(Bloomberg) -- The European Union established rules to prevent foreign investments from threatening national security in a sign of growing political unease over Chinese acquisitions.
The European Parliament approved legislation to screen foreign direct investments, wrapping up 17 months of deliberations over an initiative that for years had been deemed too controversial to take as a result of opposition in the bloc’s national capitals.
The EU assembly’s vote on Thursday in Strasbourg, France, removes the last political hurdle for the new law. The bloc’s national governments have already signaled support, making their final endorsement due on March 5 a formality.
Concerns are mounting across the western world about national-security risks tied to foreign investment, particularly by China.
In 2017, U.S. President Donald Trump blocked a Chinese-backed investor from buying Lattice Semiconductor Corp. as a result of national-security worries and Germany moved to shield cutting-edge technologies after a bid by China’s Midea Group Co. for robot maker Kuka AG prompted an outcry. Last year, the German government stopped a Chinese bid for the first time by vetoing the potential purchase of machine-tool manufacturer Leifeld Metal Spinning AG.
The new EU legislation sets up a bloc-wide “cooperation mechanism” for foreign direct investments through a combination of data collection, information exchange and peer pressure.
The goal is to limit foreign threats to:
“critical infrastructure” including in the energy, transport, communications, data, space and financial industries “critical technologies” such as semiconductors, robotics and artificial intelligence
The law creates an alert mechanism for future foreign investments in Europe and a centralized database of ones that occur after the system enters into force without taking the ultimate power of approving deals away from individual member nations.
EU governments will be allowed to request information and offer comments on a foreign investment in a particular member country. In addition, the European Commission, the bloc’s executive arm in Brussels, will have the right to ask for information and issue an opinion.
The nation in which the investment is planned would have to give “due consideration” to any comments and opinion as well as take “utmost account” of any commission view regarding a foreign investment deemed to affect a European project or program.
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