The Committee on Foreign Investment in the United States (CFIUS) is a multi-agency committee responsible for the control of Mergers and Acquisitions (M&A) between US and non-US companies, that is to say the purchase of the partial or total shareholding of a US company by a non-US investor. The CFIUS is part of the executive branch and is directly responsible to the President. The aim of the control exercised by the CFIUS on M&A that have cross-border elements is to protect national security. Indeed, the US often consider the acquisition of control of a US company by a non-US investor as a threat to their national security, especially when the foreign investor is a company of a non-allied country or a State-Owned Enterprise. The CFIUS control procedure is made of three phases: an informal stage, a review of 30 or 75 days, and a decision. The decision consists of either approval of or opposition to the transaction. In the great majority of the cases a M&A operation proposed by a non-US investor is prima facie not compatible with US national security. So, it is usual that the CFIUS subjects the approval of non-US investments to certain conditions.
The operations that fall within the competence of the CFIUS are generally considered as Foreign Direct Investment (FDI). Also in EU Law, the notion of FDI encompasses M&A operations. In effect, according to the CJEU case law which has interpreted the notion of FDI included in directive 88/361: ‘as regards shareholdings in new or existing undertakings» an FDI has «the objective of establishing or maintaining lasting economic links’ which ‘presupposes that the shares held by the shareholder enable him […] to participate effectively in the management of that company or in its control’ (C-446/04, pp. 181-182). The EU definition of FDI includes both inflow and outflow FDI. Inflow FDI are investments originating in third countries that are realized within the territory of the EU. Outflow FDI are investments originated in the EU that are realized within the territory of third countries. As noted before, the CFIUS is responsible only for inflow FDI. Therefore we will consider only the power of the EU to adopt measures on inflow FDI when asking whether the CFIUS model would work in the EU.
The EU Treaties provide two legal bases for the adoption of EU measures affecting inflow FDI: Articles 64(2) and 207(2) TFEU. On the one hand, Article 64(2) provides the Parliament and the Council with the power to adopt restrictive measures on inflow FDI. On the other, Article 207(2) provides the Parliament and the Council with the power to adopt unilateral measures of Common Commercial Policy (CCP) which can limit inflow FDI such as the trade defense measures do for trade in goods (e.g. antidumping regulations). In short, these are the legal basis that we must consider if there is to be a European equivalent of the CFIUS.
Before the Lisbon Treaty, the Commission (COM(2008)115, p. 3.1) and a part of the doctrine obviously considered Article 64(2) as the only legal basis for the institution of a committee on FDI in the EU. However, the Lisbon Treaty has introduced Article 207(2). In other words, now the EU Treaties seem to include two different legal bases for the adoption of the same kind of measure. Nevertheless, these provisions do not overlap. In fact, Article 64(2) can be used only to protect the ‘EU general interest […] in certain specific circumstances’ of emergency (C-205/06, pp. 28-35), while Article 207(2) can be used to protect the EU general interest in all other circumstances through the adoption of ordinary measures such as unilateral measures of CCP. Indeed, according to Article 21 of regulation 1225/09, the unilateral measures of CCP are adopted to defend the ‘EU interest’.
To conclude, it is possible for the EU to establish an equivalent of the CFIUS through a regulation adopted in accordance with Articles 64(2) and 207(2). This regulation should institute an advisory committee of the Commission responsible for the control of inflow FDI. The decision regarding the admission of FDI should be taken by the Commission according to the EU general interest, which is the criterion of the two legal bases considered here.
Fabrizio Di Benedetto
PhD Researcher, Università degli Studi di Milano