Revision of the EU Foreign Direct Investment Screening Regulation

Briefing 22-07-2024

In 2019, the European Union (EU) adopted the Foreign Direct Investment (FDI) Screening Regulation (Regulation 2019/452/EU), applied since October 2020. The regulation provides the EU with a framework for screening incoming foreign direct investment (FDI) from third-countries, with the objective of better equipping the EU to identify, assess and mitigate potential risks certain FDIs pose to the security or public order of the Union or its Member States. These concern, for example, access to sensitive information, security of supply of critical inputs, and control over crucial technologies. According to the FDI Regulatory Restrictiveness Index of the Organisation for Economic Co operation and Development (OECD) the EU has one of the world's most open investment regimes, and FDI from countries outside the EU is a driver of economic growth and jobs. The relevance of FDI as a source of economic activity has increased over the past two decades, with over 35 % of EU assets owned by foreign (non-EU) investors. Foreign investment increasingly focuses on critical infrastructure and advanced technology sectors, such as telecommunications. This has raised concern in the EU about the consequences that foreign acquisitions of EU businesses may have on security and public order, particularly in the Union's strategic sectors. In January 2024, the European Commission presented a proposal for the revision of the FDI Screening Regulation, part of the Commission work programme, accompanied by an extensive evaluation of the current framework. The proposal for a revised regulation includes the mandatory establishment of national FDI screening mechanisms for all Member States, a set of minimum assessment criteria for investments, and expanding the scope to include investment made by EU-based entities, but controlled by foreign investors. This briefing discusses the implementation of the current FDI Screening Regulation in EU Member States on the basis of the Commission evaluation findings, other institutional reports, and expert analysis.