The figures are fresh off the press: the European Commission published its Fifth Annual Report on the screening of foreign direct investments (“FDI”) into the European Union (“EU”) just a few days ago.[1] Like the previous editions, the Fifth Annual Report offers a statistical overview of the EU FDI framework’s activities in the previous year (2024 for the Fifth Annual Report). Based on submissions from all 27 Member States, the report surveys both the performance of Member States’s national screening regimes and the functioning of the EU cooperation process for FDI. FDI screening has expanded its reach in the EU, from 14 Member States having active FDI screening tools in 2019,[2] to 24 today, with the remaining three Member States in the midst of enacting similar tools. [3] This post distils the five key trends that have emerged in the past year highlighted by the Fifth Annual Report.Continue Reading EU’s Fifth FDI Annual Report: Five trends in Europe’s screening activities
Five Key Points on FDI Screening in the EU Defence Sector
The war in Ukraine, and other recent geopolitical conflicts, has underscored the need for EU-based defence capabilities to scale up to face these challenges. Several EU initiatives which have sought to stimulate investment are starting to bear fruit, as the European Defence Agency recently reported record high defence spendings in the EU (€350bn for 2024, a 19% increase to 2023). Political support for the sector has been demonstrated by Commission President Von Der Leyen proclaiming “a new era for European Defence and Security” in her latest State of the European Union address.
In this context, understanding the regulatory framework applicable to investments in the EU defence sector is proving increasingly important. Foreign direct investment (“FDI”) screening regimes represent one of the most important regulatory checks to clear for investors.
This blog post reviews five key points for investors to consider when making investments in the defence sector given the current geopolitical context.Continue Reading Five Key Points on FDI Screening in the EU Defence Sector
EP Approves Draft FDI Regulation Giving Extensive Powers to EC
Introduction
On Thursday 8 May 2025, the EU took another important step towards revamping its framework to screen foreign investment, with the European Parliament adopting an amended version of the bill (the “EP Bill”, available here). That vote has now cleared the way for the next step in the legislative process: the tri-partite negotiations between the European Commission, the Council of the EU, and the European Parliament (aka “trilogue”) to arrive to a final text that will become law.
The EP Bill endorses the Commission proposal[1] that sought to bring more harmonisation/oversight over Member States, but also goes further and makes several ambitious additions to the Commission proposal in particular, the EP Bill would: (i) give new decision-making powers to the Commission in an area where such powers previously have squarely rested in the hands of the EU Member States, (ii) expand the list and scope of sectors in which foreign investments could undergo screening, and (iii) require reporting and screening of greenfield investments above a certain amount in many sectors.
This post explains these key proposed changes for non-EU investors and sets out how we see the prospects of these changes surviving the remainder of the legislative process.
What key changes has the Parliament made to the European Commission’s Proposal?
1. New decision-making powers for the Commission
By way of context, the existing EU foreign investment screening regulation (“Current FIR Regulation”) establishes a complex mechanism requiring a Member State authority screening a given foreign investment into its country to notify it to the Commission and the other Member States.[2] The screening Member State authority must then take “due consideration” of any comments from the Commission or other Member States, but it remains the ultimate decision maker.[3]Continue Reading EP Approves Draft FDI Regulation Giving Extensive Powers to EC
Toward EU Outbound Investment Regulation
On 15 January 2025, the European Commission recommended that EU Member States review outbound investment in three critical technologies—semiconductors, AI, and quantum—with the aim of potentially creating an EU–wide regime to regulate such investment. EU Member States should report to the Commission on their findings and risk assessment within 18 months. These findings would inform a future policy proposal, so any introduction of outbound investment rules in the EU is likely to be several years away.
How did we get here?
Outbound investment mechanisms aim to regulate domestic companies making outward investments of capital, expertise, and knowledge that could contribute to the ‘leakage’ of critical and sensitive technologies to third countries. Outbound investments typically take the form of EU firms purchasing equity in non-EU entities (e.g. through joint ventures, greenfield investments), but can also take place through less structured arrangements such as R&D cooperation or transfer of employees.
The focus on outbound investment screening has its roots in transatlantic cooperation on China policy, and specifically the desire to minimize Western technology leakage to China. In particular, the U.S. Treasury Department issued new regulation prohibiting or otherwise requiring disclosure of outbound investment—in semiconductors, AI, and quantum—in Chinese entities as well as entities in other jurisdictions that hold certain interests in Chinese companies. The regulations entered into force on 2 January 2025.
Within the EU, outbound investment control was put on agenda with the European Economic Security Strategy and a subsequent white paper on outbound investment. Before then, only a few EU countries, such as Austria and Spain would screen outbound investment, and there had been no EU-wide approach on this topic.
What does it mean?
EU Member States are requested to monitor outbound investments in three critical technologies: semiconductors, AI, and quantum. The original white paper proposal also named biotechnologies amongst suggested critical technologies to be covered by the review, but this has been dropped in the new recommendation. The recommended scope of the monitoring exercise is as follows:Continue Reading Toward EU Outbound Investment Regulation