Foreign Direct Investment Screening and National Security: Reducing Regulatory Hurdles to Investors Through Induced Reciprocity

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    Abstract

    An increasing number of States has adopted new or revised existing laws that establish
    foreign direct investment (FDI) screening mechanisms on grounds of national
    security. Comparing FDI screening in Germany and China as a case study, this article
    identifies three regulatory hurdles to investors related to such mechanisms, namely
    unpredictability, procedural uncertainty, and the lack of transparency in practice.
    Adopting the theory of induced reciprocity, this article argues that these regulatory
    hurdles could be reduced if symmetry constraint on national FDI screening schemes
    can be established between sovereign States in an international agreement. To achieve
    induced reciprocity between the European Union and China regarding FDI screening
    on grounds of national security, the EU-China Comprehensive Agreement on
    Investment could incorporate certain fundamental principles and regulatory objectives
    of EU Regulation 2019/452 Establishing a Framework for the Screening of Foreign
    Direct Investments into the Union as a starting point and a way forward.
    Original languageEnglish
    Pages (from-to)561-595
    Number of pages35
    JournalJournal of World Investment and Trade
    Volume22
    Issue number4
    Publication statusPublished - 16 Aug 2021

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