The Rise of Screening Mechanisms in the Global North: Weaponizing the Law against China’s Weaponized Investments?

Abstract

Investment screening mechanisms are proliferating, especially in the global North, apparently in direct reaction to China’s global rise and what is perceived to be its ‘weaponized investments’. Given the lack of clear shared objectives and coordination between screening mechanisms, which remain a core prerogative of each sovereign State’s self-judgment on national security, and the possible negative repercussions on the international economy and cooperation, this article looks at the increase of screening mechanisms for foreign direct investments in Europe and the USA in relation to China’s global rise. What does it entail for Chinese outward foreign direct investments and for the international economic legal order more broadly? In discussing the strengths and limitations of screening mechanisms, this article argues that, while the concerns for Chinese commercial investments aimed at acquiring technology and critical assets are legitimate, at the same time, Western States can disproportionally discriminate against Chinese investments by creating an investment regime that is overly protectionist. The article, adopting the recent screening mechanism of the European Union as a model, proposes how screening mechanisms could be improved through harmonization and cooperation among States, alongside the setting of clear objectives to limit their discriminatory, unjustified, and overly discretionary use.