EU foreign investment screening and export controls help underpin European security

The European Commission analysed over 420 foreign direct investments (FDI) into the EU over the past year, according to the Annual Report on FDI Screening released today. In addition, EU Member States blocked 560 requests for exports of dual use goods over the same period. This level of activity demonstrates a clear commitment by the European Commission and Member States to safeguarding European security and public order in times of increased geopolitical tensions.

The number of EU Member States with a screening mechanism has grown from 11 to 21 since the EU’s FDI screening regulation came into force, with more on the way.

As regards dual-use goods (goods which can be used for civil or military purposes), Member States reviewed 38,500 export applications in 2021 for goods worth €45.5 billion. Member States blocked exports on account of security risks in 560 cases, worth a total of €7 billion.

FDI Screening

The third Annual Report on FDI screening shows that the use of the screening mechanism continued to grow in 2022. Its key findings are:

• The Commission rapidly completed the assessment of FDI transactions notified by Member States: 87% were assessed in just 15 calendar days, thus ensuring no delays to authorisations by Member States.
• The EU mechanism does not restrict the EU’s openness to FDI: of the more than 420 cases screened in 2022, less than 3% led to the Commission issuing an opinion.
• The top six sources of FDI into the EU in 2022 were the US, UK, China, Japan, the Cayman Islands and Canada.
• Most cases concerned manufacturing (59%), covering a diverse set of industries including energy, aerospace, defence, semiconductors, health, data processing and storage, communication, transport and cybersecurity.

The EU FDI Screening Regulation entered into full application in October 2020. The cooperation mechanism created by the Regulation enables Member States and the Commission to exchange on FDI quickly and efficiently. It has allowed for the prevention of investments posing security or public order risks without restricting the overall flow of foreign investment into the EU. Since the creation of the cooperation mechanism, the Commission has screened more than 1100 foreign direct investments.

The Economic Security Strategy published in July 2023 highlights the need to build a shared understanding of risks to the EU’s economic security and to make better use of existing tools. Against this backdrop, the European Commission is completing an evaluation of the FDI Screening Regulation and a revised Regulation will be proposed before the end of the 2023.

Export Controls

This statistical update on the implementation of the Export Controls Regulation published today by the European Commission complements the 2022 Annual Export Control Report. It provides 2021 licensing data collected using a methodology developed on a voluntary basis with Member States, under the previous Dual-Use export control regulation. The update closes a data gap, as the forthcoming 2023 Annual Export Control Report will include 2022 licensing data collected following an updated methodology, in line with the requirement for enhanced transparency under the current Dual-Use export control Regulation (EU) 821/2021.

Background

EU Member States which operate FDI screening regimes are required to notify foreign direct investments to the other Member States and to the European Commission if these investments risk affecting security or public order in more than one Member State or have an impact on strategic projects or programmes of interest to the whole EU. The Commission then analyses the notified investments and where there are concerns, the Commission or other Member States can share them with the notifying Member State, which then takes these into account when deciding on the investment.