The Question of Loyalty – The Economic Journal

The new EU Regulation establishing a regime for the analysis of foreign direct investment in the Union (IDE Regulation) was published on 21 March this year.

The FDI Regulation entered into force on 10 April 2019 and will apply from 11 April 2020 for operations carried out from 11 July 2019.

The Regulation establishes a mechanism for the analysis of FDI, based on security and public order considerations.

The "review mechanism" is a generally applicable instrument which refers in particular to terms and procedures for assessing, permitting and prohibiting FDI for reasons of security and public order.

Fundamentally, the "review mechanism" consists of cooperation procedures which oblige the Member State to make available to the Commission and the other Member States information on FDI in the territory of the former. "Information" encompasses the ownership structure and acquirer and target activities, the value of the investment, and the financing and sources of funding.

If the Commission or another Member State considers that the transaction affects security or public order, they may "give an opinion" or "comment" on that transaction. The Member State must "take due account of" the comments and the opinion and, in the case of FDI which may affect projects or programs of Union interest, it shall "take the utmost account" of the Commission's opinion and "provide an Commission if it does not follow the opinion ".

How should we look at this new regulation?

When we speak of FDI, under the Treaties, we are talking about free movement of capital and right of establishment. The Treaty prohibits all restrictions on the movement of capital between Member States and between Member States and third countries. Even though it is not a "portfolio investment", there is a lot of FDI that is not an "establishment", that is, it empowers the investor to participate effectively in the management of the company, with no possibility to control it.

However, each Member State, including within the framework of the Treaties, shall be responsible in its territory for public security and public order.

If this is a competence of the Member States, which is safeguarded in the FDI regulation itself, what is the meaning of this new mechanism of analysis, based on Article 207 of the Treaty, ie the rules on

Common commercial policy, exclusive competence of the Union? It will be only an anodyne mechanism of information for the Commission and

Member states?

Not! As usual, the Commission never gives up, and continues tirelessly to strengthen its powers.

Please note in recital 17 of the Regulation that the Member State must, in particular, take due account of the Commission's opinion "in accordance with its duty of sincere cooperation, as provided for in Article 4 (3) of the Treaty on European Union".

What does this mean?

Although the principle of loyal cooperation does not change the allocation of competences, it is applicable in all spheres of EU law

European Union. Its scope is not only to strengthen the effectiveness of the rules, but also to create positive obligations for the Member State to ensure that the rules are fully effective. The jurisprudence of the Courts of the

European Union has given it the meaning of binding the Member State not to deprive the rules of the Treaties of their effectiveness. The consequence is that the powers conferred on the Member States must be exercised to ensure compliance with the Treaties. This is the case where the activity of private individuals, and in particular the activity of FDI vessels, has economic consequences for any Member State.

The purpose of the new FDI regulation is thus to centralize FDI decisions within the Commission, making the national administration a mere extension of the Union's administration.

However, despite loyalty to Europe, Portugal has always been a citizen of the World. Its duty lies not only with Europe, but not with the Commission.

Being alone with Europe impoverishes Portugal and the Portuguese.

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