €119 billion in 2019.

The new Regulation that entered into force on 9 September this year strengthens export controls further by:

• Introducing a novel ‘human security' dimension in order to capture emerging dual-use technologies – especially cyber-surveillance tools;
• Simplifying procedures and making the export control system more agile and able to evolve and adjust to circumstances;
• Developing an EU capacity-building and training programme for Member States' licensing and enforcement authorities;
• Coordinating and supporting robust enforcement of controls;
• Setting up dialogues with third countries so as to enhance global security and promoting a level playing field at global level.

Memorandum on Dual Use Controls 9 September 2021.

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