European Union: A New Regulation On FDI Screening In Europe

I. Introduction

On 5 March 2019, the Council of the EU approved a new framework to screen foreign direct investments ("FDI") coming into the EU. This concludes a legislative process kicked off in 2017. The newly adopted Regulation aims to protect the EU's strategic critical assets against investments that are detrimental to the legitimate interests of the Union or its Member States. It sits well with the more ambitious move by France and Germany to shape a European industrial strategy,1 which acknowledges FDI screening as one of its centrepieces.

II. The new enabling framework

The Regulation does not establish EU-level screening nor does it harmonise existing screening mechanisms or obligate Member States to create an FDI screening mechanism. Instead, it confirms that Member States may maintain, amend or adopt FDI screening mechanisms on grounds of security or public order under the conditions spelled out in the Regulation. It also acknowledges that Member States will retain their final decision-making power on FDI.

Rather, the Regulation seeks to set in place a framework that will enable structured cooperation between the European Commission (EC) and the Member States, while allowing decentralised FDI investment screening by the Member States.

To that end the new framework will:2

  • Create a cooperation mechanism where Member States and the EC will be able to exchange information and raise concerns related to specific investments; this includes a notification obligation of the Member States towards the EC and other Member States regarding FDIs that are subject to their screening;
  • Allow the EC to issue opinions when 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 of EU interest (e.g. Horizon 2020 or Galileo). The EC is obliged to issue an opinion if at least one third of the Member States believe the FDI may adversely affect their security or public order, or upon a request from the Member State in whose territory the FDI is planned.

    The Member State to which the opinion is addressed is required to take utmost account of the EC's position and to provide the EC with an explanation should it decide not to follow the EC's recommendations;
  • Encourage international cooperation on investment screening, including sharing experiences, best practices and information on issues of common concern. The cooperation between the EC and the Member State should be carried out through established contact points. In addition, the Regulation establishes an expert group composed of representatives of the Member States that should support the EC and the Member States in their policy-making.
  • Set certain requirements for Member States who wish to maintain or adopt a screening mechanism at the national level. For instance, Member States will need to put in place effective rules that their screening cannot be circumvented;
  • Take into account the need to operate under short business-friendly deadlines and strong confidentiality requirements.

The attainment of these objectives is centered on the cooperation mechanism. Going forward, Member States and the EC will be able to cooperate on incoming foreign direct investments in the framework of a structured process.

This cooperation process also applies to FDIs in Member States without a screening mechanism. Thus, the Regulation empowers Member States and the EC to comment on FDI that are not subject to an official screening.

The Regulation covers a broad range of investments which aim to establish or maintain lasting links between a non-EU investor (including state entities) and an undertaking carrying out economic activity in a Member State.

It sets out an indicative list of factors which the Member States / EC should consider when determining whether an investment is likely to affect security or public order. This includes effects of the investment on critical infrastructure, critical technologies, supply of critical inputs (e.g. energy or raw materials), access to sensitive information or the ability to control information, and the freedom and pluralism of the media.

The Member States and the EC may also consider the general background of the foreign investor, in particular whether the foreign investor:

  • is directly or indirectly controlled by the government;
  • has been previously involved in activities affecting the security or public order of a Member State; or
  • carries a serious risk that it engages in illegal or criminal activities.

The Regulation will enter into force in the coming weeks following publication in the Official Journal. Member States and the EC will then have a transitional period of 18 months to put in place the necessary arrangements for the application of this new mechanism.

III. Outlook

While the EU will remain an open economy for investments, the new FDI screening is anticipated to increase scrutiny of foreign acquisition. Currently 14 Member States have FDI screening mechanisms in place, while several others are in the process of reforming them or adopting new ones. In Central Eastern Europe, Austria, Hungary and Poland have FDI screening mechanisms. It is anticipated that the new EU-level screening framework will accelerate the convergence of existing FDI review rules, but also may encourage the adoption of new laws in those countries which currently do not foresee FDI screening.


1 Franco-German Manifesto for a European Industrial Policy Fit for the 21st Century

2 See press release of the European Commission of 5 March 2019, Foreign Investment Screening: new European framework to enter into force in April 2019

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions