EU Issues Export Control, Investment Screening Proposals

The European Commission this week released a package of proposals that could lead to new restrictions for a host of transactions involving dual-use technologies, including by expanding the bloc’s screening of inbound investments, improving export control coordination among member states and studying the possibility of new outbound investment restrictions.

The proposals -- which also include an initiative for streamlined guardrails around technology research security risks -- build off the economic security strategy released by the EU in June (see 2306200052). That strategy called for a clearer EU-wide approach to protecting trade in sensitive technologies and comes as the U.S. focuses on bolstering its own export restrictions and investment screening tools.

Although the EU is an “export powerhouse,” it must also be “more clear-sighted about the risks we face at this time of profound geopolitical turmoil and fast technological shifts,” said Valdis Dombrovskis, the European Commission’s top trade official. He said the bloc needs to “make investments safer and control the export of sensitive products to avoid them getting into the wrong hands.”

One proposal on foreign direct investment will “ensure” all members states have a screening tool in place, the EU said, as opposed to the current patchwork of FDI restrictions that aren’t mandatory and are imposed by just over 20 countries (see 2310200038). The proposal also could put in place a “minimum sectoral scope” for FDI screening by member states, and require transactions to be screened if they involve EU investors “that are ultimately controlled by individuals or businesses from a non-EU country.”

The commission also is hoping to improve the way different member states approach export controls of dual-use goods, specifically naming advanced electronics, toxins and nuclear and missile technology. A new export control white paper proposes “uniform” EU controls on items that haven’t been adopted by multilateral export control regimes, such as the Wassenaar Arrangement, “due to the blockage by certain members,” the commission said, referencing but not naming Russia (see 2309270015).

Dombrovskis called multilateral controls “the best way to develop robust export controls globally,” but Moscow’s veto of Wassenaar proposals “creates loopholes that we cannot afford to have.”

The EC didn’t give a timeline for the export control and FDI proposals.

Another white paper on outbound investment proposes a “step-by-step analysis” of outbound investments from the EU “to understand potential risks linked to them.” That will include a three-month public consultation period and a one-year “monitoring and assessment” of all EU outbound investments at the national level. After that, the commission said it “will determine, together with Member States, if and which policy response is warranted.”

Dombrovskis said the outbound investment effort would focus on only a "narrow set of sensitive technologies," such as artificial intelligence, advanced semiconductors, quantum and biotech. He said the EU hopes to make progress "by early summer."

Another proposal would give “more clarity, guidance and support” to member states and universities to “mitigate the risks to research security,” while another explores the potential of dedicating more resources to EU research and development efforts surrounding dual-use technologies.