The European Commission welcomes the political agreement reached today by the European Parliament and the Council on a strengthened EU Foreign Direct Investment (FDI) screening system. The conclusion of these negotiations marks an important step toward strengthening the EUs security and public order, ensuring that foreign investments continue to support, rather than undermine, Europes economic security, resilience and broader interests.
The revised framework will make investment screening more robust, coherent, and strategic. It will reinforce the EUs ability to identify and collectively address potential risks from foreign investments to security and public order.
The agreed framework introduces several fundamental improvements:
- Mandatory screening mechanisms in all Member States, supported by harmonised national rules to ensure consistent screening across the Union.
- A minimum mandatory scope for screening, ensuring that all Member States assess foreign investments in a core set of sensitive and strategic areas.
- Broader coverage of indirect foreign control, extending EU screening to cover investments made by EU-based investors that are ultimately controlled by individuals or entities from non-EU countries.
- Filtering criteria to ensure that the network of national authorities and the Commission only review potentially sensitive cases.
- Transparency improvements, such as requiring Member States to publish guidance on the scope of their screening mechanisms and annual reports.
- A common minimum level of harmonisation of key procedural elements throughout the EU. This should facilitate investments in corporate groups present in several Member States, in line with the broader call from the Draghi Report of 2024.
Next steps
The revised framework will enter into force in the first half of next year, once the Council and the European Parliament have formally voted on it. It will start applying 18 months after entry into force.
Background
The EUs framework for FDI screening, which began to operate on 11 October 2020, is part of a broader three-pillar approach to boosting EU economic security by promoting the EUs competitiveness, protecting against risks, and partnering with the broadest possible range of countries to advance shared economic security interests. With that in mind, on 24 January 2024 the Commission adopted five initiatives aimed at further strengthening the EUs economic security, – including the legislative proposal agreed on today.
The original Regulation did not harmonise the formal FDI screening mechanisms then used by almost half of the Member States but aimed to enhance cooperation and information-sharing on FDI screening between the Commission and Member States, and to increase legal certainty and transparency.
In 2024, more than 3,000 investment transactions were reviewed by national screening authorities in the Union. The new Regulation is expected to apply to more transactions as it will also cover intra-EU transactions and the common minimum scope will likely require some Member States to expand their screening mechanisms.
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