Much Ado About Nothing?: State-Owned Enterprises Under Foreign Investment Control in the European Union

Abstract

This paper explores the treatment of state-owned enterprises (SOEs) in foreign direct investment (FDI) control in the European Union (EU). Although the alleged security risks linked to SOE-led investments in the EU shaped the drafting and adoption of the EU FDI Screening Regulation, the key issues related to the definition of SOEs, determination of the foreign state’s control/influence over foreign investors, and specific security risks stemming from foreign SOE-led investments have remained largely undefined at the EU level. The author makes the following three findings. First, the review of the national FDI screening regimes of the Member States shows no signs of a common approach towards the “SOE factor” in FDI screening. Second, as demonstrated by the example of EU merger control enforcement, the determination of the existence of state control and/or influence over particular investors proved to be a challenging task, as the investigation needs to go beyond traditional corporate structures. Third, the example of China’s military-civilian fusion strategy demonstrates that the focus on the “SOE factor” will not be sufficient for the identification of security risks, and therefore, the state/private dichotomy of foreign investors should be abandoned in favor of more comprehensive asset-focused FDI screening.