The current global context of geopolitical tensions and the rapid paceof technological change means thatcountries and markets are strengthening their national economic security in theface of investments by third countries in strategic sectors.

In the EU, this has led the EuropeanCommission to approve, on 24 January 2024, new initiatives to strengthensecurity in the EU in various areas: exports, control of investments abroad,support for research and development of dual-use technologies, increase inresearch security, and foreigninvestment in the EU – the latter, with a proposal for a new regulation onforeign investment screening and cooperation mechanism within the EU:

Strengthened foreign investments control in the EU.

With the experience of Regulation (EU) 452/2019 of the European Parliament and of the Council of 19 March 2019 on foreign direct investment ("Regulation (EU) 452/2019") and in the face of possible threats from indirect foreign investments - in particular the pronouncement of the CJEU (case C-106/22 (Xella-Magyarország) a proposal for a new Regulation has been submitted, to replace the 20219 one, inorder to standardize and improve control mechanisms and fill in the gaps detected.

The key legal changes proposed are:

• Mandatory prior authorization for investments in certain activities ormatters listed in the Annex to the proposalof EU Regulation.
• Extension of thescope of controls to investments by companies from EU Member States in whichcompanies from third countries exercise significant influence.
• ‍Ex ante controls:Minimum-standard procedures with the possibility of allegations, to reviewwhether the intended operations -as well as those not notified or otifiedafter they have been carried out- affect or may affect security or public orderand, where appropriate, approve, prohibit or impose conditions.
• ‍Ex-post controls: For 15 months after the formalization of an investment, Member States may ex officio review foreign investments not subject to authorization.
• ‍Risk Assessment Criteria: Details objective and subjective criteria for determining whether aforeign investment may affect public safety or order.
• ‍Enhanced cooperation mechanism by detailing which operations are to benotified within harmonized deadlines and coordination in the event that anotherMember State submits comments, which will be analyzed in the light of theprinciple of comply or explain or the Commission issues an opinion.

 Dual-use products exports  

With the aim of improving the coordination of export controls of technologies and products suitable for use for civil and defense purposes — e.g. advanced electronics, toxins, nuclear or missile technology — a White Paper on export control with measures and in the short and medium term has been published without amending the current Community and multilateral rules.

To overcome the fragmentation of nationalpolicies, a policy coordination forum and a Recommendation are opened for summer 2024, in the coordination of the current national control lists, beforethe adoption of national controls. Likewise, the evaluation of Regulation (EU)2021/821 on export control, brokering, technical assistance, transit and transfer of dual-use items is brought forward to 2025.

Outwardinvestments from the EU in third countries.

With the publication of a White Paper on External Investment, a 12-month program for consultation, monitoring and evaluation is proposed, to identify risks in investments by EUcompanies in third countries targeting certain advanced technologies, in particular the leakage of technologies and know-how suitable for enhancing military and intelligence capabilities that may be turned against the EU itselfor international peace and security – the most important of which is to preventthe EU from being able to do so, which is not currently being monitored byMember States or the EU. A joint report is envisaged to enable the appropriatestrategy to be adopted.

Support for R&D in dual-use technologies:

The above notwithstanding, as the Commission aims to strengthen controls on transfers outside the EU, it aims to encourage R+D activities in critical and emerging dual-use technologies, to strengthen EU competitive position: it opens a public consultation until 30 April 2024 and publishes a White Paper to evaluate alternatives.

‍Strengthening security in R&D across the EU.  

In order to reduce risks to the safety ofresearch - e.g. transfer of critical technologies - and to promoteinternational cooperation in open and secure research and innovation, a proposal for a Council Recommendation is made to provide guidance to Member States in this respect.

How will this initiative affect Spain?

If this Regulation is eventually passed in the terms proposed by the Commission, Spain should proceed to adapt its current internal rules and administration controls on the matter, currently constituted by RD 571/2023 of July 4, 2023 on foreign investments, in particular, with regard to sectors and matters subject to control, the authorization procedure, its phases, and the ex officio review during the 15 months following the formalization of an investment and take into account in the procedure, comments/objections from other EU states and the opinio of the Commission.

_____________________________________________________________________________

© amber legal & business advisors This document is a compilationof legal information for general use and should not be considered legal advice. For specific information andadvice you can contact us at info@amberbas.com andwww.amberbas.com