Muidža explains for Akta.ba what the new EU rules on foreign investments bring

In October 2020, the EU adopted new rules on foreign direct investment. The reason for the new regulation, according to the European Commission, is in fact concerns about investors from third countries, closely linked to their domestic governments, who take over European companies with key technologies for strategic reasons, and doubts that EU investors often do not enjoy the same investment rights in the investors”” origin country.
The Regulation of the European Parliament and of the Council establishing a framework for screening of foreign direct investments into the European Union aims to establish a framework for Member States, and in some cases for the EU Commission, for the verification of foreign direct investment in the European Union and the Member States. The Regulation provides legal certainty for Member States that have an established mechanism for verifying foreign direct investment or which wish to establish such a mechanism, given the Union””s exclusive competence in the field of the common commercial policy, which also includes foreign direct investment.
Differences between Member States in the verification of foreign direct investment
Branimir Muidža, President of the Foreign Investors Council in BiH, General Manager of the Kakanj Cement Factory and Director of the Heidelberg Cement Group for BiH and Croatia, explained the legal framework.
“So, it is a legal framework of the EU for the establishment of national mechanisms that allows the EU state to monitor investments in companies / sectors that are considered strategically important and to oppose them in certain conditions”, said Muidža for web portal Akta.ba.
Half of the EU member states already have verification mechanisms in place, while the remaining members do not have such mechanisms.
“This Regulation regulates existing differences between Member States in terms of foreign direct investment verification and allows Member States that do not have such mechanisms to establish it. The Regulation does not require Member States to establish or apply a foreign direct investment verification mechanism. The aim is to establish a framework for enabling Member States that already have or want to introduce a verification mechanism and ensure that any such verification mechanism meets certain basic requirements, such as the possibility of legal protection against decisions, non-discrimination between different third countries and transparency”, said Muidža.
Muidža believes that the application of this Regulation will not have a significant impact on investors who already insist on legal protection and transparency. However, the established rules could have an impact on multinational, but also domestic (BiH) companies that have ambitions to invest in the territory of the EU and in sectors or projects of interest to the European Union.
“On the one hand, the Regulation seeks to open the EU to other economies and ensure that everyone respects the same rules, and on the other hand, it is intended to protect key European assets from investments that would harm the legitimate interests of the Union or its Member States”, pointed out Muidža.
As the director of the Heidelberg Cement Group, Muidža believes that this regulation will not affect their business.
“Given the fact that the HeidelbergCement Group comes from one of the most regulated EU countries, and that we are already applying the business standard at the EU level, we believe that the introduction of new rules will not influence our new investment projects within the EU. The provisions of the EU Treaty on Freedom of Business, which is one of the four fundamental economic freedoms on the European Union market. This provision, prohibit restrictions on establishment of representative offices, subsidiaries or branches by citizens of a Member State who have acquired the right of establishment in the territory of another Member State”, said Muidža.
More rigorous checks for third country investors
This Regulation will have the greatest impact on investors coming from third countries to the EU, who are likely to be subject to more rigorous checks in accordance with national mechanisms.
“What may emerge as the biggest obstacle for investors is the bureaucracy, which, like any other bureaucracy, will be subject to lobbying, influence and expansion of its power. This may open the risk of extending control to investments from all third countries and potentially investments within the Union”. Muidža said.
A regulation is a framework legal act that determines to whom it will apply, in which cases and under what conditions. It thus allows member states to establish mechanisms to verify foreign investment coming from third countries, including BiH.
Verification procedure
The verification process includes the evaluation, investigation, approval, conditionality, prohibition or cancellation of foreign direct investment. The verification may be carried out by the EU State and EU Commission.
“The verification shall be carried out only for reasons of security or public order. In determining whether foreign direct investment may affect security or public order, Member States and the Commission may consider whether the foreign investor is controlled by a third country government, including through significant financial resources”, pointed out FIC President.
The verification will consider the possible effects of foreign investment, inter alia, on:
 critical infrastructure, including energy, transport, communications, space and financial infrastructure and data storage infrastructure and sensitive facilities;
 critical technologies, including artificial intelligence, robotics, semiconductors, dual-use technology, cybersecurity, and space or nuclear technology;
 security of supply of key resources; or
 access to sensitive information or the ability to control sensitive information.
In addition to the above, the Regulation also provide the verification procedure before the EU Commission and the relationship between the Member States and the EU Commission in the verification process. The imposition of specific obligations and rules on a foreign investor from a third country, is left to the EU member states to verify and regulate individual investments through national mechanisms.
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October 23, 2020
FIC supported 6th edition of the “Sarajevo Arbitration Days”
The sixth ‘Sarajevo Arbitration Days’ were held online on October 23, 2020. This year””s Sarajevo Arbitration Days were dedicated to arbitration practice during the COVID-19 pandemic and the opportunities that arise despite the challenges.
World-renowned experts such as Gary Born (Wilmer Hale), Muhammad Abdel Wahab (Zulficar & Partners Law Firm), Lucy Greenwood (Greenwood Arbitration) and many others, spoke about online arbitration, diversity among arbitrators, regionalization in international arbitration, environmental protection and other interesting topics.
The Foreign Investors Council of BiH financially supported this event, which is held every year in the organization of the Association ‘Arbitri’.