EU Businesses in Favor of Narrow Outbound Investment Monitoring, Commission Says

A majority of companies and business groups that answered survey questions from the European Commission this year said they were in favor of new EU measures to monitor outbound investments in a narrow set of advanced technologies. But they also cautioned the bloc against placing too heavy a compliance obligation on European companies, with some arguing the reporting should be voluntary.

The commission last week released both the responses and a summary of the responses it received on its January white paper on outbound investments, which proposed that the EU begin studying whether it should follow the U.S. in placing restrictions on outgoing investments in countries of concern (see 2401240078). The commission said it received more than 50 responses during the Jan. 24 through April 17 comment period, including 35 from businesses or business associations, five from academic institutions, three from public authorities and 10 from EU citizens or nongovernmental organizations.

“Most” of the industry respondents that answered said the EU should begin monitoring outbound investments in semiconductors, artificial intelligence, quantum technologies and biotechnologies, the commission said. The Biden administration in June issued a set of proposed investment prohibitions and notification requirements that would capture all those technologies except biotech (see 2406210034).

But some industry officials said they thought the EU should continue studying the technologies and then “refine the scope,” adding that it’s not yet “possible to ascertain whether this initial scope was sufficient, but it was a reasonable starting point.” They argued that “technological progress varies greatly across the four technologies and not every activity in these fields is sensitive.”

The commission said the industry officials it surveyed provided “cautious arguments” in favor of monitoring outbound investment, saying that monitoring could help “measure the existing level of risk” and give the EU a “broader understanding of the outbound investment environment.”

But they also said the EU shouldn’t “prejudge a decision on the necessity of outbound investment screening,” the commission said, and also were concerned about whether a new outbound investment reporting obligation for EU companies could cause “additional administrative burden.” Some said there are “too many corporate reporting obligations already,” and any monitoring “should therefore take place on a strictly voluntary basis.”

Other survey respondents argued against monitoring outbound investments, saying EU companies are “best equipped” to assess the risks to their investments, and new restrictions would only hurt European competitiveness. “They fear a potential chilling effect of the monitoring,” the commission said, and they suggested the EU instead gather data from businesses’ annual reports, national statistical offices, central banks and discussions with companies.

Most industry officials that answered the survey said the monitoring should cover asset transfers, joint ventures and venture capital transactions, and fewer were in favor of monitoring mergers, acquisitions and greenfield investments. But the commission also said the number of respondents who didn’t give a “clear answer” was “very high.”

Several respondents suggested a narrow scope of transactions that should be monitored because they said they feared the EU would impose “overly burdensome and unproductive” reporting obligations for transactions that don’t impact national security. Many of the respondents from the financial services sector proposed “extensive exceptions,” the commission said, including for investments by funds, especially private equity transactions and joint ventures where the controlling partner is from the EU.

The commission also said most respondents agreed that the monitoring should be based on risk criteria used by member states’ export control authorities when assessing dual use export license applications. States should take into account the potential use of any technologies that may be transferred in an investment, the end-user of that technology, and “country-specific risks,” they said, according to the commission.