Investment Screening Put to the Test of the Covid-19 Pandemic: Typology, Legality and Externality

The Covid-19 Pandemic has introduced or revived a concern in the
foreign direct investment (FDI) context that was less emphasized
pre-Pandemic, namely public health. This article discusses the
typology of Covid-19 related FDI screening, expounds on the
legality of these measures in the context of both national
investment law and international investment law, and identifies
the potential negative externalities to foreign investors and to
the host state. Newly promulgated FDI screening measures
intensify governmental intervention and scrutiny in cross-border
takeovers in the health sector and beyond to protect domestic
companies from being taken over by predatory foreign buyers.
FDI screening during Covid-19 has become more comprehensive
and inclusive in its scope than what was already considered a
system capable of excessive and arbitrary use pre-Pandemic. FDI
screening on grounds of public health may be justified for its
legality under both national and international investment law,
nonetheless certain conditions need to be satisfied. The negative
externality of FDI screening during Covid-19 pertains to a concern
that, if applied aggressively in practice, FDI screening might
potentially result in a deterrence effect on the cross-border
capital flow that is much needed for market revival after a global
economic shutdown.