This Essay analyzes the prospects of a “multispeed” framework for screening foreign direct investment (FDI) in the European Union. A slew of takeovers of EU-based companies in recent years has raised concerns that European know-how and key technologies are being exported with few benefits flowing in the opposite direction. Some Member States have called on the European Commission to create a uniform screening framework across the Union and demand reciprocity in investment agreements with third countries. Other Member States worry that such intervention would deprive them of foreign capital and oppose a centralized screening framework. The deep split among Member States has hamstrung the European Commission in its policymaking role. Last year, the Commission put forth a proposal that sought to harmonize the existing patchwork of national regulations without imposing uniform standards.

As an alternative to seeking a compromise among all Member States, this Essay examines the possibility of allowing some Member States to cooperate on a common framework for screening foreign direct investment. The European Commission has recognized voluntary coalitions as an option for advancing the EU project. The principle has gained traction as Member States have become increasingly divided on the proper scope and mission of the EU as an institution. A “multispeed” option is particularly attractive in policy areas like FDI, where Member States are deeply divided. The Essay evaluates the opportunities for Member States to pursue such cooperation through the prism of FDI, one of the items at the top of the Commission’s agenda.

The findings identify several hurdles, some perhaps insurmountable, to multispeed cooperation on FDI under current treaty law. Because Member States have conferred exclusive competence on the Union to craft a common commercial policy—which includes FDI—Member States have a limited scope of intervention. On the other hand, Member States remain competent to regulate indirect, or “portfolio” investments. While the European debate has focused on regulating FDI, indirect shareholdings constitute a significant component of total foreign investment. As Member States step up their enforcement against FDI, more investors are likely to structure their investments as indirect holdings, while still trying to exercise significant influence over EU-based companies. Member States are competent to control such indirect investments in sensitive technologies on security grounds.