CELIS Update on Investment Screening and Economic Security – February 2025
by Helene Schramm with the help of intern Surbhi Gupta
INVESTMENT SCREENING MECHANISMS
European Union – European Economic Area’s Standing Committee of the EFTA States comments on the Proposal for a regulation on the screening of foreign investments in the Union
On 25 February 2025, the European Economic Area (EEA) European Free Trade Association (EFTA) States—comprising Iceland, Liechtenstein, and Norway—released a comment on the European Commission’s proposal to revise the regulation on the screening of foreign direct investments within the Union of 24 January 2024.
The EEA EFTA States acknowledged the importance of foreign direct investments (FDI) for economic growth but emphasized the necessity of protecting national security and public order. They expressed concern that the proposed mandatory FDI screening mechanisms for all EU Member States could lead to regulatory fragmentation and potentially hinder cross-border investments. To mitigate these risks, the EEA EFTA States advocated for a harmonized approach that balances openness to foreign investments with adequate safeguards. They recommended that the regulation considers the specificities of smaller economies and avoids imposing disproportionate administrative burdens.
The EEA EFTA States also highlighted the importance of close cooperation and information sharing between the EU and EEA EFTA countries to ensure the effectiveness of FDI screening mechanisms. They stressed that such collaboration is crucial for addressing security risks associated with foreign investments while maintaining the integrity of the internal market.
Furthermore, they called for clear definitions and criteria within the regulation to ensure transparency and predictability for investors. This clarity would help prevent the misuse of FDI screening mechanisms for protectionist purposes and maintain a fair investment environment.
The EEA EFTA States underscored the need for proportionality in the application of the regulation, suggesting that FDI screening should be limited to sectors where security risks are evident. They cautioned against an overly broad application that could unnecessarily deter beneficial investments.
The EEA EFTA Comment on the Proposal for a regulation on the screening of foreign investments in the Union of 25 February 2025 can be accessed here.
European Union – European industry demands streamlined EU FDI Screening framework in Joint Business Coalition Letter
On 11 February 2025, a coalition of European industry leaders issued a Joint Business Coalition Letter, urging the European Union to reform its Foreign Direct Investment screening regulation. The letter criticizes the current Regulation (EU) 2019/452, highlighting that fragmented national screening mechanisms create legal uncertainty, administrative burdens, and investment deterrents across Member States.
On 24 January 2024, the European Commission proposed a new FDI Screening Regulation, requiring all Member States to implement mandatory screening mechanisms with a harmonized sectoral scope. It also extends scrutiny to indirect foreign investments via EU-based intermediaries. The coalition supports harmonization but warns against overbroad extraterritorial policies, arguing they risk deterring strategic investments and complicating compliance.
The Joint Business Coalition Letter urges the European Commission to establish clear legal definitions, uniform procedures, and enhanced cooperation between national authorities to protect security interests while preserving investment flows. Without such reforms, the EU risks losing global competitiveness in critical industries.
The Joint Business Coalition Letter can be accessed here.
Romania – Romania opens public consultation on FDI Screening Guidelines
On 2 February 2025, Romania’s Competition Council launched a public consultation on draft guidelines for its FDI screening framework, refining the implementation of Emergency Ordinance No. 46/2022 in line with EU Regulation 2019/452.
The guidelines seek to enhance transparency and legal certainty, specifying notifiable transactions, including acquisitions of control, minority stakes with significant influence, expansions into new business lines, and certain internal restructurings. A key feature is the introduction of pre-closing notifications, allowing investors to seek clearance based on preliminary agreements like Memorandums of Understanding and Letters of Intent.
The guidelines set out assessment criteria focusing on potential threats to national security and public order, particularly in sectors involving critical infrastructure, sensitive technologies, and essential supply chains. Romania’s Foreign Direct Investment Review Commission (CEISD), responsible for screening transactions, retains significant discretionary power in determining strategic risks, raising concerns about regulatory predictability and consistency. Notably, the guidelines do not provide a clear definition of “effective participation in management”, which could create uncertainty for minority investors.
This move comes amid heightened EU-wide scrutiny of foreign investments, particularly from non-EU entities with geopolitical implications. Romania’s stricter approach reflects broader regional efforts to safeguard strategic sectors while balancing investment openness.
The consultation period, open until 11 March 2025, offers stakeholders an opportunity to influence the final framework, which will likely set a precedent for FDI regulation in Central and Eastern Europe.
The drafted guidelines can be accessed here (Romanian version).
Finland – Finnish FDI authority publishes Evaluation Report on stricter FDI screening measures
On 5 February 2025, the Finnish government released an Evaluation Report assessing the effectiveness of its Foreign Direct Investment Act and proposing significant revisions to enhance scrutiny of foreign investments in critical infrastructure and strategic industries. The Evaluation Report highlights the need for a stricter, risk-based approach, particularly for investments in energy, telecommunications, defence, and emerging technologies.
Key recommendations include expanding the scope of mandatory filings to cover indirect acquisitions, minority shareholdings with substantial influence, and supply chain vulnerabilities affecting national security. The report also suggests aligning Finland’s FDI framework more closely with EU Regulation 2019/452, reinforcing coordination with the European Commission and other Member States to mitigate security risks posed by state-backed foreign investors.
Finland’s evolving stance reflects broader EU-wide concerns over foreign acquisitions in sensitive sectors, particularly those involving non-EU entities linked to geopolitical risks. The proposed revisions, if implemented, would place greater compliance burdens on investors, requiring earlier engagement with Finnish authorities to navigate the approval process. These changes signal Finland’s commitment to balancing investment openness with national security interests, reinforcing its position within Europe’s tightening FDI control landscape.
The Evaluation Report on stricter FDI screening measures can be accessed here (in Finnish).
Germany – German Federal Ministry for Economic Affairs and Climate Action publishes its annual facts and figures on investment screening 2024
Germany remains a leading destination for FDI, but recent data highlights a tightening regulatory landscape in response to national security concerns. The Federal Ministry for Economic Affairs and Climate Action (BMWK) has published updated figures on FDI screening in Germany, reflecting an increase in investment reviews, conditional approvals, and blocked transactions under the Foreign Trade and Payments Act (AWG) and the Foreign Trade and Payments Ordinance (AWV).
A key trend is the growing scrutiny of non-EU investments in critical sectors, particularly technology, energy, and defence, aligning with EU Regulation 2019/452. Germany’s cross-sectoral review process now covers acquisitions of 10% or more in sensitive industries, while transactions involving dual-use technologies or infrastructure face heightened examination.
The 2025 regulatory update also underscores concerns over state-backed foreign investors and supply chain security, with authorities emphasizing earlier engagement and pre-notification consultations for smoother clearance. Notably, BMWK is increasingly using mitigation agreements rather than outright prohibitions to address security risks, signaling a pragmatic but cautious approach to inbound investments. As Germany strengthens its FDI controls, investors must navigate a more complex regulatory environment, balancing compliance obligations with opportunities in one of Europe’s most attractive investment destinations.
The annual facts and figures on investment screening 2024 can be accessed here (in German).
ECONOMIC SECURITY STRATEGIES
European Union – European Commission unveils ‘Competitiveness Compass’ to enhance EU’s economic dynamism
On 29 January 2025, the European Commission introduced the Competitiveness Compass, a strategic roadmap designed to revitalize Europe’s economic growth and global standing. This initiative draws heavily from the findings of the Draghi report: A competitiveness strategy for Europe (Part A) and the Draghi report: In-depth analysis and recommendations (Part B), which underscores the necessity for a unified economic strategy, robust industrial support, and an improved financial system to bolster green investments.
The Competitiveness Compass outlines three primary areas for transformative action:
- Innovation: Aiming to close the innovation gap by fostering research and development in cutting-edge technologies.
- Decarbonization: Establishing a joint roadmap that aligns environmental sustainability with economic competitiveness.
- Security: Reducing excessive dependencies and enhancing the EU’s strategic autonomy.
The Competitiveness Compass emphasizes the importance of integrating security considerations into EU economic policies, recognizing that a secure environment is essential for the economic success and competitiveness of EU firms.
While the initiative seeks to streamline regulations and reduce administrative burdens—targeting a 25% reduction in costs for companies and up to 35% for small and medium-sized enterprises—there are concerns about a potential deregulation. Critics caution that easing regulations might undermine environmental standards and worker protections.
In summary, the Competitiveness Compass represents the European Commission’s commitment to fostering a resilient, innovative, and secure economic environment, positioning the EU to navigate contemporary global challenges effectively.
The Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the regions: A Competitiveness Compass for the EU of 29 January 2025 can be accessed here.
European Union – European Commission introduces the Clean Industrial Deal on 26 February 2025
On 26 February 2025, the European Commission unveiled the Clean Industrial Deal, a comprehensive strategy to bolster EU industrial competitiveness while advancing decarbonization efforts.
A central component of the Deal is the allocation of over €100 billion to support EU-based clean manufacturing. This funding will be channeled through the proposed Industrial Decarbonisation Bank, which aims to leverage additional private investments to accelerate the transition to a low-carbon economy. To ensure affordable energy—a cornerstone of industrial competitiveness—the Deal includes measures to expedite the deployment of renewable energy sources, enhance electrification, and complete the internal energy market with necessary interconnections. These efforts are designed to reduce energy costs for industries, businesses, and households, thereby promoting sustainable economic growth. The Clean Industrial Deal also emphasizes the importance of circularity by proposing a Circular Economy Act aimed at reducing waste and extending the lifecycle of materials. This initiative seeks to maximize the EU’s limited resources and decrease reliance on external suppliers for raw materials, thereby enhancing market resilience.
To strengthen global partnerships, the EU plans to launch Clean Trade and Investment Partnerships aimed at diversifying supply chains and securing mutually beneficial agreements. Additionally, the Deal proposes simplifying and strengthening the Carbon Border Adjustment Mechanism to ensure fair competition and protect EU industries from carbon leakage.
The Clean Industrial Deal represents a holistic approach to transforming Europe’s industrial landscape by integrating sustainability with economic growth, thereby positioning the EU as a leader in the global transition to a net-zero emissions future.
The Clean Industrial Deal: A joint roadmap for competitiveness and decarbonisation of 26 February 2025 can be accessed here.
USA – President Trump issues the America First Investment Policy memorandum
On 21 February 2025, President Donald J. Trump issued the “America First Investment Policy” memorandum, aiming to bolster the U.S. economy while safeguarding national security.
The policy encourages foreign investment from allied nations to create jobs and stimulate economic growth, emphasizing the United States’ commitment to maintaining an open investment environment.
However, it raises concerns about investments from adversarial nations, particularly the People’s Republic of China (China), which is accused of leveraging investments to acquire advanced technologies and strategic assets. The memorandum highlights that China exploits U.S. capital markets to fund its military and intelligence operations, posing significant risks to U.S. security. In response, the policy directs the Committee on Foreign Investment in the United States to enhance scrutiny of foreign investments in critical sectors, including technology, agriculture, and infrastructure. Additionally, the administration is considering restrictions on U.S. outbound investments to China in sensitive technologies such as semiconductors, artificial intelligence, and biotechnology.
The America First Investment Policy memorandum of 21 February 2025 can be accessed here.
