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COVID-19: The Commission Provides Guidance to Member States on the Protection of EU’s Critical Assets and Technologies from Acquisitions and Investments by Non-EU Companies in the Context of the COVID-19 Outbreak

On March 25, 2020, the Commission issued guidelines concerning foreign direct investment (“FDI”) and free movement of capital from non-EU countries (the “Guidelines”). The Guidelines provide helpful guidance to EU Member States to effectively protect “Europe’s strategic assets” in light of the current COVID-19 crisis and its severe implications for the EU economy.

For many years, the Commission has been concerned by the lack of an adequate level of protection of EU’s strategic assets and technologies from potential hostile takeovers and investments by non-EU companies. To that end, it has established a mechanism of cooperation and coordination of national screening procedures for new FDI (“FDI Screening Regulation”), which will enter into force on October 11, 2020.

The rationale behind the FDI Screening Regulation is to keep the EU open to foreign investment in strategic sectors (e.g., energy, transport, and communications) while granting each Member State the ability to block foreign investment that may represent a risk to their security or public order. This regime applies on top of normal merger control procedures and provides an additional tool to EU Member States to scrutiny transactions and investments in key sectors.

With the adoption of the Guidelines, the Commission seeks to further raise the importance of protecting critical assets that are essential for European’s security, namely in healthcare-related industries, and to avoid a “sell-off of Europe’s business and industrial actors, including small and medium-sized enterprises” to non-EU companies. The Guidelines also refer to “potential risk to strategic industries.” This suggests that the Guidelines are intended to apply well beyond the health-care sector.

In the Guidelines, the Commission calls on Member States to make full use of their domestic FDI screening mechanisms. In particular, the Guidelines stress the importance of protecting the healthcare and related sectors in light of the COVID-19 outbreak when reviewing FDIs.

The Commission also points out that only 14 Member States have FDI screening mechanisms in place and urges the remaining 13 to set up effective screening mechanisms. In that respect, certain Member States such as Italy or Germany have already begun to tighten the existing FDI screening rules. To the extent that FDI screening mechanisms have not already been adopted, the Commission invites the Member States to use all the other available options to protect critical assets. For instance, the Commission suggests that Member States could impose conditions on strategic investments to ensure continuity in the supply of medical products and devices or require compulsory licenses on patented medicines.

In addition to FDI screening mechanisms, the Guidelines refer to the possibility for Member States to make use of golden shares powers (i.e., special rights) to block or limit investments by non-EU companies in strategic companies.

The Guidelines will result in an increased scrutiny by national governments on acquisitions and investments involving strategic companies and assets. It remains to be seen whether the Commission will adopt additional measures to protect the EU’s critical assets and technology in the context of the COVID-19 outbreak. In light of the above, both EU strategic companies and non-EU companies should carefully consider the impact of the Guidelines on FDI and take into due account the political sensitivity of Member States when planning acquisitions in certain key

Copyright 2020 K & L GatesNational Law Review, Volume X, Number 127


About this Author

Philip Torbøl, KL Gates, cartel investigations lawyer, merger control attorney

Philip Torbøl is a founding partner of the firm’s Brussels office. His practice focuses on EU competition law and government strategies.

Mr. Torbøl’s competition experience includes advising clients in matters related to the conduct of dominant companies, cartel investigations, merger control, and state aid.  In addition to defending clients before European institutions, Mr. Torbøl’s practice focuses on helping companies define their distribution strategies within the framework of EU competition law – not only preventively, but also to ensure...

Mélanie Bruneau Regulatory Compliance Attorney

Mélanie Bruneau is a partner in the firm’s Brussels office. She advises on a broad range of areas in European Law. Her practice focuses on advising clients in a variety of industrial sectors, including transport, manufacturing, chemicals and IT, on the legal aspects of their business activities, with a particular emphasis on regulatory compliance. 

Ms. Bruneau advises large multinationals on all aspects of EU competition law. She has significant experience in cartel investigations. Ms. Bruneau was also involved in the first cartel settlement and in the first hybrid cartel settlement before the European Commission. Ms. Bruneau regularly advises clients on global compliance programs regarding antitrust. She performs internal audits and compliance trainings. She frequently advises on the rules and procedures governing State aid and EU public procurement directives. In terms of compliance, Ms. Bruneau also advises on anti-corruption (including the OECD Convention, UK Bribery act and US FCPA) and on the anti-money laundering legislation. 

Ms. Bruneau has significant experience in advising on vertical agreements including exclusive distribution and supply as well as selective distribution and franchising. She frequently advises on resale price maintenance (RPM) and price discrimination issues on behalf of some of the largest companies in the world. Ms. Bruneau frequently advises on restrictions of active and passive sales, non compete provisions but also on termination of distribution agreements. She also advises on parallel import restrictions and more generally on free movement of goods. Ms. Bruneau regularly advises on commercial agency agreements (including on compensation and termination issues). 

She also advises on consumer protection legislation including unfair commercial practices as well as misleading and comparative advertising. She advises companies on distribution agreements including e-commerce cross-border issues and distribution networks in Europe. She has assisted various clients in the setting up of their commercial websites in compliance with the e-commerce, e-sign and data protection legislations. 

More generally, Ms. Bruneau has experience in EU legislation covering chemicals, including REACH - the EU Regulation on the Registration, Evaluation, Authorization and Restriction of Chemicals- and CLP - the EU Regulation on Classification, Labelling and Packaging, the WEEE and RoHS Directives and industrial emissions. In the context of REACH, Ms. Bruneau was involved in the drafting of consortium agreements for several trade associations and has assessed competition compliance of these agreements and drafted guidelines for collaboration with competitors. She is also involved in issues arising out of the practical implementation of REACH requirements including in data sharing and issues concerning IP rights. 


Giovanni Campi, KL Gates Law Firm, Financial Services Policy Director
Financial Services Policy Director

Giovanni Campi is financial services policy director in the Brussels office. Mr. Campi, a non-lawyer, has experience of assisting with advocacy strategy, policy analysis, and interest representation on various financial services dossiers, including Supervision, Recovery and Resolution, Capital Requirements, Financial Transaction Tax (FTT), and Benchmarks, among others.

Francesco Carloni, KL Gates, EU merger control attorney, dominant position abuse lawyer

Francesco Carloni is a partner in the firm’s Brussels and Milan offices where he is a member of the antitrust, competition & trade regulation practice group.

As a European and Italian competition law practitioner, Mr. Carloni’s experience primarily lies in the field of merger control, , restrictive practices and agreements, e-commerce, abuse of dominant position, EU sector inquiries, public consultations, and state aid. He offers compliance training and develops customized compliance programs adapted to clients' specific risk profiles. He...

Miguel A. Caramello Alvarez Counsel  Brussels Antitrust, Competition & Trade Regulation

Miguel Caramello Alvarez is a counsel at the firm’s Brussels office. He is a member of the antitrust, competition and trade regulation practice group.

He is a regulatory and competition lawyer with extensive experience in the transport sector, in particular on rail. Within his practice, he focuses on all aspects of EU and international rail transport law, competition law and state aid, public procurement, market access and public policy. He provides regulatory and competition representation before the European Commission and other national competition authorities, national rail...