Investment screening

Trade topics

Investment

Key information about the EU framework for foreign direct investment screening

The objective of the EU's Foreign Direct Investment (FDI) Regulation is to make sure that the EU is better equipped to identify, assess and mitigate potential risks to security or public order, while remaining among the world’s most open investment areas. It fully applies since 11 October 2020.

Main features of the EU investment screening framework

The EU framework for investment screening is part of the Commission's commitment to a Europe that protects its companies, workers and citizens. Due to the high degree of integration within the EU, foreign direct investment* in one Member State could pose risks to security or public order in another Member State, or in the whole Union.

Stepping up information sharing and cooperation in the EU is necessary to identify new challenges and to react accordingly. For that purpose, the new framework:

creates a cooperation mechanism where Member States and the Commission are able to exchange information and raise concerns related to specific investments;
allows the Commission to issue opinions when an investment threatens the security or public order of more than one Member State, or when an investment could undermine a strategic project or programme of interest to the whole EU, such as Horizon 2020 or Galileo;
encourages international cooperation on investment screening, including sharing experience, best practices and information on issues of common concern;
sets certain requirements for Member States that wish to maintain or adopt a screening mechanism at national level (Member States also have the last word on whether or not a specific investment operation should be allowed on their territory), and;
takes into account the need to operate under short business-friendly deadlines and strong confidentiality requirements.

Factsheet on the EU investment screening regulation

To improve the functioning of the cooperation mechanism set up by the EU investment screening framework, the services of the Commission, at the initiative of DG Trade, have developed a form for providing information to be submitted under the cooperation mechanism (the form is also available in a format that complies with web accessibility standards).

The use of this form speeds up the examination by the 26 recipient Member States and the Commission and enables the notifying Member State to finalise its investigation without delay.

*'Foreign direct investment' means investments of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity in a Member State, including investments which enable effective participation in the management or control of a company carrying out an economic activity.

Revision of the FDI Screening Regulation

On 24 January 2024, the Commission adopted five initiatives to strengthen the EU’s economic security at a time of growing geopolitical tensions and profound technological shifts. One of these initiatives concerns further strengthening the protection of EU security and public order by proposing improved screening of foreign investment into the EU.

This legislative proposal builds on the experience gained by the Commission and Member States with reviewing over 1,200 FDI transactions notified by Member States over the previous three years under the existing FDI Screening Regulation. It also builds on an extensive evaluation of the functioning of the current regulation and a recent report of the European Court of Auditors.

The legislative proposal aims to address existing shortcomings and improves the efficiency of the system by:

Ensuring that all Member States have a screening mechanism in place, with better harmonised national rules.
Identifying minimum sectoral scope where all Member States must screen foreign investments.
Extending EU screening to investments by EU investors that are ultimately controlled by individuals or businesses from a non-EU country.

Factsheet - Proposal for a new regulation on the screening of foreign investments

Screening mechanisms of Member States

Under the regulation, Member States may maintain their existing screening mechanisms, adopt new ones, or remain without such national mechanisms.

The Commission calls on those Member States that currently do not have a screening mechanism, or whose screening mechanisms do not cover all relevant FDI transactions or do not allow screening before investments are made, to urgently set up a comprehensive FDI screening mechanism. In the meantime, it calls on such Member States to use other suitable legal instruments to address cases where the acquisition or control of a particular business, infrastructure or technology would create a risk to security or public order in the EU.

The Commission calls on those Member States that are in the process of setting up such a screening mechanism to accelerate its adoption and prepare its implementation, including by supporting it with appropriate resources.

The regulation does provide for some key requirements for national screening mechanisms:

transparency of rules and procedures;
non-discrimination among foreign investors;
confidentiality of information exchanged;
the possibility of recourse against screening decisions, and;
measures to identify and prevent circumvention by foreign investors.

On the basis of notifications by Member States pursuant to the regulation, the Commission publishes an up-to-date list of screening laws in the EU.

Consult the list of screening mechanisms notified by Member States

Annual reports

The regulation requires the Commission to submit a report on the implementation of the regulation to the European Parliament and to the Council on a yearly basis.

The Commission’s third 'Report on the Screening of Foreign Direct Investments into the Union' was adopted on 19 October 2023. The report includes:

figures and trends for FDI into the EU;
legislative developments in Member States;
screening activities by Member States, and;
an assessment of the EU cooperation mechanism on FDI screening in 2022.

The report also has a Staff Working Document with more economic data on foreign investments as well as additional details on the legislative developments in all Member States.

Annual reports on the screening of foreign direct investments into the Union

Group of experts on screening foreign direct investment

The Commission in 2017 established a group of experts from Member States. The objective of the group is to discuss issues relating to investment screening, share best practices and lessons learned, and exchange views on trends and issues of common concern relating to foreign investments. Pursuant to Article 12 of the new regulation, the group may also discuss systemic issues relating to the implementation of the regulation.

Commission Decision of 29.11.2017 setting up the group of experts on the screening of foreign direct investments into the European Union C(2017)7866 final
Register of Commission Expert Groups

Data protection under the EU investment screening mechanism

Joint Controllership Arrangement (JCA)

Under the EU cooperation mechanism set up by the FDI Screening Regulation, Member States and the Commission exchange information about foreign direct investments. This may involve the processing of personal data (e.g. names and addresses of natural persons involved in a transaction).

Hence, the Member States and the Commission have concluded a Joint Controllership Arrangement (JCA) in line with data protection rules, notably the GDPR (Article 26), the EDPR (Article 28) and the EU FDI Screening Regulation (Article 14) and the underlying Commission Decision. The JCA is an agreement between Member States and the Commission on the processing of these personal data. It sets out the allocation of the respective roles, responsibilities and practical arrangements between Member States and the Commission: both being joint controllers of these data.

The document entered into force on 28 April 2022. The main elements of the JCA are available in the EU Register of the Data Protection Officer (DPO).

International cooperation on investment screening

The regulation encourages Member States and the Commission to cooperate with the responsible authorities of like-minded third countries on issues relating to the screening of foreign direct investments on grounds of security and public order.

Such administrative cooperation should aim to strengthen the effectiveness of the framework for screening of investment by Member States and the cooperation between Member States and the Commission. The EU pursues international cooperation bilaterally or in a wider format.

In particular, the EU is supporting the ongoing work of the OECD on Investment policies related to national security and public order.

Since 2021, cooperation with the US on investment screening is also ongoing in Working Group 8 of the Trade and Technology Council (TTC). Stakeholders may provide inputs on Futurium, which is a virtual space for businesses, public authorities, innovators, researchers, civil society, and policymakers to shape the EU and US discussions in the Trade and Technology Council together.

EU-US Trade and Technology Council Inaugural Joint Statement (Pittsburgh, 29 September 2021)
Website of the TTC Investment Screening Working Group on Futurium