Interplay with EU Merger Regulation In certain situations, the interplay between the FDI screening in the EU and the EU Merger Regulation (EUMR) may give rise to uncertainty. While the Commission has exclusive jurisdiction over transactions that are notifiable under the EUMR, Article 21(4) of the EUMR recognizes that Member States may take appropriate measures to protect interests other than competition, provided the measures are compatible with “general principles and other provisions” of EU law (so-called “legitimate interests”). However, Member State FDI interventions may go beyond the “legitimate interests” capable of recognition under the EUMR. Certain national regimes are notably broad. For example, in Hungary, the law may apply to wholesale and retail, while in France the regime applies to agriculture, fishing and forestry. In addition, there are EU Member States such as Poland in which the acquisition of equity interests in a publicly listed company beyond a given threshold automatically qualifies for review, irrespective of the sector in which it is active. These issues were recently brought to the forefront when the Commission found that Hungary’s decision to invoke its FDI screening rules to veto the acquisition of the Hungarian subsidiaries of Aegon by Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG) contravened Article 21 of the EUMR. The transaction, which was notifiable under the EUMR, involved the acquisition of the Hungarian, Polish, Romanian and Turkish entities of Aegon,
a Dutch multinational insurance group, by VIG, an Austria-headquartered international insurance group. The transaction was cleared unconditionally by the Commission under merger control rules in Phase I, but the Hungarian government blocked the acquisition of the Hungarian entities a few months prior to the adoption of the clearance decision, claiming it was harmful to Hungary’s legitimate interests. Following the opening of an investigation in October 2021, the Commission concluded that there were reasonable doubts as to how a transaction between two EU businesses could “pose a threat to a fundamental interest of society.” Accordingly, Hungary’s failure to communicate the veto to the Commission prior to its implementation was found to be in breach of Article 21 of the EUMR. This effectively confirmed the formal position that Member States are required to notify measures intended to protect legitimate interests that are not explicitly recognized by the EUMR. The Commission’s decision carried with it the threat of infringement proceedings if Hungary failed to withdraw its veto. Hungary withdrew its veto, but it was ultimately able to negotiate the acquisition of a 45% interest in the Hungarian business of VIG by the Hungarian state holding company Corvinus. This example calls into question the legality of Member State FDI rules that protect interests outside of the recognized categories of “legitimate interests.” It also suggests that further interventions by the Commission may be required to resolve future conflicts. Investors may face potentially significant delays in completing their transactions if similar EU-Member State stand- offs arise.
One of the key features of the Regulation is its introduction of a coordination mechanism. This has been achieved through two channels: (i) the facilitation of information sharing between Member States, including information on active cases; and (ii) a cooperation mechanism for the Commission and third-party Member States to provide their views and opinions to the Member State(s) screening the investment.
28
FDI and National Security Review
Powered by FlippingBook