European Commission Urges Member States to Protect Suppliers of Essential Products From Foreign Takeovers

In a March 25, 2020 communication, the European Commission (“EC”) issued guidance on the screening of foreign direct investments (“FDI”) in the context of the COVID-19 pandemic.

The communication identifies an increased risk of attempts by non-EU acquirers to obtain control over suppliers of essential products, in particular healthcare sector products. The EC calls on Member States to make use of pre-existing FDI regimes, and to introduce robust screening mechanisms where they do not already exist, to protect “critical health infrastructure, supply of critical inputs, and other critical sectors.” The communication builds on the increasing coordination among Member States that was already encouraged by the EU FDI Screening Regulation that comes into effect in October 2020.

This alert memorandum provides a brief summary of the FDI Screening Regulation, identifies the principal points of interest from the EC’s new communication, and discusses how governments have been considering the use of FDI rules to secure healthcare and other assets in the context of the COVID-19 pandemic.