In recent years, Chinese investment abroad has reached unprecedented levels worldwide. Many Chinese cross-border transactions have been successfully completed. However, a few recent aborted transactions are indicators of a growing trend towards advance scrutiny of investments from abroad in a number of European Member States, especially where investments in high-technology sectors are concerned. This has affected Chinese investors specifically. For example, in 2016, the German government withdrew approval for the acquisition of Aixtron (semiconductor equipment manufacturer) by Chinese investors. In the U.S., the Committee on Foreign Investment in the United States (CFIUS) operates as a gating approval on grounds of national security. Less than a week ago, U.S. President Donald Trump blocked a Chinese-backed private equity firm from purchasing Lattice (semiconductors) in the U.S. on that basis.

European Commission (EC) proposal

On 13 September 2017, the EC published a proposal for a Regulation in which a framework for the screening of foreign direct investment into the European Union (EU) has been outlined (the Draft FDI Regulation). The Draft FDI Regulation will allow for EU-level review of investments into the EU that may affect projects or programs of EU interest on grounds of the Union’s security or public order, in order to preserve Europe’s essential interests. The Draft FDI Regulation pertains to investors from third counties (i.e. non-EU), notably (but not exclusively) those that are owned or controlled by foreign states, inclusive sovereign funds.

The Draft FDI Regulation provides a list of projects or programmes of EU strategic interest, which includes research (in particular, in key enabling technologies such as nanotechnology, photonics, biotechnology, advanced materials and advanced manufacturing systems), space, transport, energy and telecommunications.

Two concrete steps have already been scheduled in connection with the Draft FDI Regulation: (i) a coordination group will be set up that will focus on identifying the sectors and assets that would qualify as being of essential interest at national or EU-wide level; and (ii) by the end of 2018, an in-depth analysis of foreign direct investment flows into the EU will be conducted, with a focus on those strategic sectors (i.e. energy, space, transport) and assets (i.e. key technologies, critical infrastructure, sensitive data).

Importantly, Member States keep the last word on the topic of investment screening at national level and may adopt new review mechanisms or continue without (currently such mechanisms are in place in 12 Member States). In addition, the EC underscores the merit of its open market system and positions the Draft FDI Proposal as a means to intervene in exceptional cases.

The Draft FDI Proposal still requires the approval of the European Parliament and EU Member States.

Recent developments in the Netherlands

Zooming in on the Dutch domestic market, in the wake also of some attempted hostile takeovers in the recent past (involving Dutch “national treasures” KPN, PostNL, Unilever and AkzoNobel), a draft bill on advance screening of foreign investments in the telecoms infrastructure was put forward, and more recently, the Ministry of Economic Affairs announced that it is considering a wider number of specific sectors of industry where national security interests could be at stake, such as utilities, internet and data, water supply, shipping and transport, and chemicals. With a new cabinet currently being formed, it is uncertain when this approach will actually be formulated in specific proposals and how these would read in detail. It is obvious though that the Draft FDI EU Regulation has a similar point of departure as the Dutch draft bill.