In a significant judgement that has profound implications for Foreign Direct Investment (FDI) screening, the Court of Justice of the European Union (Court) passed a ruling undermining Hungary’s national foreign investment screening laws. Dated July 13, 2023, the decision specifically penalises the Hungarian government for blocking the proposed purchase of a Hungarian sand and gravel quarry.
According to a report provided by Latham & Watkins LLP, the Court’s verdict dramatically narrows down the scope of the EU FDI Screening Regulation. It further reinforces that national regulators must meet a high legal criterion to veto foreign investments.
Interestingly, the regulation at the core of this issue stipulates that Member States’ attempts to block foreign investments must be grounded in concrete verifiable risks to public order or security. The Court ruled that the Hungarian government failed to demonstrate the proposed acquisition’s genuine, sufficiently serious threat posing an immediate effect on fundamental interests of society.
This watershed decision is anticipated to make waves within the legal community, having potentially long-lasting impacts on dispute resolution concerning national FDI screening regulations within the EU block. It emphasizes the need for national regulators to scrutinize their justifications against a rigorous legal standard while dealing with foreign investments.
As the dust settles on this ground-breaking judgment, legal professionals globally will have their eyes firmly set on individual national responses and the European Union’s approach on the matter of FDI in the coming years.