Study On The Regulation Establishing A Framework For Screening Of Foreign Direct Investments Into The European Union

In September 13 rd 2017,the European Commission publicized the Proposal for a regulation establishing a framework for screening of foreign direct investments into the European Union(hereinafter referred to as “the draft”),signaling the beginning of the reform for EU foreign investment national security review regime.Although the Treaty of Lisbon gave EU exclusive competence with regards to foreign direct investment(FDI)being a part of common commercial policy,EU never established the regime for foreign investment national security review in the past twenty years out of the compliance with the principle of free movement of capital.In June 2017,with the effort of France,Germany and Italy,a debate of unified FDI national security review regime was lit up inside EU.Different from the attitude regarding Sovereign Wealth Fund(SWF)ten years ago,the European Commission proposed a draft for framework regulation,bringing the EU-level FDI national security review into legislative procedure.The first part of this study analyzes the background of this draft.From the inside,despite the fact that EU lacks a unified system for FDI review,concerns of risks posed by FDI to national security can be seen in some EU regulations.Moreover,thirteen member states maintain their own FDI national security review legislation,the contents of which differentiate in many ways.From the outside,many FDI crowed into sensitive sectors of EU every year,posing great risks to the Union.In addition,the investment climate in many origin countries is not as open as EU,which the EU perceives as non-reciprocal.Except for EU,most of the primary capital importing countries maintained their FDI review regime,revealing the necessity for EU to establish similar system.The second part of this study analyzes the main content of the draft from the perspective of related definitions,reviewing institution,factors concerned,anti-circumvention,cooperation mechanism and informing obligation,from which it can be seen that the emphasis of the draft is the coordination between member states and between member state and the Union.The third part of this study extracts four features of the draft: enabling feature,simplifying feature coordination feature and the vagueness of the definition of national security.Enabling feature means that the draft provides for basic principles for member states' FDI review legislations,without detailed provisions,and the coordination feature offers the opportunity for member states and the Union to share information,strengthening the power to protect security interests from the risks posed by FDI.The vagueness of the definition of national security makes the draft more flexible,but the transparency of the draft declines.The fourth part of this study analyzes the influence of the draft.First of all,the draft may cause conflicts and contradiction inside the EU law.The first one is contradiction between the principle of free movement of capital and the security interests of member states.Virtually all FDI review legislations are faced with this contradiction;however,as free movement of capital is the basic principle embedded in the Treaty of the Functioning of the European Union,this contradiction seems sharper here.The second one is the overlapping competence of member states and the Union regarding FDI national security review,which is also constitutional.However,from another perspective,the draft may also deepen the unity of foreign investment policy in the EU.At the same time,the draft would also bring impact on international investment and related policy.The turning attitude of EU,which is a consistent supporter of free trade and investment,will undoubtedly bring international investment policy on a more conservative track.Even worse,the conservative trend will depress the FDI flow globally.Recently,EU is negotiation a lot of BITs and FTAs,and the concerns of national security regarding FDI will be brought into these negotiations,making them more difficult and complex.Lastly,this study gives several possible solutions facing the new EU FDI review regime from the perspective of Chinese government and Chinese enterprises respectively.