A. Introduction
The current Portuguese foreign direct investment (“FDI”) screening regime was enacted in 2014 under Decree-Law 138/2014 of 15 September (“Screening Decree-Law”). In 2020, an EU-wide FDI screening regime entered into force under Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (“Screening Regulation”).
Significant geopolitical events since then have influenced views on the relationship between foreign direct investment and economic security within the European block. These have led to a growing regulatory focus at the EU level on what are deemed key or strategic sectors. In line with this trend, in January 2024 the European Commission published a proposal for a new EU-wide FDI screening regulation, which would repeal the Screening Regulation and impose a minimum level of FDI screening across the block.
This Insight aims to identify certain key features of the current Portuguese screening framework and outline the changes proposed by the European Commission on the back of a changing EU attitude towards FDI and European economic security more broadly.
B. Current framework
The Screening Decree-Law established a framework aimed at safeguarding Portugal’s essential strategic assets to ensure national defence and the security of supply of services that are fundamental to the national interest, in the areas of energy, transport and communications.
Among other things, the Screening Decree-Law:
- deems strategic assets as the main infrastructures and assets that serve defence and national security interests or the supply of services in the areas of energy, transport and communications;
- empowers the Portuguese Council of Ministers to oppose transactions resulting in a non-EU/EEA person directly or indirectly gaining control over strategic assets, where this could, in a real and sufficiently serious way, jeopardise national defence and security or the security of supply of services that are fundamental to the national interest in the areas of energy, transport and communications;
- prescribes the criteria and factors for determining when the circumstances detailed in (ii)above are present;
- sets out the procedure for the Council of Ministers to reach a decision; and
- does not create a mechanism for cooperation with other Member States or EU institutions.
The European Screening Regulation acknowledged FDI’s contribution to Union growth and its support for EU investment objectives, projects, and programmes. However, it also recognised that, unlike its major trading partners, the EU had no comprehensive framework for the screening of FDI on the grounds of security or public order or for coordination and cooperation among Member States which have national screening frameworks.
The Screening Regulation does not require Member States to adopt or amend FDI screening regimes. Its purpose is to promote cooperation and exchange of information between Member States on FDI matters. It allows Member States to issue observations if they deem FDI to pose a risk to their national security or public order, and the Commission to issue opinions when it deems FDI to pose a risk to the national security or public order of more than one Member State. Any observations or opinions thus issued are not binding on the Portuguese Government. Among other things, the Screening Regulation also:
- provides a list of non-exhaustive factors that Member States and the Commission may consider in determining whether a FDI is likely to affect security or public order;
- sets out cooperation mechanisms among Member States and the Commission in relation to any FDI undergoing, or not undergoing, screening, as well as in relation to FDI likely to affect projects or programmes of “Union interest” on the grounds of security or public order. Projects or programmes of Union interest include those involving a substantial amount or a significant share of EU funding, or which are covered by EU legislation regarding critical infrastructure, critical technologies or critical inputs which are essential for security or public order.
- A list of projects or programmes of Union interest is set out in an annex to the Screening Regulation, which the Commission may update. At the time of publication of the Screening Regulation, eight projects or programmes were listed.
C. Commission proposal for a new EU screening regulation
As mentioned above, in January 2024, the Commission published a proposal for a new FDI screening regulation that would repeal the Screening Regulation and impose a minimum level of FDI screening across the EU (“Proposal”).
The proposed regulation would require Member States to have FDI screening regimes with harmonised minimum core elements, including in relation to the scope of investments to be screened, the key features of the screening procedure, and the interaction between national mechanisms and the Union cooperation mechanism. To illustrate this, under the proposed regulation Member States would be required to, among other things:
- consider, when determining whether an investment is likely to negatively affect security or public order, a number of factors set out in the Proposal, including the security, integrity and functioning of critical infrastructure, the availability of critical technologies, the continuity of supply of critical inputs, the protection of sensitive information, including personal data, and the freedom and pluralism of the media, as well as certain information related to the foreign investor;
- ensure that their screening mechanisms impose an authorisation requirement for FDI where the Union target is part of or participates in one of the (so far) twenty projects or programmes of Union interest listed in an annex to the Proposal, or is economically active in one of the many areas listed in a second annex to the Proposal (e.g., advanced semiconductor technologies, artificial intelligence, quantum technologies, biotechnologies, energy technologies, robotics systems, listed critical medicines, critical activities in the Union’s financial system, etc.);
- notify the Commission and other Member States, through the cooperation mechanism, of cases where a FDI meets those conditions;
- where comments are submitted by Member States and/or the Commission, set up a meeting with such Member States/Commission to discuss how best to address the risks identified; and
- where a Member State or the Commission indicates that the screening decision by the relevant Member State does not give utmost consideration to the comments submitted, organise a meeting to explain the obstacles encountered or the reasons for disagreement and with a view to finding solutions for any future situations.
D. Conclusions
The changing attitude towards FDI is a consequence of the evolving geopolitical landscape, which has generated increased concerns about the potential impact of foreign investments on the security and public order of the EU and its Member States. This is part of a broader trend in the regulation of key sectors in the EU, where other regulations and directives have been adopted, and recommendations issued, over recent years to protect such sectors (including cybersecurity (Directive 2022/2555), resilience of critical entities (Directive 2022/2557), anti-coercion (Regulation 2023/2675), and critical technology areas (Commission Recommendation 2023/2113), among others).
