By Thomas Verellen
Covid-19 represents a shock to global capital flows. As companies see the value of their assets tumble, they may become attractive targets to foreign investors – in particular, state-backed foreign investors less exposed to the economic fallout of the pandemic. To address what has been described as ‘opportunistic investment behaviour’ and – less euphemistically – ‘predatory buying’ practices, jurisdictions with well-established foreign investment screening mechanisms such as Australia and Canada have tightened scrutiny: the Australian government has reduced the value threshold for screening of all foreign investments to zero dollars, and the government of Canada has announced it will subject public health related investments and all investments by state-owned investors, regardless of their sector of activity, to enhanced scrutiny.
For the European Union, Covid-19 came at an interesting time. The EU recently introduced its own FDI screening framework – a mechanism which leaves the ultimate decision-making power over individual investments with Member State screening authorities, but which sets up a framework for cooperation between EU and Member State authorities. The framework will go live on 11 October 2020 and thus was not operational when the pandemic hit in the spring of 2020. Against this backdrop, this blog post explores how the EU has responded to the Covid-19 crisis and in particular to the aforementioned risk of predatory buying that flows from the pandemic’s impact on asset prices. Given the multi-level set up of the EU’s approach to FDI screening, an analysis of the EU response to this risk needs to take into account developments at both the EU and Member State levels. This blog post focusses on the EU side of the equation.Continue reading