Revision of the EU FDI Screening Regulation: Is EU-wide investment screening on the way?

On 24 January 2024, the European Commission published a proposal to revise the EU FDI Screening Regulation (Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union) to make the investment screening mechanisms of the EU Member States more effective by further harmonising them and closing loopholes.

The EU FDI Screening Regulation, which has been in force since October 2020, has already established certain minimum standards for screening foreign investments in EU Member States and forms the basis of the EU cooperation mechanism. The European Commission now plans to tighten the rules of the EU FDI Screening Regulation. In particular, changes in the political situation and national security since 2020, marked by the Covid-19 pandemic and the Russian war of aggression against Ukraine, have shown that a screening mechanism for investments from non-EU countries is an important regulatory tool.

Planned changes to the EU FDI Screening Regulation

(i) Obligatory screening mechanism

The revised EU FDI Screening Regulation is intended to oblige all EU Member States to introduce their own national investment screening regime. At the time of publication of the European Commission’s Fourth Annual Report on the screening of foreign direct investments in October 2024, only three EU Member States (Greece, Croatia and Cyprus) did not yet have their own investment screening regime; these countries would now be obliged to establish their own national regime.

(ii) EU FDI Screening Regulation to be extended to indirect foreign investments

The EU FDI Screening Regulation currently applies only to investments where the direct acquirer has its registered office outside the EU; acquisitions by EU companies whose parent company is based outside the EU are not covered. The European Commission’s revision proposal aims to change this in order to close the loophole in the Regulation’s scope of application.

(iii) Improvement of the procedure for the cooperation mechanism

The existing EU cooperation mechanism is to be made more effective, partly by introducing a uniform standstill obligation. The aim is to ensure that the EU cooperation mechanism is able to better identify investments critical for security in the future.

(iv) Harmonisation of critical sectors

Since there are currently still considerable differences between the existing investment screening mechanisms of the EU Member States in terms of their sectoral scope, a uniform minimum standard for critical sectors is to be established. Investments in the critical sectors must always be reviewed and are subject to a notification requirement.

Implications for German investment screening

The greatest need for change in the current German investment screening mechanism is likely to arise with regard to the critical sectors (section 55a German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung)), if the European Commission’s proposals are implemented. The sectors in which an obligatory review is envisaged are set out in detail in Annexes I and II of the revision proposal and in some cases go beyond the notification requirements in the German investment review. For example, the revision proposal would impose additional notification requirements on projects of Union interest, as well as through the comprehensive reference to goods covered by the Dual-Use Regulation, the Internet of Things, virtual reality and biotechnologies. Additionally, the planned standardisation of certain definitions and sectoral boundaries may require further amendments.

Regarding indirect acquisitions by foreign investors, the German investment screening regime already goes beyond the revision proposal. German investment screening covers indirect acquisitions by foreign investors above the relevant screening thresholds (from 10%, depending on the sector), whereas the planned revision requires an acquisition of control by an (indirect) non-EU based acquirer.

This article is part of the Competition Outlook 2025. You can find all Competition Outlook articles here.