**The EU is seeking improved screening of greenfield projects and a bigger say on which investments member states approve on national security grounds, as it expands its efforts to protect critical assets and know-how amid rising geopolitical tensions involving countries such as China. **
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“What comes out throughout [the reforms] is the Commission trying to give itself a … greater role in foreign investment screening,” says Christoph Barth, a partner in law firm Linklaters’s antitrust and foreign investment practice.
Among the proposed changes to the inbound screening regulation, which must be approved by European parliament and council to take effect, is obliging member states to give ‘utmost consideration’ to the Commission’s input when assessing a transaction’s national security risks and an explanation when their views diverge. “The question is whether the Commission now makes its opinions more directive in the sense of achieving a particular outcome for a particular case,” says Mr Barth, adding that this could “result in a potential clash between the Commission and member states”.
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“The push toward a FDI screening of greenfield investments is likely to build another hurdle for investments in the energy, battery or e-car sector … sectors where foreign competitors of EU companies have been gaining significant market share,” said Udo Herbert Olgemöller, partner at Allen & Overy. “Such screenings are time-consuming and create a certain level of legal uncertainty as their outcome may be affected by political considerations that are hardly predictable.”
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The Commission has also progressed plans to screen outbound investments into critical technologies in countries such as China, where it fears sensitive technologies and know-how could be used to undermine national security. It is seeking industry feedback via a three-month public consultation, which will be followed by a year of monitoring outbound deals and a final decision on an outbound mechanism by August 2025.
One of the early questions is whether the challenging task of obtaining the buy-in of each member state, which is necessary to introduce an outbound mechanism, can be achieved. On January 17, the European parliament passed a resolution calling for the expansion of legislative initiatives to tackle risks emanating from Chinese investment in the bloc. But neither industrial policies nor views on China are fully aligned across EU countries.
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