This thesis examines the European paradigm shift (i.e., from unconditional openness to foreign direct investment to the statement “we are not naive free traders” pronounced by the former President of the European Commission Jean-Claude Juncker) toward the concerns raised by the Franco-German Manifesto and the subsequent interventions of European legislator. The research will focus on the new Foreign Direct Investments Screening Regulation and Cybersecurity Regulation. Furthermore, this thesis addresses a final proposal for a regulation to address state aid from non-European countries, as well as prospects for amending European competition law to meet Member States' desire to create "national and European champions".
Globalization, the development of new technologies and the recent COVID-19 pandemic crisis prompted the reopening of old issues in the European Union concerning the demand for protection and the interplay between industrial policy and European competition law. To preserve the internal market, sovereignty and the future economic independence of Europe, unified and strategic European thinking is required. In this vein, Germany and France formulated an industrial policy proposal to induce the European Union to amend its rules on the subject, now perceived as 'outdated' when confronted with increasingly fierce industrial competition from the Asian powers and the United States. This understanding, labelled as the Franco-German Manifesto, illustrates Member States' concerns on the need for new European defence tools for technologies, companies and the European market, along with the reform of the current regulatory framework to enable European companies to compete globally.
The analysis performed in this thesis thus investigates the rationale underpinning the new regulations and their approach to the critical issues highlighted by the Member States. The scrutiny of the mentioned regulations will concentrate on their effectiveness in countering risks related to (i) foreign acquisition of strategic assets, (ii) new technologies, and (iii) distortions of the internal market due to the lack of a global level playing field, will lead this thesis to argue in favour of further action by the legislator.
Table of Contents
I - Introduction
1.1 Background information and scope of research
1.2 Analysis structure and research methods
II - National concerns and the European Commission’s paradigm shift
2.1 The evolution of the European approach
2.2 The request for strategic thinking in a new European Industrial policy
2.3 National concerns and the European Union
III - Foreign direct investment screening in Europe and the European Commission’s paradigm shift
3.1 Toward a level playing field: Foreign direct investment screening in Europe
3.2 Cooperation mechanisms for European screening
3.3 Concluding remarks and de iure condendo perspectives
3.4 Analysis of the first year of screening
3.5 The 5G revolution and the need for a European cybersecurity framework
3.6 Concluding remarks
IV - The demands of competition law innovation and the search for national and European champions
4.1 The return of a debate that has never been entirely dormant
4.2 Industrial policies, competition law and their reconciliation perspectives
4.3 Reflections and final thoughts
4.4 The proposal for a regulation on foreign subsidies
4.4.1 The path toward a global level playing field within the internal market
4.4.2 The evaluation process of subsidies and their effects
4.4.3 Corrective measures and the European Commission’s investigation powers
4.4.4 Mergers and acquisitions review
V - Conclusion
Research Objectives & Key Themes
This thesis examines the European paradigm shift from a policy of unconditional openness toward foreign direct investment (FDI) to a more protective stance in response to the Franco-German Manifesto. The central research question assesses whether the recent EU regulatory framework effectively addresses the concerns raised by Member State promoters regarding competition fairness and strategic autonomy.
- Analysis of the Franco-German Manifesto and its impact on EU industrial policy.
- Evaluation of the EU Foreign Direct Investment Screening Regulation (EU 2019/452).
- Investigation into European cybersecurity frameworks and the protection of strategic technologies.
- Review of the interplay between competition law, state aid, and the creation of "European champions."
- Assessment of the proposed Regulation on foreign subsidies in the context of creating a global level playing field.
Excerpt from the Book
1.1 Background information and scope of research
This LL.M. thesis will analyse the current European framework for FDI screening following the Franco-German Manifesto (the "Manifesto"). More specifically, this thesis’s goal is twofold. On the one hand, it seeks to identify the main issues and queries put forward by Member States concerning the European approach to FDI competition. On the other, it scrutinizes how the EU-level measures have been implemented to address those issues and concerns.
Previous research has found that Member States requests have consistently overlapped in demanding protection. Protection becomes necessary to safeguard the strategic national interests and critical infrastructures. The presence of market players directed by state strategies to gain control over civil and military technologies requires screening to prevent any security risks. In the European integrated market, there are e.g. companies that provide energy and transmission and the neighbouring region of other countries completely rely on that company. Should that company be acquired by a foreign investor who decides to stop providing such services, the risks would spill over to entire populations. In this context, scholars coined the term “geopolitics of protection”, whereby Member States may equip themselves with a set of instruments aimed at effectively controlling foreign investments and domestic markets.
Paradoxically, even in a liberal economy, it may prove necessary to extend the power of the state, thus responding to the query for protection that subjects demanded from the sovereign – a need that is linked to "obedience", forming "the cornerstone of Hobbes' State".
Summary of Chapters
I - Introduction: This chapter introduces the core research objectives and questions, outlining the focus on the effectiveness of the current EU regulatory framework for FDI screening.
II - National concerns and the European Commission’s paradigm shift: This chapter explores the evolution of the EU's approach to FDI and the catalyst for the shift from openness to protection, driven by national concerns.
III - Foreign direct investment screening in Europe and the European Commission’s paradigm shift: This chapter provides a detailed analysis of Regulation (EU) 2019/452, the cooperation mechanisms for screening, and the integration of cybersecurity frameworks.
IV - The demands of competition law innovation and the search for national and European champions: This chapter addresses the debate on reconciling EU competition law with industrial policies, focusing on proposals to curb foreign subsidies.
V - Conclusion: This chapter summarizes the evaluation of the effectiveness of the implemented regulations and assesses the EU's progress in achieving its strategic economic objectives.
Keywords
competition law, cybersecurity, foreign direct investment screening, Franco-German manifesto, industrial policy, internal market, level playing field, merger control, reciprocity, state aid, European champions, foreign subsidies, protectionism, strategic assets, sovereignty.
Frequently Asked Questions
What is the core focus of this research?
This thesis investigates how the European Union has adapted its regulatory framework to address concerns related to foreign direct investment (FDI), unfair foreign subsidies, and the protection of strategic technologies, specifically following the Franco-German Manifesto.
What are the primary themes discussed in this work?
Key thematic areas include the tension between maintaining an open internal market and the need for new defensive tools, the "geopolitics of protection," the regulation of foreign state-controlled enterprises, and the debate surrounding the creation of European industrial champions.
What is the primary goal of the study?
The primary goal is to evaluate, through a legal and political-economic lens, whether current EU legislative instruments (such as the FDI Screening Regulation and the proposed Foreign Subsidies Regulation) are effective in mitigating risks to security and public order while maintaining global competitiveness.
Which research methodology is employed?
The research uses a qualitative analysis approach, examining legislative texts (Regulation 2019/452, 2019/881, and COM(2021) 223) and drawing on legal theory and political-economic frameworks to assess the effectiveness of these measures in meeting Member States' demands.
What does the main body cover?
The main sections cover the evolution of European FDI policy, an analysis of the FDI screening regulation and cooperation mechanisms, the cybersecurity framework, and the proposal for addressing foreign subsidies that distort competition.
How would you characterize the key terminology?
The work revolves around concepts of Open Strategic Autonomy, level playing field, and the reconciliation of competition law goals with the emergence of state-directed actors in the global economy.
How is the EU's cybersecurity framework linked to FDI control?
The study highlights how both FDI screening and cybersecurity are part of a broader strategy to protect critical digital infrastructures. Cybersecurity measures (such as the Cybersecurity Act and NIS Directive) are seen as essential for safeguarding the data and sensitive technologies that form the core of current investment security concerns.
What is the author's argument regarding the Regulation on foreign subsidies?
The author argues that while this proposed regulation is a necessary step to fill the gap in addressing distortions from foreign state aid, its effectiveness remains to be proven, as the legislation is still in a proposal stage and faces implementation challenges regarding enforcement and the balancing of various economic interests.
- Quote paper
- Cosimo Marcantuono (Author), 2022, Foreign Direct Investment and Competition Policy after the Franco-German Manifesto. Embedding Political Dissent in Law, Munich, GRIN Verlag, https://www.grin.com/document/1321669
