Foreign Direct Investment Screening and National Security

An increasing number of States has adopted new or revised existing laws that establish<br/>foreign direct investment (FDI) screening mechanisms on grounds of national<br/>security. Comparing FDI screening in Germany and China as a case study, this article<br/>identifies three regulatory hurdles to investors related to such mechanisms, namely<br/>unpredictability, procedural uncertainty, and the lack of transparency in practice.<br/>Adopting the theory of induced reciprocity, this article argues that these regulatory<br/>hurdles could be reduced if symmetry constraint on national FDI screening schemes<br/>can be established between sovereign States in an international agreement. To achieve<br/>induced reciprocity between the European Union and China regarding FDI screening<br/>on grounds of national security, the EU-China Comprehensive Agreement on<br/>Investment could incorporate certain fundamental principles and regulatory objectives<br/>of EU Regulation 2019/452 Establishing a Framework for the Screening of Foreign<br/>Direct Investments into the Union as a starting point and a way forward.