A review mechanism for foreign investments that prohibits the acquisition of regional companies classified as strategic by foreign groups is not compatible with European Union law. The European Court of Justice recently came to this conclusion (ECJ, C-106/22). In this case, the Hungarian concrete element manufacturer Xella Magyarország wanted to know whether the Hungarian Ministry of Innovation and Technology could prohibit it from acquiring the raw material extraction company Janes és Társa.
The minister considered this necessary. He feared that the takeover of Janes és Társa by Xella Magyarország would jeopardize the long-term security of supply for the construction sector. Janes és Társa, which is owned by an umbrella company based in Bermuda, extracts gravel, sand and clay. However, the Court ruled that the restriction on the freedom of establishment cannot be justified by the stated objective of ensuring the regional supply of the construction sector.
The Court stated that security of supply for the construction sector at local level cannot be regarded as a "fundamental interest of society" within the meaning of the Court's settled case-law. It also found that the takeover would not lead to an "actual and sufficiently serious threat" within the meaning of the Court's case-law. The present case is complicated because, for example, Xella Magyarország is owned by a German company. However, other countries are also involved in the concrete element manufacturer via holding companies and ownership structures.
Source and further information: curia.europa.eu/C-106/22
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