How to allocate the powers to collect information, surveil and restrict investment between the EU and the Member States? The question which competence the EU can base a legislative measure on is not only of importance for the legal validity of the measure, it also has far reaching ramifications for the underlying political relationship between the EU and its Member States.
according to the draft regulation
explicitly bases the regulation on art. 207 (2) TFEU as part of the
common commercial policy falling within the exclusive competence of
the EU. From this it follows that Member States are prohibited to
enact national legislation as long as they are not authorized by the
EU to do so (art. 2 (1) TFEU). Thus, it would fit to see the
regulation as an authorization of the MS to keep their national
screening mechanisms in place. The language of the explanatory
memorandum partly reflects this, when it describes the regulation as
enabling framework for Member States”
to provide legal certainty.
things are not that clear. The
explanatory memorandum also states the regulation merely “confirms”
that FDI may be screened by the Member States.
However, if FDI screening falls within the exclusive competence of
the EU, which Member State competence is there to be “confirmed”?
Rather, Member States would have to be explicitly empowered
Restriction of the
freedom of capital movement?
legal basis for the proposed regulation could be seen in art. 64 (3)
TFEU. The provision allows the Council, acting in accordance with a
special legislative procedure, to “adopt measures which constitute
a step backwards in Union law as regards the liberalisation of the
movement of capital to or from third countries.” Screening
mechanisms can constitute such measures since they usually create
certain administrative obstacles for the foreign investor to move
capital into the European Union.
At the same time, Member States could base their existing screening
mechanisms on the exemption clause of art. 65 (1) b TFEU which grants
Member States the right “to lay down procedures for the declaration
of capital movements for purposes of administrative or statistical
information, or to take measures which are justified on grounds of
public policy or public security.” The EU regulation and the
national legislations would then go hand in hand – without a need
for an authorization of the Member States by the EU. This result
would have two important consequences: Firstly, the matter would not
fall within the exclusive competence of the EU which means that
current national screening mechanisms would not be in violation of EU
law. Secondly, the legislative procedure is different. Whereas art.
207 (2) TFEU refers to the ordinary legislative procedure, art. 64
(3) TFEU prescribes a unanimous decision by the Council.
Member State control over the
new FDI screening framework would be significantly higher.
Art. 207 (2) TFEU or art. 64 (3) TFEU as lex specialis?
majority of commentators sees art. 207 (2) TFEU as the correct legal
basis for investment restricting legislative measures.1
This position is partly based on the requirement of “uniform
principles“ in paragraph 1 of art. 207 TFEU which – according
to this position –
can only be achieved through exclusive competence of the EU. Yet,
instead of finding a general preference of one legal basis over the
might be more convincing to look at each legislative measure on a
case by case basis. A
strong argument for art. 207 (2) TFEU with a view to the proposed
regulation is that the regulation itself hardly constitutes “a
step backwards in Union law as regards the
liberalisation of the movement of capital to or from third countries”
(art. 64 (3) TFEU) but rather a “framework”
(art. 207 (2) TFEU) that provides for the coordination between
different national screening mechanisms. An interesting scenario that
needs to be further addressed would be an EU regulation which creates
additional barriers such as a reciprocity requirement in the
liberalisation of FDI. In this situation the language of art. 64 (3)
TFEU might provide a strong lex
specialis argument and also the special
legislative procedure could suite the highly political nature of such
a regulation more. With regards to the current proposal, however,
art. 207 (2) TFEU appears to be the correct legal basis.
this in mind, the question arises whether current Member States
screening mechanisms are now – in the absence of an authorization –
in violation of EU law. The basic answer to this question might not
be surprising: More than one provision as well as the unwritten
exemptions based on the case law of the CJEU grant Member States the
right to take measures for the protection of national security or
public order. Whether this can be achieved by relying on art. 65 (1)
b TFEU “via” art. 207 (6) TFEU or art. 346 (1) b TFEU or
unwritten exemptions is a question that has to be further addressed
in detail. What could already be concluded now is that current Member
States screening mechanisms do not – against
the view of some commentators
– constitute a violation of EU law. Rather, the draft regulation
should be understood as ensuring that Member States screening
mechanisms are based only on
grounds of national security and not on other policy objectives (art.
3 (1) of the regulation). It is at this point the regulation proves
that it aims at a liberal FDI framework: The text of the regulation
obliges Member States not to take any FDI restricting measures which
are not based on national security while at the same time the
regulation itself does not go beyond security concerns – even if it
could do so based on art. 207 (2) TFEU or art. 64 (3) TFEU.
1Boysen/Oeter, in: Schulze/Zuleeg/Kadelbach (eds.), Europarecht, 3. Aufl. 2014, § 32 Rn. 34 f.; Beuttenmüller, Das deutsche Außenwirtschaftsgesetz vor dem Hintergrund der neuen Unionskompetenz für ausländische Direktinvestitionen, 28 Ritsumeikan Law Review 2011, S. 281 (286); Herrmann, Die Zukunft der mitgliedstaatlichen Investitionspolitik nach dem Vertrag von Lissabon, EuZW 2010, S. 207 (208 f.); Nowak, Europarecht nach Lissabon, 2011, S. 264