ZWeR 2025, 277
The EU’s Foreign Direct Investment Trilemma
In an era of heightened geopolitical tensions and evolving security challenges, the European Union (“EU”) faces a fundamental trilemma in its approach to foreign direct investment (FDI). How can the Union simultaneously maintain its attractiveness as a global investment destination, preserve the integrity of its single market, and safeguard its security and strategic autonomy? This article examines the EU's evolving FDI screening framework through the lens of this trilemma, tracing the journey from the Union’s foundational commitment to free markets to the emergence of “open strategic autonomy” as a guiding principle. By analyzing both the 2019 EU FDI Regulation and the 2024 Draft EU FDI Screening Regulation, this article explores how the EU is attempting to navigate these competing objectives through an incrementalist approach of cooperation and harmonization, while revealing persistent tensions that continue to shape the future of European investment regulation.
Contents
- I. Introduction
- II. The shifting political and legal bases of foreign direct investment
- 1. The political environment from the Treaty of Rome to today: “the world has changed”
- 1.1 The EU’s quasi-constitutional commitment to free markets
- 1.2 Towards a brave new world
- 1.3 The genesis of open strategic autonomy
- 2. FDI and the single market – an exception to a general principle of freedom
- 2.1 The free movement of capital, a sui generis freedom
- 2.2 The narrow path of public policy and security justifications
- 2.3 Restricting the scope of Article 65 TFEU for third-country investments
- 3. The shifting legal bases of foreign direct investment
- 3.1 The “competence conundrum”
- 3.2 The “commercialization” of FDI and the eschewing of conflicts of competence – the 2019 EU FDI Regulation
- 3.3 The “marketization” of FDI and the move to harmonization – the Draft EU FDI Screening Regulation
- II. The art of muddling through: the EU FDI Regulation and its proposed revision, an incrementalist approach through cooperation and harmonization
- 1. A wider net – the expanding scope of EU FDI screening
- 1.1 Geographic scope expansion – the increase in the number of national screening regimes
- 1.2 Sectoral scope – towards an expanding list of sensitive activities under the Draft EU FDI Screening Regulation
- 1.3 Expanding the remit of the FDI Regulation to new types of transactions
- 2. A deeper net – steps towards greater harmonization of FDI screening in the EU
- 2.1 From “may” to “shall” – setting a minimum floor for the substantive assessment of FDI in the EU
- 2.2 From “due” to “utmost” consideration – the cooperation mechanism
- 2.3 Procedural harmonization within the cooperation mechanism and beyond
- 3. Unsolved issues – the limitations of the Draft EU FDI Screening Regulation and challenges for the future
- III. Conclusion
- *
- *)Partner based in the Brussels office of Cleary Gottlieb Steen & Hamilton. He is a member of the Paris and Brussels bars. The views expressed in this article do not necessarily reflect those of Cleary Gottlieb or its clients.
- **
- **)Associate based in the Brussels office of Cleary Gottlieb Steen & Hamilton. He is a member of the Brussels bar. The views expressed in this article do not necessarily reflect those of Cleary Gottlieb or its clients.
Der Inhalt dieses Beitrags ist nicht frei verfügbar.
Für Abonnenten ist der Zugang zu Aufsätzen und Rechtsprechung frei.
Sollten Sie über kein Abonnement verfügen, können Sie den gewünschten Beitrag trotzdem kostenpflichtig erwerben:
Erwerben Sie den gewünschten Beitrag kostenpflichtig per Rechnung.
Erwerben Sie den gewünschten Beitrag kostenpflichtig mit PayPal.
