MLex exclusives from Europe
MLex® exclusives from Europe
In a frenetic week for our correspondents in Europe, MLex published a string of scoops, bringing our subscribers invaluable insights on competition, trade and tech regulation ahead of the pack.
EU AI startups may get EUR3 billion of public funding in new strategy
By Matthew Newman and Tono Gil
Foreign investors face tougher EU screening landscape
By Lewis Crofts and Tono Gil
Uniform export control regime for dual-use goods to be sought by EU, draft white paper shows
By Joanna Sopinska and Tono Gil
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MLex exclusive: EU AI startups may get EUR3 billion of public funding in new strategy
European artificial-intelligence startups could soon benefit from up to 3 billion euros in public funding under a new EU policy to bolster its AI industry, according to a draft policy paper seen by MLex. The strategy follows concerns that while the EU is a leader in AI regulation, the bloc's startups have failed to attract the same level of investment that's pouring into US, UK and Chinese AI companies.
19 January 2024
By Matthew Newman and Tono Gil
European artificial-intelligence startups could soon benefit from up to 3 billion euros ($3.3 billion) in public funding under a new EU policy to bolster its AI industry, according to a draft policy paper seen by MLex.
In a draft document, which may be released as soon as next week, the European Commission outlined six steps, from more funding and training to access to EU supercomputers, to help make the bloc's AI industry more attractive to private investors.
"The [EU] will encourage public and private investments in AI startups and scaleups, including through venture capital or equity support," it said. The plan calls for boosting AI startups' access to "high-quality data."
The commission said the AI initiatives would generate "an overall public investment of close to 3 billion euros until the end of this multiannual financial program (2027), as well as significant private investments, including 1 billion euros through InvestEU."
The commission said that while the EU has 180 AI startups, they don't have "sufficient access to the investment they need to be able to train their models and scale up their activities to become globally competitive."
"To overcome the challenges and exploit its assets, it is vital to strengthen the [EU]’s tech landscape and ensure its global competitiveness," the policy paper said.
The strategy includes a plan to "bolster the leadership of European startups" by establishing “AI Factories,” which are formed around European public supercomputers.
These factories would bring together "key material and human resources needed for the development of generative AI models and applications."
The EU strategy comes as the bloc takes the final steps to approve the AI Act, which puts obligations on AI systems based on how much risk they pose to citizens' health, safety and fundamental rights.
It also follows concerns that while the EU is a leader in AI regulation, the bloc's startups have failed to attract the same level of investment that's pouring into US, UK and Chinese AI companies.
Equity investment in AI in the EU represents less than 10 percent, compared with a total of 80 percent for China and the US, according to a 2021 study by the Organization for Economic Cooperation and Development.
The EU's ability to attract investment has become a political priority. French President Emmanuel Macron said last year that he supported the emergence of European AI clusters to provide an alternative to US companies, such as OpenAI.
Paris is home to a vibrant hub for AI startups, including Mistral AI, which is developing an open-source AI model and has attracted investment.
The commission said there's a sense of urgency to implement its strategy, because "the battle may not be to the strong, but this race will definitely be to the swift."
MLex exclusive: Foreign investors face tougher EU screening landscape
Companies and governments looking to invest in Europe will face a stiffer screening regime for their transactions under new EU proposals designed to protect the bloc’s economic security. EU states will have to ensure active screening mechanisms that can review investments up to 15 months after they have taken place, according to documents seen by MLex.
19 January 2024
By Lewis Crofts and Tono Gil
Companies and governments looking to invest in Europe will face a stiffer screening regime for their transactions under new EU proposals designed to protect the bloc’s economic security.
EU states will have to ensure active screening mechanisms that can review investments up to 15 months after they have taken place, according to documents seen by MLex.
The proposal is part of a package to be announced next week looking to safeguard European interests in a global economy where investors from countries such as Russia and China are viewed with increasing skepticism.
Central to the EU’s policy response is upgrading a 2019 law that encouraged national governments to monitor investments that might jeopardize “security or public order.” That law was relatively light touch, giving loose suggestions on how to design screening regimes and ensure cooperation between countries via the European Commission.
The new proposal ramps up that scrutiny, setting out minimum standards for screening mechanisms, setting stricter timelines and ensuring governments in one state can raise concerns about investments in another, if they fear knock-on effects.
“The screening authority shall be empowered to start screening foreign investments by its own initiative for at least 15 months after the completion of a foreign investment” if it hasn’t been notified, the draft says.
The commission will also be able to open an “own initiative procedure” in such instances.
Nearly all 27 EU states have active FDI regimes in place. In 2021, governments reported 1,563 authorization requests and own-initiative cases. This increased scrutiny is seen as making global transactions and investments more complicated, as they may be subject to multiple reviews for their impact on competition, security and any distortion through foreign subsidies.
Cooperation
The commission wants to have a more central role in coordinating FDI reviews when an investment might affect more than one EU state. It can offer formal opinions if EU projects are affected by an investment or if several countries are implicated.
Foreign companies that might notify authorities in several countries of their investment will be obliged to submit notifications to all of them on the same day, referencing the other states involved.
Subsidiaries from a foreign investor established in the EU also fall within the scope of the regime, the commission specified.
The proposal also suggests tightening up information sharing between authorities who believe the investment might “negatively affect its security or public order.”
A country has 15 days to tell others it intends to issue an opinion on an investment. It can then seek more information before giving its opinion. That entire process should have a 35-day deadline under the proposal.
A screening authority then has to “give utmost consideration” to the opinions of other countries or the European Commission before issuing a final decision. That might impose “mitigating measures” on the investment or block it outright.
Investors have a right to be told they will face a prohibition or “mitigating measures,” the draft says, in a nod to the due process rights of companies.
The obligation to notify investments and seek authorization will fall on companies participating in programmes of EU interest or when they are economically active in set areas that will be specified in an annex to the legislation.
The proposal also fleshes out criteria to determine whether an investment is “likely to negatively affect security or public order.”
EU countries will need to assess whether the foreign investor was involved in other investments previously screened, and whether they are “likely to pursue a third country’s policy objectives, or facilitate the development of a third country’s military capabilities.”
The text also says authorities should consider the “security, integrity and functioning of critical infrastructure, whether physical or virtual,” when weighing the investment risks.
*Joanna Sopinska contributed reporting.
MLex exclusive: Uniform export control regime for dual-use goods to be sought by EU, draft white paper shows
The planned revamp of the EU’s export controls for dual-use goods — those with both civilian and military applications — will allow the bloc to establish a uniform control system outside multilateral regimes, a draft white paper seen by MLex shows. The document, to be issued next week, also proposes steps to tighten coordination between EU governments and the European Commission on potential new national export restrictions.
19 January 2024
By Joanna Sopinska and Tono Gil
The planned revamp of the EU’s export controls for dual-use goods — those with both civilian and military applications — will allow the bloc to establish a uniform control system outside multilateral regimes, a draft white paper seen by MLex shows. The document, to be issued next week, also proposes steps to tighten coordination between EU governments and the European Commission on potential new national export restrictions.
The EU export-control regime — in place since 2009 — is to a large extent dependent on multilateral systems, such as the Wassenaar Arrangement for upgrading the bloc’s export-restriction lists. Agreements on these updates have always been challenging. But since the beginning of the war in Ukraine, Russia’s membership in three of the four existing multilateral export-control arrangements — all of them requiring consensus — has significantly impeded the process.
A revamp of the EU’s export-control regime in 2021 significantly improved coordination of controls for dual-use goods between the national jurisdictions, and expanded their scope. But the power to control the export of additional items not listed in Wassenaar still rests entirely with EU governments. This creates differences in the scope of controls across countries.
The commission wants to get rid of this situation by putting forward a proposal in the coming months, to introduce a uniform EU export control system. Such a system would encompass “those items that would have been adopted in the multilateral regimes, had it not been for the blockage of the decision-making process.”
By the summer of this year, the commission will issue recommendations to improve coordination with EU governments on any new national control lists that would allow for comments on potential effects beyond individual jurisdictions.
Under current EU rules, governments can restrict exports on the grounds of national security concerns. The Netherlands used this avenue in March 2023 — alongside the US and Japan — to ban the sale of advanced-chip printers to China. Dutch company ASML is the world’s only supplier of such machines.
Other EU governments can follow suit and put forward their own export restrictions. Spain did it in June last year by imposing a licensing regime on exports of some advanced quantum computers, certain semiconductor devices and additive-manufacturing technology.
But there is a risk that such unilateral decisions will only deepen the differences within the bloc, and expose individual EU countries and their companies to foreign retaliation.
As a medium-term action, the commission will speed up the review of the current export controls rules to the first quarter of 2025.
The draft on export controls is part of an economic security package to be issued next week, looking to safeguard European interests against the increasing threat of China’s economic and military dominance.
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