On 5 April 2022, the European Commission (the “Commission“) published new guidance for EU Member States relating to foreign direct investment (“FDI“) from Russia and Belarus (the “Guidance“).

The Guidance aims to address the heightened risk that investments subject to the Russian or Belarussian government may pose to security or public order in the EU, especially with investments into critical assets in the EU. Whilst the EU has adopted sanctions against Russia and Belarus as a response to Russia’s military action against Ukraine, FDI screening goes beyond investments by persons or entities that are subject to sanctions.

At a high level, the Commission calls upon Member States to ensure effective FDI screening mechanisms are in place, to enhance cooperation between authorities involved in FDI screenings and those responsible for the enforcement of sanctions, and to ensure full compliance with anti-money laundering rules to prevent the misuse of the EU financial system.

More specifically, the Commission urges Member States to:

  • systematically use their FDI screening mechanisms to assess and prevent the threats related to Russian and Belarusian investments on grounds of security and public order;
  • in the context of implementing EU sanctions, ensure close cooperation between national authorities competent for sanctions and those competent for FDI screening, and also with national promotional banks and institutions where appropriate;
  • for the Member States that currently do not have one in place, urgently set up a FDI screening mechanism;
  • for the Member States with screening mechanisms that do not cover all relevant FDI transactions or do not allow screening before investments are made, strengthen its screening mechanism; and
  • for the Member States that are in the process of setting up a FDI mechanism, accelerate the process.