International Trade 2024 Comparisons

The European Union (EU) and its 27 member states are members of the World Trade Organization (WTO).

The EU is also a party to several multilateral and plurilateral agreements, including:

• the Government Procurement Agreement;
• the Trade Facilitation Agreement;
• the Civil Aircraft Agreement;
• the Information Technology Agreement; and
• the Pharma Agreement.

The EU is party to several bilateral and multilateral trade and partnership agreements with third countries. The European Commission (the “Commission”) website provides an overview of the current bilateral and multilateral trade agreements concluded by the EU, as well as those which are currently being negotiated.

The EU has adopted special trade regimes under which it grants trade preferences to developing and least-developed countries. Examples include:

• the Generalised Scheme of Preferences;
• the African Caribbean and Pacific Partnership Agreement; and
• the Overseas Countries and Territories Decision.

The EU is currently negotiating free trade and partnership agreements with, inter alia, Australia, India, Indonesia, Philippines and Thailand. It is also putting forward new agreements with countries in Latin America and the Caribbean.

In March 2023, the EU and Thailand formally relaunched trade negotiations for an ambitious, modern and balanced free trade agreement. The relaunch follows the signature of the partnership and co-operation agreement in December 2022. The EU will commission a sustainability impact assessment and commence negotiations.

The EU and New Zealand signed a free trade agreement in July 2023. Negotiations started in June 2018 and were finalised in June 2022, after 12 rounds of negotiation. The agreement will enter into force after the ratification process in the EU and New Zealand is completed.

The EU and Kenya concluded negotiations for an economic partnership agreement (EPA) in June 2023. After legal scrubbing, translation, signing and ratification of both parties, the EPA will enter into force. The agreement will be open to other members of the East African Community in the future.

The EU is in the process of ratifying the trade agreement with New Zealand to ensure its entry into force.

Continued negotiating efforts are also planned for the EU’s agreements with Australia, India, Indonesia, Philippines and Thailand.

The EU’s Generalised System of Preferences (GSP) is set to expire at the end of 2023. In July 2023, the Commission proposed to extend the application of the GSP Regulation until 2027. In the meantime, the EU legislature continues to negotiate the proposal for an updated GSP Regulation, which aims to adapt the scheme to the needs and challenges of GSP countries, and to strengthen the scheme’s social, environmental and climate aspects.

Pursuant to Article 3 of the Treaty on the Functioning of the European Union (TFEU), the EU has exclusive competence with regard to its customs union and its common commercial policy.

Article 31 TFEU establishes that common customs tariff duties shall be fixed by the Council upon a proposal from the Commission. Furthermore, Article 33 TFEU foresees that the European Parliament and the Council take measures to strengthen customs co-operation between member states, and between the latter and the Commission.

The Commission’s Directorate-General for Tax and Customs Union (DG TAXUD) represents the EU in the World Customs Organization (WCO) and is responsible for the negotiation and implementation of customs-specific agreements or other agreements with a customs component. This includes:

• rules of origin, customs co-operation and trade facilitation chapters in free trade or partnership agreements; and
• customs enforcement provisions in relation to intellectual property rights.

In accordance with Articles 3 and 5 of the Union Customs Code (UCC), national customs authorities:

• implement the EU customs rules;
• impose and collect import and export duties;
• oversee goods in transit and under special customs procedures; and
• pursue customs and export violations.

National customs authorities are also responsible for issuing binding tariff information (BTI) and binding origin information (BOI) decisions upon a written request by an economic operator. The former determine the correct tariff classification of the goods, whereas the latter certify their origin.

A list of the competent customs authorities in the 27 EU member states is available on DG TAXUD’s website.

The core EU customs legislation is:

• the UCC (Council Regulation (EU) No 952/2013);
• the UCC Delegated Act (Commission Delegated Regulation (EU) No 2015/2446); and
• the UCC Implementing Act (Commission Implementing Regulation (EU) No 2015/2447).

The EU Trade Barrier Regulation (Regulation 2015/1843) provides a complaint mechanism for EU exporters that experience discriminatory trade practices in third countries. EU companies can file market-access complaints via the Access2Markets portal on DG Trade’s website.

On 1 March 2023, Release 2 of Import Control System 2 (ICS2) became effective. ICS2 is a new customs security and safety programme, consisting of a large-scale advance cargo information exchange on all goods entering the EU. ICS2 obliges carriers of goods to complete an entry summary declaration (ENS) prior to the arrival of goods in the EU. Release 2 applies to all goods transported by air in postal, express and general cargo consignments. As of 1 March 2024, Release 3 will take effect and expands the obligations to maritime, road and rail carriers. ICS2 aims to protect Europe’s single market and its citizens, and will facilitate the free flow of trade through improved data-driven customs security processes.

In October 2023, the latest version of the combined nomenclature (CN) was published in the EU’s Official Journal. The CN 2024 will apply from 1 January 2024.

In May 2023, the Commission put forward proposals for a comprehensive reform of the EU customs union. The proposals are based on three pillars:

• a new partnership with business;
• a smarter approach to customs checks; and
• a modern approach to e-commerce.

The Commission also proposed the creation of a new EU Customs Authority and an EU Customs Data Hub. The European Parliament and the Council are currently negotiating the reform proposals.

Restrictive measures are adopted in the framework of the Common Foreign and Security Policy (CFSP) by unanimous decisions of the Council of the EU on the basis of proposals from the High Representative of the Union for Foreign Affairs and Security Policy, and following examination in the relevant Council working groups.

EU sanctions are either:

• implementations of UN sanctions;
• additional reinforcements of UN sanctions (by applying stricter and additional measures – eg, vis-à-vis North Korea); or
• autonomous sanctions (eg, vis-à-vis Syria, Venezuela, Ukraine/Russia).

Restrictive measures imposed by the EU can target:

• governments of third countries;
• non-state individual and legal persons; or
• certain industry sectors.

They can take the form of restrictions on exports/imports, or on engaging in certain activities or with certain natural or legal persons (see further in 3.5 List of Sanctioned Persons and 3.6 Sanctions Against Countries/Regions).

Due to the division of powers between the EU and its member states, EU sanctions usually consist of a Council Decision and a Council Regulation. The Decision is binding for the member states and obligates them to implement those sanctions for which they have exclusive competences (eg, military sanctions and travel bans). The Regulation is binding on all EU citizens and implements those sanctions that are within the competence of the EU (ie, economic sanctions). The CFSP Council Decision and the Council Regulation are usually adopted together to allow both legal acts to produce their effects at the same time.

The enforcement of EU sanctions lies with member state competent authorities (customs, finance, export control). Member states are obliged to have in place effective, proportionate and dissuasive penalties, and to enforce them in cases of violations. The Commission is responsible for ensuring the uniform application of sanctions.

EU sanctions usually apply:

• within the territory of the EU, including its airspace;
• on board any aircraft or any vessel under the jurisdiction of a member state;
• to any person inside or outside the territory of the EU who is a national of a member state;
• to any legal person, entity or body, inside or outside the territory of the EU, which is incorporated or constituted under the law of a member state (this includes foreign branches of EU companies); and
• to any legal person, entity or body in respect of any business done in whole or in part within the EU.

Restrictions imposed on sanctioned parties usually include:

• a prohibition of travel to the EU (if they are not EU citizens);
• a freeze of assets within the EU; and
• an obligation for all legal and natural persons located in the EU to not provide funds or economic resources to the sanctioned persons.

Parties are sanctioned via Council Regulation and/or Decision and are notified of being sanctioned either through direct communication (ie, by letter, if their address is known) or by publication of a notice in the EU’s Official Journal.

Sanctioned parties can appeal to the European Courts.

The EU sanctions map provides a comprehensive overview of the EU sanctions in force. The EU imposes thematic sanctions on persons engaged in or facilitating:

• terrorist activities (Regulation 2580/2001 and Regulation 881/2002);
• human rights violations (Regulation 2020/1998);
• cyber-attacks (Regulation 2019/796); and
• the proliferation of chemical weapons (Regulation 2018/1542).

In addition, sanctions imposed on a specific country usually also contain restrictions on specific individuals and companies.

The Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) maintains a consolidated list of persons, groups and entities subject to EU financial sanctions.

The EU generally does not impose total embargoes, but targets selected products and sectors in a given country/region. Product groups frequently targeted include:

• military items;
• dual-use items;
• internal repression equipment;
• telecommunications and internet reception equipment; and
• equipment for key industries of the respective country.

Sectors often targeted include the finance sector and core industries of the subject country – oil and gas, mining, etc. The EU can also impose restrictions on investments and financing activities.

The sanctions against Russia, Syria and North Korea, for instance, are among the most comprehensive. The EU sanctions map provides an overview of the restrictions under each regime.

Please refer to 3.5 List of Sanctioned Persons and 3.6 Sanctions Against Countries/Regions.

Generally, the EU refrains from adopting legislative instruments with extraterritorial application. Thus, the EU restrictive measures only expressly apply in situations where links exist with the EU or EU persons (see 3.4 Persons Subject to Sanctions Laws and Regulations). However, in practice, it is possible that certain requirements (eg, licences or end-user declarations, or anti-circumvention clauses) have a secondary sanctions-like effect on the third-country end user or recipient.

The enforcement of EU sanctions lies with the member states. Depending on the specific sanctions regime and the national legislation of the EU member states, as well as on the gravity of the violation, penalties can be administrative or criminal, and range from warnings to fines and prison sentences.

At EU level, very severe or repeated violations of sanctions could lead to the designation of the violating party as a sanctioned party. The EU legislature is currently considering a proposal for a Directive on the definition of criminal offences and penalties for the violation of EU restrictive measures, which would make violating and circumventing sanctions punishable criminal offences subject to prison sentences and fines.

The competent authorities of the member states can grant specific exemptions or licences for otherwise prohibited activities if this is provided for in the relevant sanctions decisions and regulations.

Sanctions implemented in the form of EU Regulations (ie, secondary EU law) have direct effect and are binding law in all member states. EU citizens therefore have to comply with EU sanctions in the same manner as with any other laws.

Sanctions regulations, however, regularly provide that actions by natural or legal persons, entities or bodies shall not give rise to liability if they did not know, and had no reasonable cause to suspect, that their actions would infringe the measures set out in the sanctions regime. However, as there is a general expectation that EU citizens are acquainted with the laws that affect them, it would be difficult to rely on this defence in administrative or criminal proceedings.

The Commission is responsible for ensuring the uniform application of sanctions. Member states have an information exchange including regarding national (enforcement) measures taken and judicial decisions on the freezing of accounts, and regarding derogations granted.

Certain EU sanctions regulations require EU individuals and legal persons, entities and bodies to provide information which would facilitate compliance with the applicable sanctions (eg, information on accounts and amounts frozen) to the competent authority of the member state and (directly or through the member state) to the Commission. In particular, this obligation concerns banks, insurance companies and fund managers in relation to any accounts or assets held for sanctioned parties.

As a general rule, the EU does not recognise the extraterritorial application of laws adopted by third countries and considers such effects to be contrary to international law. In 1996, in order to protect EU operators from the extraterritorial application of certain third-country laws, the EU adopted the EU Blocking Statute (Council Regulation (EC) No 2271/96), which was last updated in 2018.

As a reaction to the Russian invasion of Ukraine on 24 February 2022, the EU adopted an unprecedented set of sanctions against Russia. The sanctions apply the following effects.

• Target import and export flows in a wide range of sectors.
• Asset freezes on several hundreds of persons and entities.
• Restrictions on:
1. the transport of goods;
2. the financial sector;
3. broadcasting of Russian media;
4. involvement with Russian state-owned enterprises;
5. the Russian Central Bank;
6. public procurement in the EU; and
7. the provision of business and other services, including legal services, IT consultancy services and accounting services.

The EU also publishes and updates guidelines and FAQs on the interpretation and application of the EU-Russia sanctions.

Several challenges against the sanctions have been lodged at the EU’s General Court. These challenges include:

• challenges of listed Russian individuals and their family members;
• a challenge of the broadcasting prohibition; and
• interim relief proceedings.

Several judgments of the General Court are currently under appeal before the Court of Justice.

The EU also listed additional individual and entities under its country-specific (eg, Syria, Iran, Myanmar/Burma) and thematic (Global Human Rights Sanctions Regime, terrorist list, chemical weapons list) sanctions frameworks.

As the war in Ukraine continues, the EU is expected to further tighten the sanctions on Russia and to also put increased emphasis on enforcement and anti-circumvention measures.

Since 2021, the Commission has been working on a further amendment of the Blocking Statute to expand deterrence of the unlawful extraterritorial application of sanctions to EU operators by countries outside the EU. This amendment would also streamline the application of the current EU rules, including by reducing compliance costs for EU citizens and businesses.

Under Article 263 of the TFEU and the UCC, goods intended for exportation are subject to an export declaration. In addition, certain goods (such as military items listed in the national military lists, dual-use items listed in Annex I to the Dual-Use Regulation (Regulation 2021/821), certain waste and endangered species) require a licence before their exportation.

Pursuant to Article 3 TFEU, the EU has exclusive competence with regard to its common commercial policy. Article 207(2) TFEU authorises the European Parliament and the Council to adopt regulations setting up an EU regime for the control of exports, including the brokering, related technical assistance, transit and transfer of dual-use items.

The Commission is responsible for administering and managing the EU’s export controls regulation, proposing legislative changes and updates of control lists, and co-ordination between member states.

EU member states may also impose additional (stricter) export controls. Information on additional national rules is available on DG Trade’s website.

Under Article 25a of Regulation 2021/821, the Council may authorise the Commission to negotiate with third countries agreements providing for the mutual recognition of export controls of dual-use items covered by that Regulation, and in particular to eliminate authorisation requirements for re-exports within the territory of the EU.

Each member state has national export control authorities that are responsible for the national export control laws, policies and authorisation procedures. The enforcement of export controls is usually done by the customs authorities of the member states. Information on the national authorities responsible for export controls is available on DG Trade’s website.

EU export controls apply to all exports from the territory of the EU. EU persons might also be subject to EU or member states’ export controls outside the EU (eg, when providing technical assistance or brokering services).

Security-based export controls apply to:

• military items;
• listed dual-use items;
• all items subject to certain end-uses (eg, use in relation to weapons of mass destruction or missiles carrying such weapons, to military uses in countries subject to military embargoes, use in relation to terrorism and human rights violations);
• cybersurveillance items;
• certain brokering activities;
• certain transit operations; and
• certain forms of technical assistance.

Member states may impose additional licensing requirements.

Please refer to 3.5 List of Sanctioned Persons.

Please refer to 4.4 Persons Subject to Export Controls.

At the core of the EU’s security-based export controls are the national/EU military lists and the EU dual-use list set out in Annex I of Regulation 2021/821. These lists reflect international control regimes (Wassenaar Agreement, Nuclear Suppliers List, Australia Group, Missiles Technology Control Regime).

Military items and highly sensitive dual-use items (Annex IV of Regulation 2021/821) also require a licence for intra-EU transfers from one member state to another (ie, not only for export outside the EU).

Additional restrictions on exports and intra-EU transfers exist for, inter alia:

• certain waste;
• endangered species;
• pesticides;
• biocides; and
• food and chemicals.

Infringements of export controls can lead to administrative sanctions, criminal sanctions, or both, depending on the seriousness of the violation and the specific laws of the respective EU member state. Penalties shall be effective, proportionate and dissuasive. Severe violations are therefore normally subject to high fines and could lead to prison sentences for the operators responsible, whereas less severe violations could imply revocation of export privileges (eg, global licences), fines and warnings.

The EU and its member states usually have three types of licences:

• individual licences, for one or more shipments related to a specific destination and third-country recipient;
• general licences, established by legislative or administrative act and useable by all exporters for exports of certain allowed items to certain allowed destinations, which can be subject to certain conditions such as the existence of an internal compliance programme; and
• global licences (“project licences”) can involve several parties, products and destinations – these are usually only granted to very experienced exporters showing high compliance standards.

Companies engaging in exports of sensitive items are required to know and comply with the applicable controls, and to have a robust internal compliance system in place. While the latter is not a general legal requirement, it is a requirement for the use of certain general licences and regularly for the granting of global licences.

If an export requires a licence, companies must obtain approval from the national export control authorities prior to the exportation. The use of general licences must be reported periodically to the national authorities.

On 12 January 2023, the (annual) update of Annex I of the Dual-Use Regulation entered into force. The annual updates are made to bring EU legislation in line with the latest development in the international export control forums of which the EU and the member states are members (the Wassenaar Group, Nuclear Suppliers Group, the Missile Technology Control Regime and the Australia Group). On 23 February 2023, an exceptional update of Annex I was adopted to implement the decisions of the Australia Group taken in 2022. On 15 September 2023, the Commission published the next update to the EU dual-use export control list, which will enter into force by the end of 2023.

On 26 October 2023, the Commission published the first compilation of EU member states’ export control lists. Member states may impose authorisation requirements on exports of items included in other member states’ control lists and added to the EU compilation list if the exporter has been informed about the public security or human rights considerations related to the use of these goods. The first compilation contains Dutch controls on machines to make semiconductors and Spanish controls on quantum computing. The EU list will be updated when member states notify export control measures to the Commission.

The EU continues the implementation of new requirements and mandates under the new 2021 Dual-Use Regulation. This includes work on:

• cybersurveillance technologies;
• enhanced information exchange and transparency;
• the enforcement of export controls;
• emerging technologies; and
• the development of EU capacity-building and training programmes for member states’ licensing and enforcement authorities.

Anti-dumping (AD), anti-subsidy (AS) and safeguard (SG) investigations (referred to jointly as the EU’s Trade Defence Investigations (TDI)) are conducted by the Commission’s Directorate General for Trade (DG Trade). TDI measures are imposed by Commission Regulation after consultation with the EU member states in the context of the EU Council. The Commission also reviews, adapts and extends trade defence measures.

The Commission’s Anti-Fraud Office (OLAF) can conduct investigations into potential avoidance of payment of conventional customs duties or trade defence measures, and can provide the results of those investigations to national authorities for enforcement and other follow-up actions.

The EU’s AD and AS rules are set out in Regulations 2016/1036 and 2016/1037, respectively. The EU’s SG rules are set out in Regulations 2015/478 and 2015/755.

The Commission monitors the application of TDI measures and can re-open investigations or initiate reviews if measures need adapting. The member states’ customs authorities enforce compliance with TDI measures upon importation and collect TDI duties. National customs authorities can also conduct administrative and criminal investigations, and can impose fines in cases of violations.

The Commission can initiate new investigations and certain reviews ex officio. However, investigations are usually initiated pursuant to a request from the EU industry.

New TDI investigations and reviews (eg, interim, expiry, anti-circumvention, absorption, newcomer and suspension) can be requested by interested parties. Certain reviews are subject to standing requirements and/or time limits.

Exporting producers, industry associations and government bodies of the country subject to the investigation can participate in EU TDI investigations. Other non-EU parties can participate if they can show a legitimate interest in the case. The notice of initiation of an investigation is published in the EU’s Official Journal and invites interested parties to come forward within a certain timeframe.

An AD/AS investigation is usually opened following a complaint/request by the EU industry to the Commission. SG investigations are brought by member states upon request of the EU industry. For new AD and AS investigations, expiry reviews and certain other procedures, a standing requirement exists to ensure that the investigation has sufficient support from the EU industry producing the subject product (at least 25% of total EU production must support the complaint/request, and EU producers representing more than 50% of the EU production must not express opposition).

A new AD/AS complaint must include prima facie evidence of dumping/subsidisation, injury and a causal link between the allegedly dumped/subsidised imports and the alleged injury. A review request must contain sufficient prima facie evidence to support the underlying request. An SG complaint must contain prima facie evidence of serious injury to the EU industry caused by a sudden and unforeseeable sharp increase in imports.

Following the lodging of a new AD/AS complaint, the Commission has 45 days to initiate the investigation or reject the complaint. Provisional duties may be imposed no later than eight (AD) or nine (AS) months from the initiation of the proceedings. The investigations must be concluded within 14 (AD) or 13 months (AS). Reviews can have different or even no statutory deadlines for their opening. Usually, reviews must also be concluded within nine or 15 months, depending on the type of review.

SG investigations normally take nine months. Provisional safeguard measures may be imposed in critical circumstances for a maximum of 200 days and can only take the form of an increase of the existing duty level. SG measures apply to imports of the subject goods from all countries. Definitive SG measures are usually imposed for up to four years (including the duration of any provisional measures), with one extension possible, up to a total maximum of eight years. If the duration of SG measures exceeds one year, they need to be progressively liberalised at regular intervals.

Regulations imposing provisional or definitive AD, CVD or SG duties, and regulations or decisions accepting undertakings or terminating investigations or proceedings, are published in the EU’s Official Journal.

Under the EEA Agreement, the use of TDI measures between the parties is generally excluded for the sectors covered by the agreement. Fishery and agriculture products are not covered by the exclusion.

AD and CVD duties are normally applicable for a period of five years. Before the end of the five-year period, EU producers may request an expiry review, which may result in measures being extended or repealed.

Definitive SG measures may last up to four years. Where they exceed three years, they must be reviewed at mid-term and can be extended once for up to a maximum of eight years in total.

Upon request or of its own motion, the Commission can review existing measures to ensure their continued effectiveness/need. The initiation of an interim review usually requires that there has been a lasting change of circumstances. An expiry review is usually initiated following a request by the EU industry, and must be made no later than three months before the expiry of the measures. The request must contain sufficient prima facie evidence that the expiry of the measures would result in a continuation or recurrence of dumping/subsidisation and injury. Expiry review investigations must be concluded within 15 months of initiation. The measures remain in force pending the outcome of that review.

Regulations and Decisions on TDI measures can be appealed under Article 263 TFEU before the EU General Court within two months of their publication in the EU’s Official Journal.

The complainants (EU producers and their associations) and exporting producers in the country subject to the measures that participated in the administrative proceedings generally have standing to bring a direct action. Judgments of the General Court can be further appealed to the Court of Justice of the EU (ECJ). Importers and users usually have to challenge TDI measures via national courts and a preliminary ruling request to the ECJ under Article 267 TFEU.

The Commission reviewed the steel safeguard measures twice in 2023. In January 2023, a revised Regulation aimed to bring the measures into compliance with the Panel’s recommendations (DS515), and in June 2023, the Commission decided not to terminate the steel safeguards early, thereby extending the measures to 30 June 2024.

On 1 March 2023, the General Court confirmed that the Commission can countervail subsidies granted by China to subsidiaries of Chinese state-owned companies established outside Chinese territory. The General Court thus endorses the Commission’s practice with regard to, inter alia, glass fibre products from Egypt and steel products from Indonesia. Ultimately, the validity of countervailing cross-border subsidies will be decided by the Court of Justice in the appeal cases against the General Court’s judgments.

On 7 June 2023, the Commission published a review of the revised Lesser Duty Rule in AD/AS investigations. The Commission reviewed the cases since the entry of the modernisation package in June 2018 and concluded that no legislative action is needed.

On 4 October 2023, the Commission launched an investigation against subsidised electric car imports from China. As announced in the State of the European Union speech, the Commission initiated the investigation on its own initiative (ex officio) based on prima facie evidence of subsidisation, threat of injury and causation. The investigation will be concluded within 13 months, with the possibility of provisional measures within nine months.

There are currently no significant pending changes in this area.

EU member states are responsible for the adoption of mechanisms to screen foreign direct investment (FDI) in their territory on the grounds of security or public order.

At EU level, the Investment Screening Regulation (Regulation 2019/452) establishes a framework for the screening by member states of FDI into the EU on the grounds of security or public order, and a mechanism for co-operation between member states, and between member states and the Commission, with regard to FDI likely to affect security or public order.

Pursuant to Article 6 of Regulation 2019/452, member states must notify the Commission and other member states of any FDI in their territory that is undergoing screening by providing information about, inter alia:

• the ownership structure of the foreign investor;
• the approximate value of the investment or the funding of the investment; and
• its source.

Furthermore, by March 31st of each year, member states must submit to the Commission an annual report covering the preceding calendar year, which is to include aggregated information on FDI that took place in their territory.

Further, Regulation 2019/452 allows the Commission to issue opinions when it considers that an investment poses a threat to the security or public order of more than one member state, or when an investment could undermine a project or programme of interest to the whole EU. Regulation 2019/452 also foresees the possibility for a member state which considers that an FDI in another member state is likely to affect its security or public order to provide comments to the member state in question.

A list of member states which had notified their screening mechanism to the Commission as of 9 October 2023, together with links to the applicable norms and contact details of the competent authorities, is available on DG Trade’s website.

See response to 6.1 Investment Security Mechanisms.

Within the EU, the assessment of investments on grounds of security and public order is conducted by each member state pursuant to its applicable national law. The paragraphs below summarise, as examples, the rules governing the assessment of investments on the grounds of security or public order in Germany, France and Belgium.

Under Sections 55 to 62 of the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung), the German Federal Ministry for Economic Affairs and Energy can assess whether there will be a likely effect on the public order or security of the Federal Republic of Germany, of another member state of the EU or in relation to projects or programmes of EU interest, if a non-EU resident directly or indirectly acquires a domestic company or a stake in a domestic company.

The decision to clear or prohibit the investment depends on factors such as whether the domestic company recipient of the investment:

• operates critical infrastructure;
• provides cloud computing services;
• holds a licence for providing telematics infrastructure components; or
• is a company of the media industry which contributes to the formation of public opinion.

Similarly, under Article L 151-2 of the French Financial and Monetary Code (Code Monétaire et Financier), the establishment and liquidation of foreign investments in France may be subject to prior authorisation if considered appropriate to protect national interests.

Furthermore, under Article L 151-3, a foreign investment in France is subject to prior approval by the Minister of Economic Affairs if it relates to:

• the exercise of public authority;
• activities likely to jeopardise public order, public safety or national defence interests; or
• the production or marketing of arms, munitions or explosive powders or substances.

Under Article 4 of the Belgian Co-operation Agreement establishing a mechanism for the screening of FDI, investments by a foreign investor resulting, directly or indirectly, in the acquisition of 25% or more of voting rights in undertakings or entities in Belgium engaged in specific fields of activities shall undergo screening. Covered sectors include:

• critical infrastructure;
• military and security;
• sensitive information and personal data;
• freedom and plurality of media; and
• biotechnology.

The threshold is lowered to 10% or more for investments in large undertakings or entities active in extra-sensitive sectors such as defence, energy, cybersecurity and digital infrastructure.

EU member states such as Germany, France or Belgium require foreign investors to file an application for authorisation or notify the competent authority for the purposes of assessing the effect on public order or security of the investment in question.

Under Section 55a of the German Foreign Trade and Payments Ordinance, the conclusion of a contract governed by the law of obligations on the acquisition of a domestic company by a non-EU citizen must be reported to the Federal Ministry for Economic Affairs and Energy in writing or electronically without delay following the conclusion of the contract. The report should provide information about:

• the acquisition;
• the acquirer and the domestic company to be acquired; and
• the shareholding structures of the acquirer.

It should also describe the main features of the fields of business in which the acquirer and the domestic company to be acquired are active.

Pursuant to Article L 151-3, foreign investments likely to affect national interests are subject to an authorisation requirement (see 6.2 Agencies Enforcing Investment Security Measures). Furthermore, Article L 151-3-1 of the French Financial and Monetary Code foresees that when an investment has been carried out without prior authorisation, the Minister of Economic Affairs may order the investor in question to file an application for the authorisation of that investment.

Article 5 of the Belgian Co-operation Agreement requires foreign investors to notify covered acquisitions to the Secretariat of the Investment Screening Commission, after signing but before the closing of the agreement. According to Article 11 of the Co-operation Agreement, the applicable standard of review is:

• national security and public order; and
• strategic interests of the federated entities in Belgium (ie, the regions, and the communities).

EU member states such as Germany and France foresee exemptions from investment security measures in cases of transactions concluded by companies belonging to the same group or controlled by the same entity.

For instance, under Section 65 of the German Foreign Trade and Payments Ordinance, the investment assessment would not take place if the transaction leading to the acquisition of a domestic company is concluded between companies whose shares are held in full by the same controlling company, and if all contracting parties have their headquarters located in the same third country.

Similarly, under Article 151-7 of the French Financial and Monetary Code, foreign investors are exempt from the obligation to file the application for authorisation in cases where:

• the investment is made between entities belonging to the same group;
• the investor exceeds 25% of the voting rights in the capital of an entity over which it has previously acquired control; or
• the investor acquires control of an entity over which it has previously exceeded the threshold of 25% of the voting rights.

The infringement of provisions governing investment security mechanisms can be subject to criminal and administrative sanctions.

For instance, Section 80 of the German Foreign Trade and Payments Ordinance categorises as criminal offences the unlawful exercise of voting rights by an acquirer or the disclosure of company-related information in violation of Section 59a of the same Ordinance.

Pursuant to Article 151-3-2 of the French Financial and Monetary Code, a failure to comply with investment security requirements may lead to the imposition of financial penalties.

Under Article 28 of the Belgian Co-operation Agreement, investors who fail to comply with the notification requirement may incur a fine of up to 10%, and in certain cases even 30%, of the investment.

Under the national law of each EU member state, foreign investors may be asked to cover certain costs arising from the authorisation procedure of their investments.

For instance, under Section 59 of the German Foreign Trade and Payments Ordinance, the costs of reports produced by independent experts assessing the foreign investors’ compliance with certain commitments or obligations are borne by the parties subject to those obligations.

In Belgium, no fee is due for the notification of investments for screening at the Investment Screening Commission.

In 2023, several EU member states adopted FDI screening legislation. For instance:

• Belgium approved its co-operation agreement between the federal and regional governments on the implementation of a general FDI screening regime;
• Estonia adopted its Foreign Investment Reliability Assessment Act; and
• Luxembourg adopted a Law of 14 July 2023 establishing a mechanism for the screening of FDI.

Furthermore, other member states have adopted specific legislation to implement or expand their existing FDI screening framework. At present, FDI screening mechanisms have been implemented in 21 member states.

Moreover, within the last 12 months, several member states have denied authorisations to foreign investments due to national security concerns.

The FDI Screening Regulation is now complemented by the Foreign Subsidies Regulation (FSR). The FSR introduces notification obligations for companies receiving foreign financial contributions from a non-EU country in the framework of M&A transactions and public tenders. The Regulation also grants the Commission ex officio investigative powers against any foreign subsidies having distortive effects on the internal market received by a company with activities in the EU.

Several EU member states have undergone consultative or legislative processes, which are expected to result in updates to an existing mechanism or the adoption of a new national investment screening regime.

By the end of 2023, the Commission will present a report evaluating the functioning and effectiveness of the FDI Screening Regulation. Based on the review, the Commission may propose a revision of the rules to improve the EU’s capacity to identify and address security and public order risks of foreign investment in the EU.

The EU has very strict controls on state aid, which are set out in the TFEU. State aids are allowed only in strictly defined circumstances to pursue particular public policies, such as environmental protection, the strengthening of SMEs, or regional development. The EU state aid rules aim at protecting fair competition on the domestic market and not at reducing imports or encouraging domestic production.

The EU and its member states have special legislation on product (safety) standards. The European standardisation organisations (ESOs) and national standardisation organisations have also adopted ample standards for products and services.

EU standards and technical requirements are adopted in order to guarantee a certain level of quality, safety and reliability of goods and services and do not aim to reduce imports and/or encourage domestic production.

The EU has high, strict and comprehensive sanitary and phytosanitary legislation – for example:

• EU General Food Law Regulation;
• REACH Regulation;
• Plant Protection Products Regulation;
• Biocidal Products Regulation; and
• Classification, Labelling and Packaging Regulation.

The aim of the EU sanitary and phytosanitary measures is to reduce or eliminate the possible risks of animal, plant and public health threats, as well as animal and plant diseases being introduced into the EU by goods coming from non-EU countries. They are not aimed at reducing imports and/or encouraging domestic production.

This matter is not applicable in this jurisdiction.

This matter is not applicable in this jurisdiction.

This matter is not applicable in this jurisdiction.

In the EU, product names can be granted a geographical indication (GI) if they have a specific link to the place where they are made. The GI recognition enables consumers to trust and distinguish quality products, while also helping producers to market their products better. Products that are under consideration or that have been granted GI recognition are listed in quality products registers. The registers also include information on the geographical and production specifications for each product.

Other EU quality schemes emphasise the traditional production process or products made in difficult natural areas such as mountains or islands.

The EU is also one of the main supporters of negotiations on geographical indications in the WTO’s Doha Development Agenda and negotiates bilateral GI protection rules with its trading partners.

The purpose of the EU quality policy and GI protection measures is to protect the names of specific products to promote their unique characteristics, and does not aim at reducing imports from third countries and/or encouraging domestic production.

All relevant issues and recent developments have been detailed in the preceding sections. Please refer to the EU Trends & Developments chapter of this guide for more information.