A regulation on the screening of foreign direct investments (FDI) into the European Union has been approved by both the European Parliament and the Council (Regulation 2019/452/EU). The Regulation establishes a framework for the screening by Member States of foreign direct investments into the Union on the grounds of security or public order. It also provides a mechanism for cooperation between Member States, and between Member States and the Commission, with regard to foreign direct investments likely to affect security or public order.

Key takeaways

The Regulation:

  • establishes a framework for the screening by Member States of FDIs into the Union on the grounds of security or public order
  • creates a cooperation mechanism whereby Member States and the Commission may exchange information and raise concerns about specific investments
  • allows the Commission to issue non-binding opinions where it believes that an investment poses a threat to the security or public order of more than one Member State, or when an investment could undermine a project or programme of interest to the whole EU (the list of such projects can be amended by the Commission)
  • sets certain requirements for Member States who wish to maintain or adopt a screening mechanism at national level. Member States without screening systems will not be required to create one
  • does not interfere with Member States' final say on whether a specific investment is permitted in their territory

The Regulation represents the EU's response to an evolving and increasingly complex investment landscape. It is an attempt to find a balance between security concerns and maintaining the EU's position as one of the world's most open investment regimes, or, as the European Commission has described it: "welcoming foreign direct investment while protecting essential interests". According to European Commission statistics, more than 35% of total EU assets belong to foreign-owned companies. FDI stocks held by investors from outside the EU amounted to €6,295 billion at the end of 2017.

While the number of companies in the EU controlled by third country investors is still small, they have a significant economic impact because of their larger than average size and their focus on high-technology sectors. FDI is high in key sectors, such as oil refining, pharmaceuticals, electronic and optical products, and electrical equipment. There has been an increase in investments from emerging economies; notably China for aircraft manufacturing and specialised machinery, and India for pharmaceuticals.

The Regulation is applicable to a broad range of investments "which establish or maintain lasting and direct links between investors from third countries including State entities", and undertakings carrying out an economic activity in a Member State. It does not cover portfolio investments. Foreign investors may be natural persons or undertakings of a third country.

Screening mechanisms of Member States

At present, some Member States maintain their own FDI screening mechanisms and reserve the power to restrict investments that pose a threat to their essential interests. The Regulation's objective is not to harmonise the formal FDI screening mechanisms currently used by Member States, but instead to enhance cooperation and information-sharing. Member States with screening mechanisms shall ensure that the rules and procedures related to their mechanisms are transparent and non-discriminatory. They shall also set out the circumstances triggering screening, the grounds for screening and the procedural rules to be applied. Screening mechanisms must also afford foreign investors and undertakings the possibility to seek recourse against screening decisions.

Annual reporting

Member States shall submit an annual report to the Commission containing information on FDIs that took place in their territory in the previous calendar year, as well as details of requests for information received from other Member States.

Ireland and FDI

Ireland, like many Member States, does not currently have a screening mechanism for FDI and will not be obliged to establish one by this Regulation. The final decision on whether to block or permit an FDI will remain with Irish authorities. It has been reported that the Department of Business, Enterprise and Innovation is considering whether Ireland should introduce an investment screening mechanism, but nothing further is known on this at present.


Member States with screening mechanisms are obliged to notify the Commission and the other Member States where an FDI is undergoing screening. The notification may include a list of Member States whose security or public order is "likely to be affected". Member States such as Ireland without screening mechanisms are not required to send these notifications.

A Member State may provide comments on a "planned or completed" FDI in another Member State where it considers it "likely to affect its security or public order", or where it has information relevant to that FDI. This provision applies whether or not the Member State in which the FDI is planned or completed has a screening mechanism. The Commission will receive these comments simultaneously and circulate them to the other Member States.

A Member State (including that in which the FDI is planned) may also request the Commission to issue an opinion or ask other Member States to provide comments. The Commission also has the power to issue opinions irrespective of whether other Member States have provided comments. These comments and opinions are non-binding, but Member States should give them "due consideration".

Member States and the Commission may also request additional information on the FDI. Any such request shall be justified, limited to information necessary to provide comments or to issue an opinion, proportionate to the purpose of the request and "not unduly burdensome" for the Member State where the FDI is planned or completed.

The Member State where the FDI is planned or completed may request the foreign investor or the associated undertaking to provide the information necessary to meet these information requests.

It is estimated by the Commission that this cooperation procedure will last 35 days, so Member States will need to factor this into their current FDI arrangements.

What information will be exchanged?

  • Identities of investor and target company
  • Sectors and countries in which the investor and target company operate
  • Value of the investment
  • Source(s) of funding
  • Anticipated date of the transaction

Contact points

Each Member State shall establish a contact point for the implementation of this Regulation. These contact points will facilitate requests for and the exchange of information between Member States and the Commission. Such communications will operate on a system provided by the Commission.


At present, 14 Member States have investment screening rules, including France, Germany and the United Kingdom. Details of these screening mechanisms must be communicated to the Commission by 10 May 2019. Member States also have a continuing obligation to notify the Commission of any newly adopted mechanisms, or amendments to existing ones, within 30 days of the entry into force of the new/amended mechanism. The Commission will publish and maintain a list of these screening mechanisms.

The Regulation comes into force on 10 April 2019, but will apply in all Member States from 11 October 2020. Preparations are ongoing at EU level to facilitate a regular exchange of information and best practices with the Member States through a dedicated expert group and to ensure the confidentiality of exchanges by way of a secure and encrypted system. The Commission has prepared a Factsheet setting out the key points of the Regulation.