EU to adopt stricter criteria for foreign investment—and some deals could be blocked

If your company is thinking of making an investment in a European Union-based business, you might want to take a second look. The EU is embracing a stricter stance as individual countries start to enforce more restrictive rules.

The new rules are typically applied when national security or public order are issue, according to a Morrison and Foerster client alert. In particular, the alert says, countries will start examining deals that involve more than a 10 percent stake in a company. And the member states will be the ones that make a final decision; the EU is expected to have input, but the. countries have the ultimate say in whether to permit an investment to go forward.

The EU-wide rules aren’t final yet; the European Commission expects to finish the rules by the end of the year. And there’s the usual interplay between different EU bodies before any rules become final. So the final shape is still unclear, but member states, once they make a determination as to whether to permit a merger or investment, will be expected to share with the other member states the factors that led to their determination.

Still unclear about it? We are, too, but things should be in better shape by the end of the year. Just be aware that investments in EU-based companies will be subjected to greater scrutiny in the near future. We’ll be following this story as it progresses.