LEGAL FRAMEWORK FOR THE REGULATION OF FREE MOVEMENT OF CAPITAL BETWEEN EU MEMBER STATES AND THIRD COUNTRIES

Abstract

Introduction. The free movement of capital is unique among the fundamental freedoms of the European Union’s (hereinafter referred to as the EU) internal market, as it extends not only to relations between Member States but also to third countries. Article 63(1) TFEU establishes a general prohibition of restrictions on capital movements. At the same time, the external dimension of this freedom gives rise to complex legal questions, particularly regarding its overlap with the freedom of establishment, justifications for restrictions, and the screening of foreign investments.

Purpose. The article aims to provide a comprehensive analysis of the legal framework governing free movement of capital between EU Member States and third countries, including primary and secondary EU law, the case law of the CJEU, and foreign investment screening mechanisms.

Materials and methods. The study is based on the analysis of EU founding treaties, secondary legislation (in particular Regulation 2019/452), CJEU case law (FII GLO II, SECIL, Xella), and scholarly works of leading European researchers. The methods of systematic analysis, comparative legal, formal legal and historical legal methods were applied.

Results. The study establishes that the legal framework for regulating capital movements with third countries is formed at several levels: primary law, secondary law, CJEU case law, and international investment agreements. Significant gaps in the foreign investment screening system have been identified, particularly concerning indirect investments and the absence of national screening mechanisms in certain Member States.

Discussion. Further research should focus on the practical impact of the European Commission’s Proposal COM/2024/23 final (with amendments) on the legal regime of foreign investments in the EU and on the effectiveness of their updated screening mechanisms.