*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"Towards an Indicative List of FDI Sustainability Characteristics", “The
Importance of Negotiating Good Contracts", "A New Challenge for Emerging
Markets: the Need to Develop an Outward FDI Policy”, "China Moves the G20
toward an International Investment Framework and Investment Facilitation", "The
Rise of Self-judging Essential Security Interest Clauses in IIAs", "Can
Host Countries have Legitimate Expectations?", "The Next Step in
Governance: The Need for Global Micro-regulatory Frameworks", and "The
Evolving International Investment Law and Policy Regime: Ways Forward" *are*
 available at and

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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 214  December 4, 2017
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Schroth ([log in to unmask])
*A European Committee on Foreign Investment?*
* <#m_8117547676793333229__edn1>
Fabrizio Di Benedetto**

On September 13, 2017, the European Commission (Commission) presented a
proposal for regulating the screening of FDI flows into the EU[1]
<#m_8117547676793333229__edn2> (based on Art. 207(2) of the Treaty on the
Functioning of the EU (TFEU)), as requested by France, Germany and Italy.
Although the proposal requires member states to notify the Commission of
planned or completed non-EU FDI (i.e., M&As and greenfield investment) that
are under scrutiny according to national legislations, it also provides the
Commission with the power to monitor FDI that could affect projects of EU
interest on grounds of security or public order. The Commission would only
have the power to issue non-binding opinions (that members should take into
account) on whether the FDI at issue represents a risk for EU security or
public order. Moreover, the proposal does not require those members that
still do not have a form of FDI control to adopt such a measure. It is
unclear, thus, how these states could notify the Commission of projects
that raise concerns without a screening mechanism.

EU Nordic members have already declared that they will oppose the
Commission’s proposal which, in their view, could harm free trade.
Similarly, Greece, Portugal and Spain also are dissatisfied with the
proposal. They might prefer an EU body for monitoring non-EU FDI that would
neither grant screening power to the Commission, nor affect existing
national mechanisms. Other member states could oppose any EU intervention
on FDI for opposite reasons. Indeed, some of them may wish to keep FDI
screening on security grounds under their exclusive control, given their
“sole responsibility” in protecting their national security, as recognized
by Art. 4(2) of the Treaty on EU (TEU), although this provision should be
interpreted restrictively.[2] <#m_8117547676793333229__edn3>

Alternatively, an act harmonizing the existing national measures of FDI
control could be proposed that would not include any consultative power for
the Commission, but that instead would require member states that still
lack an FDI screening system to adopt one. Moreover, such a EU act could
include clear guidance to states to adopt or amend their national measures
of FDI control or the protection of EU security and public order.

Beyond the mentioned options, the most ambitious idea would be the
establishment of a European Committee on Foreign Investment (ECFI) that
would replace existing national mechanisms.[3]
<#m_8117547676793333229__edn4> Indeed, the most recent case law of the EU
Court of Justice confirms that the EU’s exclusive competence on FDI (i.e.,
Art. 207(2) TFEU) covers not only FDI liberalization and protection, but
also restrictions adopted on public interest grounds.[4]
<#m_8117547676793333229__edn5> Hence, it could be argued that the EU has
gained the exclusive power to adopt measures to limit non-EU inward FDI.

An ECFI could be modeled on both the Committee on Foreign Investment in the
United States and the Canadian FDI control system under the Investment
Canada Act (ICA), to protect the EU’s economy, security and public order.
Indeed, the US notion of security is broad and covers sectors linked to
defense and critical technologies and resources. This concept of security,
together with the “net benefit test” provided by the ICA (according to
which the government must consider the effects of FDI on the economy, e.g.,
employment and productivity), could be points of reference.

Obviously, an ECFI could not exactly replicate these models. Indeed, it
should consider the responsibilities of member states in protecting their
essential interests regarding defense, as recognized in Art. 346(1)(b) of
the TFEU: members are free to adopt any measures necessary to protect their
military production, including restrictions on foreign ownership.[5]
<#m_8117547676793333229__edn6> Therefore, given that EU competence is
limited in this sector, an ECFI could be provided with the power to screen
non-EU FDI at least in non-military strategic sectors (e.g., energy,
telecommunications, transport, hi-tech industries, banking, critical
infrastructure). In particular, an ECFI should be able to block (or
condition) inward FDI that affects security and critical economic concerns
(without violating the EU’s international obligations).

EU-wide FDI screening would be more efficient than the present system based
on national measures: it would reduce a number of FDI limitations, as well
as the number of competent authorities.[6] <#m_8117547676793333229__edn7>
An ECFI would provide foreign investors a simple, transparent and
predictable framework of FDI control, while serving the European general

* <#m_8117547676793333229__ednref1> *The Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author(s) do not
reflect the opinions of CCSI or Columbia University or our partners and
supporters.* *Columbia FDI Perspectives** (ISSN 2158-3579) is a
peer-reviewed series.*
** Fabrizio Di Benedetto ([log in to unmask]), PhD in European
Union Law, is a Postdoc Fellow at the Università degli Studi di Milano. The
author is grateful to Bernard Hoekman, Petros Mavroidis, André Sapir,
Catharine Titi, and two anonymous reviewers for their helpful peer reviews.
[1] <#m_8117547676793333229__ednref2> COM(2017) 487.
[2] <#m_8117547676793333229__ednref3> Indeed, since the EU has gained
exclusive FDI competence, states’ competence on national security cannot be
broadly interpreted, so as to impinge on the EU’s exclusive competence.
That would constitute a violation of the principle of conferral (Art. 5
[3] <#m_8117547676793333229__ednref4> For similar conclusions, *see *R.
Vidal Puig, “The scope of the new exclusive competence of the European
Union with regard to ‘foreign direct investment,’” *Legal Issues of
Economics Integration*, vol. 40 (2013), p. 161.
[4] <#m_8117547676793333229__ednref5> ECLI:EU:C:2016:992, paras. 326-337,
and ECLI:EU:C:2017:376, paras. 98-109.
[5] <#m_8117547676793333229__ednref6> ECLI:EU:C:2014:2139, para. 37.
[6] <#m_8117547676793333229__ednref7> Only Bulgaria, Estonia, Luxembourg,
Hungary, and Malta do not have any limitation on FDI (
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Fabrizio Di Benedetto, ‘A European Committee on
Foreign Investment?,’ Columbia FDI Perspectives, No. 214, December 4, 2017.
Reprinted with permission from the Columbia Center on Sustainable
Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*. *

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Schroth, [log in to unmask]

   - No. 213, Perrine Toledano, Olle Östensson and Kaitlin Y. Cordes,
   “Parsing the myth and reality of employment creation through resource
   investments,” November 20, 2017.
   - No. 212, Stephen Kobrin, “The rise of nationalism, FDI and the
   multinational enterprise,” November 6, 2017.
   - No. 211, Mélida Hodgson, “NAFTA 2.0:  a way forward for the investment
   chapter,” October 23, 2017.

*All previous FDI Perspectives are available at *
*. *

*Other relevant CCSI news and announcements*

   - *On December 11*, Senator Sheldon Whitehouse of Rhode Island will
   share his eye-opening take on what corporate influence looks like today
   from the Senate floor, as he discusses his new book, *Captured: The
   Corporate Infiltration of American Democracy
   w*ith introduction by Professor Jeffrey Sachs. *Please see our website
   for more information.*
   - CCSI is accepting applications for our three upcoming executive
   trainings: on Extractive Industries and Sustainable Development
   (June 4-15, 2018), Sustainable Investments in Agriculture
   (June 19-29, 2018), and Investment Treaties and Arbitration for
   Government Officials
   (July 30-August 9, 2018). Each program is designed to equip participants
   with the necessary skills, analytical tools, and frameworks to address
   relevant challenges and opportunities, and to encourage a rich dialogue
   about best practices from around the globe. *More information about each
   training, including brochures and applications, is available at the links
   - CCSI is announcing a *Call for Papers* for the edition of the *Yearbook
   on International Investment Law and Policy
   2017. Submissions will be accepted on a rolling basis until February 1,
   2018. *Please see details here

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2017 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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