When Integration by Stealth Meets Public Security: The EU Foreign Direct Investment Screening Regulation

Abstract

The EU FDI Screening Regulation (the Regulation) is an interesting application of the ‘integration by stealth’ theory to the sphere of investment screening. The Regulation leads to integration in the sense that, for the first time, the Commission is granted a role in the process of investment screening within the EU. However, Commission involvement comes at the cost of simultaneously strengthening the hands of the Member State screening authorities, leading to a suboptimal policy outcome whereby neither the Commission nor the Member States may have at their disposal the necessary tools to screen investments quickly and thoroughly, as is required to maintain an open investment environment. The shortcomings of the Regulation are likely to trigger calls for further reform. To develop this argument, this article (1) legally examines the main features of the Regulation and (2) explores the interplay of the Regulation with EU free movement rules. The article explains how the Regulation is likely to contribute to an uptake in national screening decisions, but not to a concomitant increase in enforcement opportunities for the Commission or the Court of Justice of the EU. This creates an enforcement gap, which may put pressure on the existing free movement framework and may risk encouraging Member States to develop a national as opposed to a common EU conception of public security and order.