By Philip Blenkinsop
BRUSSELS (Reuters) - The European Union's scrutiny of foreign investment suffers from blind spots because some EU members do not carry out screening and those that do have widely different approaches, the European Court of Auditors (ECA) said on Wednesday.
The EU has since 2020 obliged EU countries with national screening in place to exchange information on potential security or public order risks, with the European Commission empowered to issue opinions if it sees a risk from an investment in critical sectors such as ports, nuclear plants or semiconductor plants.
The law does not name China, but its proponents' complaints about investments by state-owned enterprises, such as COSCO Shipping's in Greek port Piraeus, and technology transfers were clear references to Beijing.
The Commission has said it will propose revisions before the end of the year, part of a package of measures to boost economic security and reduce the bloc's dependence on China.
The ECA said EU countries reported 886 cases to the Commission from 2020 to 2022, but that 92% of them came from just six countries, including France, Germany, Italy and Spain, and the rest from nine countries, with a further 12 either not screening or not reporting any cases.
"Screening of foreign investment in the EU is a work in progress," said Mihails Kozlovs, the ECA member in charge of the audit. "As the EU's safety net, it has some large holes in it."
The ECA added that the system was overburdened with low-risk or ineligible cases.
EU rules do not oblige countries to set up screening or follow opinions, give them discretion to determine the scope of screening, and do not oblige them to report findings to the Commission, even when it gives an opinion.
The ECA says the Commission should require all EU members to establish screening mechanisms and make them report decisions, should assess whether national screening systems are adequate and should encourage EU countries to align their systems with each other.
The Commission said it accepted a number of the recommendations.