REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL First Annual Report on the screening of foreign direct investments into the Union
Date: 2021-11-23
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: EU Member State, activity report, coronavirus disease, direct investment, epidemic, financial control, foreign capital, foreign investment, investment policy, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.11.2021  COM(2021) 714 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL First Annual Report on the screening of foreign direct investments into the Union     {SWD(2021) 334 final}  
 
 
INTRODUCTION  

This Report is the first Annual Report by the European Commission regarding the application of 
the EU Foreign Direct Investment (FDI) Screening Regulation (the “FDI Screening Regulation”, 
or the “Regulation”). 

Prior to the entry into force of the FDI Screening Regulation on 11 October 2020, there was no 
EU-wide formalised cooperation among Member States and the European Commission on these 
matters. The European Commission had no role in the screening of FDI into the EU.  

The  past  years  have  seen  a  clear  change  in  investor  profiles  and  investment  patterns,  i.e. 
increasingly  non-OECD  investors,  occasionally  with  government  backing  or  direction,  whose 
motivation  for  a  particular  investment  might  not  always  be  exclusively  commercial1.  The  FDI 
Screening Regulation - and individual EU Member State screening legislation and mechanisms - 
reflect  a  strong  focus  on  protecting  security  or  public  order,  and,  a  strong  awareness  of  the 
criticality  of  certain  investment  targets,  e.g.  critical  infrastructure  and  inputs,  including  certain 
technologies, certain sectors such as the health sector,  and the risks that investments by certain 
investors may pose.  

This  Report  provides  transparency  around  the  operation  of  FDI  screening  in  the  EU,  and 
developments in national screening mechanisms. It contributes to the accountability of the Union 
in  an  area  where,  given  the  security  interests  at  stake,  transparency  regarding  individual 
transactions is neither possible nor appropriate.  

This first Annual Report, based on the reports by the 27 Member States and other sources, confirms 
the clear value-added of the Regulation and the cooperation mechanism.  

The Report consists of four Chapters:  

  Chapter 1 on figures and trends for FDI into the EU;  
  Chapter 2 on legislative developments in Member States;  
  Chapter 3 on screening activities by Member States;  
  Chapter 4 on the functioning of the EU cooperation on FDI screening.   

This  Annual  Report  is  adopted  simultaneously  with  the  Annual  Report  on  Dual  Use  Export 
Controls.  Both  FDI  Screening  and  Export  Controls  are  important  tools  for  strategic  trade  and 
investment controls in order to ensure security in the European Union.  

1  

For this, see e.g. Welcoming Foreign Direct Investment while Protecting Essential Interests, COM(2017) 494 
final – 13 September 2017. 

1 

 
 
 
 
                                                           
CHAPTER 1 - FOREIGN DIRECT INVESTMENT INTO THE EUROPEAN UNION – 
TRENDS AND FIGURES2  

The particular characteristics of 2020, and their impact on FDI, including for the European Union, 
are best understood when placed within a broader time-frame3. This allows a contrast against both 
the pre-COVID-19 pandemic environment and developments, as well as the indications, of some 
rebound in economic activity globally for the first quarter of 2021, including FDI transactions.  

In 2020, as shown in Figure 1 below, global FDI flows fell sharply to €885bn, meaning 35% less 
than in 2019, which was already significantly lower than the 2018 levels4. In the EU, the COVID-
19 pandemic produced even harsher effects when compared to the world average, with inward FDI 
falling by 71% to €98bn in 2020, down from €335bn in 2019. In 2020 inward FDI accounted for 
a mere 0.7% of EU27 GDP, sharply down from 3.6% in 20185. 

Figure 1: World and EU FDI flow  

R
U
E
N
O
I
L
L
I
B

2.200

2.000

1.800

1.600

1.400

1.200

1.000

800

600

400

200

0

1.903

1.973

1.518

1.478

1.367

488

376

277

481

335

885

98

2015

2016

2017

2018

2019

2020

Total Flows into EU27

Total Flows World

Source: OECD data, extracted on 20 May 2021.  

The word “uneven” captures developments well. The negative impact on FDI activity has been 
uneven depending on the origin of the foreign investor, the host EU Member State, and the sectors 

2      This Chapter covers the period from 1 January 2019 through 31 March 2021 
3  

For FDI flows from National Account figures (Figure 1) the time window 2015-2020 allows to see the effect of 
COVID-19 within an already decreasing trend in flows. The rest of the Chapter, based on the number of deals, 
covers the time-period of January 2019 through first quarter of 2021. 

4   Global FDI flows corresponds to the inflows FDI value reported by the OECD. 
5        Source: OECD, data extracted in May 2021.  

2 

 
 
 
 
                                                           
 
 
at issue (see Figures 2 and 3 and Table 1 below, which zoom in on mergers and acquisitions deals 
in  the  EU6).  In  2020,  34%  fewer  foreign7  M&A  deals  were  announced  as  compared  to  2019. 
Deal-making recovered slowly by end-2020 and in the first quarter of 2021 (+4.5% with respect 
to the first quarter of 2020), but remained 30% below the 2019 level (Figure 2). 

Figure 2: General trends of foreign M&A deals into the EU from January 2019 to March 2021  

s
l
a
e
d
A
&
M
n
g
e
r
o
f

i

.

N

160

140

120

100

80

60

40

20

0

trend 2019

trend 2021

trend 2020

Jan

Feb

March

Apr

May

June

Jul

Aug

Sep

Oct

Nov

Dec

Source: JRC calculations on Bureau van Dijk data extracted on 6 May 2021. Trend refers to 3-months rolling average. Foreign M&A deals indicate 
deals where the investor is ultimately owned by a non-EU entity.   

All EU Member States saw a drop in the number of M&A transactions (Figure 3), with France 
and Sweden particularly affected. Germany, with a more contained drop in the number of M&A 
transactions, witnessed reduced Chinese and US investments, while in Spain and the Netherlands 
deals from EFTA countries and from Korea and Japan lost ground in 2020 as compared to 2019.  

6  

The terms deals and transaction are used interchangeably when referring to mergers and acquisitions (henceforth 
M&A).  

7       The term foreign, when associated to M&A deals or to greenfield projects, refers to transactions made by non-
EU  investors  in  Europe.  An  Investor  is  classified  as  non-EU  when  it  is  majority  owned  by  a  non-EU  entity 
(person  or  company).  In  the  absence  of  a  majority  ownership,  the  location  of  headquarters  will  define  the 
nationality of the investor. 

3 

 
 
                                                           
 
 
 
 
Figure 3: Number of foreign M&A deals by target EU country: share over the total in 2020 and 
percentage change with respect to 2019. 

-80,0%

-60,0%

-40,0%

-20,0%

M&A deals
0,0%

20,0%

40,0%

-20,8%

-32,5%

-33,0%

-33,8%

-58,7%

-56,2%

-18,8%

-5,6%

-35,5%

-29,9%

21,3%

17,9%

13,3%

7,1%

9,0%

4,7%

8,4%

5,2%

4,1%

9,1%

DE

ES

NL

FR

IT

SE

IE

DK

BE

REST OF EU

Source: JRC calculations on Bureau van Dijk data extracted on 6 May 2021. 

Share 2020

Change 19-20

A large share of foreign investments in Europe in 2020 originated in the United States (US) and 
Canada, with nearly 35% of M&A transactions in the EU, followed by the United Kingdom (UK) 
with 30.5%8. EFTA countries follow next with 12.1% (with 7.5% from Switzerland). China, with 
2.5% (down from 4% in 2019), was the fourth foreign investor in the EU in 2020 (Table 1)9. 

Table  1.  Foreign  M&A  transactions  in  2020  by  nationality  of  the  investor’s  ultimate  owner. 
Percentage change in 2020 as compared to 2019, and share over total in 2020.  

USA and CAN 

UK 

EFTA 

Offshores  

Developed Asia 

China  

Percentage change 
2020 over 2019 

Share over total  
(in %), 2020 

-35 

-21 

-25 

-34 

-47 

-63 

34.9 

30.5 

12.1 

6.9 

5.6 

2.5 

8   The figure for US and Canada follows the country grouping used in the analysis accompanying the FDI screening 
Regulation (see the SWD(2019) 108 final). For 2020 the US and the UK were the largest investors with 30.5% 
each of all non-EU investments in the EU (for the US down from 31% in 2019). In 2021 Q1, the US share reaches 
37.1%. 

9   Chinese figures include Hong Kong and Macao. 

4 

 
 
 
  
  
                                                           
Central & S. America 

India 

AUS and NZ 

Gulf Coop Countries 

Turkey and other ME 

Other Asia 

Russian Federation 

Rest of the World  

-37 

-44 

-50 

0 

-50 

-73 

-83 

-54 

1.7 

1.4 

1.2 

1.2 

0.9 

0.4 

0.1 

0.6 

Source: JRC calculations on Bureau van Dijk data extracted on 6 May 202110 

While accounting for a relatively small share of deals, Chinese outward investments into Europe 
have shown the sharpest reduction starting from November 2019, i.e. two months prior to the lock-
down in Wuhan (China) at end-January 2020, and this regardless of the early re-opening of the 
Chinese economy in mid-2020. 

It  is  noticeable  that  economic  sectors  in  Europe  were  not  equally  impacted  by  COVID-19 
(Figure 4). Some sectors such as medical supplies, pharma manufacturing, and e-commerce saw 
unprecedented surges in deal-making, while others such as tourism, leisure, aviation and marine 
transportation were adversely affected. The hardest-hit sector was accommodation with a drop of 
more than 70% in the number of foreign deals.  

Figure 4: Foreign M&A deals by target EU sector, 2019-Q1 – 2021-Q1 

Transport
Finance
Retail
Manuf.

Electricity
Prof. Scientif
ICT

s
l
a
e
d
A
&
M

f
o

.

N

400

350

300

250

200

150

100

50

0

2019-Q1

2019-Q2

2019-Q3

2019-Q4

2020-Q1

2020-Q2

2020-Q3

2020-Q4

2021-Q1

Source: JRC calculations on Bureau van Dijk data extracted on 6 May 2021 

10   Acronyms: CAN (Canada), EFTA (Switzerland, Norway, Iceland, Liechtenstein), AUS (Australia), NZ (New 
Zealand), ME (Middle East). The main Offshores by number of deals or greenfields are (in alphabetical order) 
Bermuda, British Virgins Islands, Cayman Islands, Mauritius and the United Kingdom Channel Islands. For a 
list  of  Offshore  Financial  Centres,  see  e.g.  Commission  Staff  Working  Document  -  Following  up  on  the 
Commission  Communication  "Welcoming  Foreign  Direct  Investment  while  Protecting  Essential  Interests"  – 
SWD(2019) 108 final – 13 March 2019. Developed Asia includes: Japan, Korea, Singapore and Taiwan; Gulf 
Cooperation Countries include: United Arab Emirates, Qatar, Saudi Arabia, Kuwait, Oman, and Bahrain. Other 
ME includes Israel and Lebanon.  

5 

 
 
                                                           
 
 
 
Representing a quarter of all foreign M&A transactions, manufacturing suffered a 40% drop in 
2020  deal  numbers  as  compared  to  2019,  and  continued  to  show  a  cloudy  outlook  in  the  first 
quarter of 2021 with a year-on-year performance rounding -1.3%.  

Information and Communication Technologies (ICT) is the sector least affected by the pandemic 
and other challenges, with a modest drop of 12% in 2020 as compared to 2019. In 2020 ICT totalled 
35% of all M&A deals into the EU, surpassing manufacturing for the first time ever. ICT also 
drives  the  recovery  in  the  first  quarter  of  2021,  with  a  year-on-year  53%  increase  in  M&A 
transactions, which brings the number of deals in this sector to its pre-COVID level. 

Further details 

Further details on the above numbers, impact and recovery per Member State and sector, greenfield 
investment,  origin  of  foreign  investors  in  the  EU,  and,  foreign  state  participation  in  foreign 
investors  in  the  EU  are  provided  in  the  accompanying  Commission  Staff  Working  Document, 
Section 2. 

CHAPTER 2 – LEGISLATIVE DEVELOPMENTS IN MEMBER STATES SINCE 201911  

The journey so far 

The adoption of the EU FDI Screening Regulation on 19 March 2019 and its full implementation 
from 11 October 2020 opened a new era.  

When tabling the European Commission proposal in 2017, the number of Member States with a 
national FDI screening mechanism, whether sector-specific or of broader scope, stood at 11.12  As 
of 1 July 2021, the figure stands at 18 (see Map hereunder). In addition to the increase in Member 
States with a screening mechanism, there has also been an adjustment and broadening of the scope 
of  existing  mechanisms  with  Member  State  screening  mechanisms  increasingly  reflecting, 
sometimes verbatim, key elements of the Regulation.13  

The EU FDI Screening Regulation and EU Member State FDI screening mechanisms 

While the Regulation deliberately does not set out, in every detail, what should be the form and 
content of EU Member State FDI screening mechanisms, it does set out certain key elements to be 
reflected in any national FDI screening mechanism.  

In particular, Article 3 of the FDI Screening Regulation sets out an obligation for any EU Member 
State with an FDI screening mechanism to ensure that such mechanisms have defined timeframes; 
are transparent and non-discriminatory; allow for taking into consideration any comments by other 
Member  States  and  the  opinion  of  the  European  Commission;  allow    relevant  parties  to  seek 

11   This Chapter covers the time-period from 1 January 2019 through 31 July 2021. 
12   Austria, Denmark, Finland, France, Germany, Italy, Latvia, Lithuania, Poland, Portugal, Spain, not including the 

United Kingdom. 

13   For three illustrative examples, see the recently adopted Danish screening law and related mechanism Act on 
screening of certain foreign direct investments, etc. in Denmark (The Investment Screening Act), the Italian law 
and related mechanism, e.g. Italian Governmental Decrees No. 179 and No. 180, and, the Lithuanian law and 
related mechanism: The Law On The Protection Of Objects Of Importance To Ensuring National Security, No.  
IX-1132. 

6 

 
 
 
                                                           
recourse  against  an  adverse  decision  by  an  FDI  screening  authority;  and  maintain  measures  to 
prevent circumvention of FDI screening mechanisms and related decisions. 

The  European  Commission  has  called  on  all  Member  States  to  have  a  national  screening 
mechanism in place, most recently in its Communication on the Trade Policy Review14:  

“In the security field, under the FDI Screening Regulation, the Commission restates its call to all 
Member States to set up and enforce a fully fledged FDI screening mechanism to address cases 
where  the  acquisition  or  control  of  a  particular  business,  infrastructure  or  technology  would 
create a risk to security or public order in the EU. The Commission will continue implementing 
the cooperation mechanism with Member States’ authorities to protect security and public order 
from  risky  foreign  direct  investments  and  consider  enhancing  the  cooperation  mechanism 
established by the FDI Screening Regulation”. 

14   Trade Policy Review - An Open, Sustainable and Assertive Trade Policy, COM(2021) 66 final  –18 February 

2021. 

7 

 
 
 
                                                           
It remains the European Commission’s strong expectation that all 27 EU Member States will put 
national FDI screening mechanisms in place. A national screening mechanism in all 27 Member 
States  serves  to  safeguard  all  individual  Member  States  against  potentially  risky  foreign 
investments  from  third  countries.  It  will  also  provide  the  necessary  links  for  the  cooperation 
mechanism  under  the  FDI  Screening  Regulation,  ensuring  that  all  27  Member  States  and  the 
Commission screen relevant FDI, keeping in mind the collective security of the Member States 
and Union as well as the security of single market and the very high level of economic integration 
which it allows. 

8 

 
 
 
In  addition  to  their  respective  national  screening  mechanisms  of  a  more  general  nature,  five 
Member States also adopted temporary measures on FDI linked to COVID-19 vulnerabilities and 
depressed EU asset prices, i.e. France, Italy, Hungary, Poland, and Slovenia15.  

Developments in EU Member States - FDI screening mechanisms 

During the reporting period 24 out of 27 EU Member States either: 

 

 

 

adopted a new national FDI screening mechanism; 

amended an existing mechanism; 

or initiated a consultative or legislative process expected to result in the adoption of a new 
mechanism or amendments to an existing one. 

Member States having adopted a new national 
FDI screening mechanism 
Member States having adopted amendments 
to an existing mechanism 

Member States having initiated a consultative 
or legislative process expected to result in the 
amendments to an existing one 
Member States having initiated a consultative 
or legislative process expected to result in the 
adoption of a new mechanism  
Member States with no publicly reported 
initiative underway 

Czechia,  Denmark,  Malta,  Slovenia,  the 
Slovak Republic 
Austria,  France,  Finland,  Germany, 
Hungary, Italy, Latvia, Lithuania, Poland, 
Romania, Spain 
the Netherlands, Portugal 

Belgium,  Estonia,  Greece, 
Luxemburg, Sweden 

Ireland, 

Bulgaria, Croatia, Cyprus 

Article 3.7 of the FDI Screening Regulation sets out an obligation for Member States to notify to 
the European Commission their screening mechanisms and any amendments to same. Article 3.8 
sets out an obligation for the European Commission to make a list of Member States’ screening 
mechanisms publicly available and to update the list, as necessary16. Despite a number of important 
similarities  between  national  screening  mechanisms,  they  also  show  significant  degrees  of 
variation  in  terms  of  what  constitutes  formal  screening  of  investment,  applicable  timelines, 
coverage,  notification  requirements  and  other  elements.  As  explained  in  further  detail  below 
(Chapter 4.3), the Commission is launching a study to examine such variations between relevant 
Member State legislation and their policy consequences on the effectiveness and efficiency of the 
EU cooperative mechanism. The Staff Working Document accompanying this report provides a 

15   On 25 March 2020, as part of measures taken in connection with the Covid-19 emergency, the European 

Commission provided guidance to Member States on how to use FDI screening in times of public health crisis 
and economic vulnerability in the EU. The Commission Communication is available here: 
https://trade.ec.europa.eu/doclib/docs/2020/march/tradoc_158676.pdf 

16   The updated list of Member States’ screening mechanisms is available on the Commission’s website, here: 

https://trade.ec.europa.eu/doclib/docs/2019/june/tradoc_157946.pdf  

9 

 
 
 
 
 
                                                           
succinct description of any legislative developments in Member States regarding  the applicable 
national legislations.  

CHAPTER 3 – MEMBER STATE SCREENING ACTIVITIES IN 202017 

While  the  FDI  Screening  Regulation  establishes  a  cooperation  mechanism  for  FDI  screening 
between the Commission and EU Member States, the decision on which investments to screen, 
approve, condition or block is taken by the screening Member States under their respective rules 
and screening mechanism. This Chapter thus relies on, and aggregates, data provided by Member 
States on cases screened under their own legislation and screening mechanisms during the whole 
year of 2020.18 For 2020, in reporting to the Commission pursuant to Article 5 of the Regulation, 
Member  States  have  reported  to  have  reviewed  1.793  investment  dossiers  upon  request  for 
approval. These dossiers relate to FDI into seven of the reporting Member States. 

Figure 5 

FDI cases submitted for approval

20%

Required formal
screening

80%

Did not require formal
screening (evident lack
of impact on
security/public order
or ineligible)

Source: Member State reporting 

Of these investment dossiers, about 
80%  were  not  formally  screened, 
either because of an evident lack of 
impact on security or public order, 
or  because  they  fell  outside  the 
scope  of  the  national  screening 
mechanism  (i.e.  ineligible)  (see 
Figure 5).  

The  remainder  of  the  cases  (20%) 
underwent  formal screening in  the 
reporting Member States. Figure 6 
offers a breakdown of the outcome 
of  the  assessment  of  those  cases 
formally screened.19 

17   This Chapter covers the time-period from 1 January through 31 December 2020. 
18   Four Member States did not report any cases under their screening legislation and one Member State reported 
one general figure of cases formally screened but no disaggregated data due to national legal constraints.  
19   Note: from the total reported number of cases formally screened (362 = 20% of 1.793), a number of cases were 
subtracted to produce the data shown in Figure 6. Indeed, those (subtracted) cases were reported by one Member 
State, which did not indicate, due to national legal constraints, what the outcome was of these cases.  

10 

 
 
 
 
 
 
 
                                                           
Figure 6 

OUTCOME OF FDI DOSSIERS FORMALLY 
SCREENED

Aborted
7%

Prohibited 
2%

Authorised 
with 
conditions
12%

Figure 6 shows that 91% of the 
dossiers formally screened were 
approved,  the  large  majority 
without conditions (79%), some 
with  conditions  (12%).  A  very 
(2%)  were 
small 
and  7%  were 
prohibited, 
aborted  by 
for 
the  parties 
unknown  reasons,  hence  not 
requiring  any  decision  by  the 
national authorities.  

portion 

Overall,  these  numbers  clearly 
illustrate that, for 2020: 

Authorised 
without 
conditions
79%

Source: Member State reporting 
•  Member States applied their respective national FDI screening laws, meant to address potential 
risks to security and public order; 

•  a very high share of dossiers were speedily approved (80%); 

•  of the remaining 20% of cases, which were  formally screened,  again  a  very  high share were 
approved without conditions (79%) and a small share (12%) were approved with conditions; 

• prohibitions remained a small exception (2%) among formally screened dossiers; 

• Member  States  screening  foreign  investments,  and  the  European  Union  at  large,  remain  very 
open to FDI, intervening only in a very small proportion of cases to address deals likely to affect 
security or public order.  

CHAPTER 4 – EU COOPERATION ON FDI SCREENING20 

1.  Notifications and other actions taken under the FDI Screening Regulation 

From 11 October 2020 through 30 June 2021 a total of 265 notifications were submitted by 11 
Member States pursuant to Article 6 of the FDI Screening Regulation. More than 90% of these 
cases were notified by five Member States, namely Austria, France, Germany, Italy and Spain. As 
will appear from the detail set out below, the transactions notified vary greatly in terms of sector 
of the investment target, the origin of the ultimate investor, and the value of the transaction. 

20   This Chapter covers the time-period from 11 October 2020 through 30 June 2021. 

11 

 
 
 
 
 
 
 
 
                                                           
The  Regulation  foresees  that  assessment  of  FDI  transactions  is  undertaken  under  two  possible 
phases.  All  notified  transactions  are  assessed  under  Phase  1,  with  only  a  limited  number  of 
transactions proceeding to Phase 221. Phase 2 implies a more detailed  assessment  of cases that 
could possibly affect security or public order in more than one Member State, or create risks to 
projects or programmes of Union interest.  

The  three  sectors  with  the  highest  number  of  transactions  were  Manufacturing,  ICT,  and, 
Wholesale and Retail22.   

Looking at the transactions’ value, the majority of the transactions had a value within the range of 
€10-100ml, with transactions in the ICT sector representing the highest deal value, and transactions 
in the sector of “Other service activities” representing the lowest value range23. 

The transactions notified show a broad range in terms of value, with the lowest deal-value indicated 
at  €1.200, and the highest approximately €34bn.  

Figure 7 

Cases closed in Phase 1 and 
Phase 2

6%

14%

80%

Closed in P1

Closed in P2

Cases still on-going

Source: Member State notifications 

Of  the  265  cases  notified,  80%  of  the  cases 
(212) were closed by the Commission in Phase 
the  remaining  14%  cases  (36) 
1,  with 
proceeding 
to  Phase  2  with  additional 
information being requested from the notifying 
Member  State.  6%  of  the  cases  were  still 
ongoing on the cut-off date.24  

information 

requested  by 

Additional 
the 
Commission  when  opening  Phase  2  varies 
the  specific 
significantly,  depending  on 
transaction  and  the  detail  and  quality  of  the 
information supporting the notification25.  

The  information  requested  typically  includes  one  or  more  of  the  following  subjects:  data  on 
products and/or services of the target company; possible dual-use classification of any products 
involved; customers, competitors and market shares; the IP portfolio and R&D activities of the 
target  company;  and  additional  defining  characteristics  of  the  investor.  This  information  is 
requested in order to better assess the criticality of the target or the potential threats posed by the 
investor. 

21   For an overview and explanation of the two Phases and applicable timelines, please refer to Section  1 of the 

accompanying Staff Working Document. 

22   Categorised under the NACE codes C, J and G respectively. 
23   The  value,  where  available,  relates  to  the  target  company  which  may  be  an  EU-based  subsidiary  of  a  larger 

corporate target.  

24   As of 1 July 2021, of the 265 cases notified, 17 were still ongoing.  
25   The notification form for information from an investor for purposes of a notification pursuant to Article 6 of the 
Regulation, and the updated Frequently Asked Questions document, serve to ensure some degree of uniformity 
and minimum level of information about the investor and the investment target provided in notifications under 
the Regulation. Both documents are available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=2006 

12 

 
 
 
                                                           
The  main  sectors  at  issue  in  Phase  2  cases  were  Manufacturing,  ICT,  and,  Financial  service 
activities. Manufacturing and ICT accounted for 67 % of all Phase 2 cases. 

Figure 8: Phase 2 main targeted sectors 

Phase 2 main targeted sectors

Other
25%

Financial
8%

ICT 
17%

Manufacturing
50%

Manufacturing

ICT

Financial

Other

Source: Member State notifications 

Six Member States accounted for the 36 Phase 2 cases. For all Phase 2 cases, the average duration 
from the date the Commission reserved the right to issue an opinion  to the date it received the 
additional information requested from a notifying Member State has been 31 calendar days, with 
a range from 2 to 101 calendar days.  

As for the origin of the ultimate investor, in the 265 cases notified, the five main countries of origin 
were the US, the UK, China, Canada and the United Arab Emirates. 

13 

 
 
 
 
 
 
 
 
Figure 9 

Origin of Ultimate Investors

31%

3%

4%

45%

8%

9%

USA

GBR

CHN

CAN

UAE

Others

Source: Member State notifications 

Of  the  265  cases  notified,  29%  constituted 
multi-jurisdiction  FDI  transactions  because 
they concerned several Member States26. The 
main  sectors  that  were  the  subject  of  such 
notifications  were  Manufacturing,  ICT,  and, 
Wholesale and Retail. 

In addition to the 265 cases notified pursuant 
to  Article  6  of 
the 
Commission has also made use of Article 7 of 
the Regulation. 

the  Regulation, 

As for the issuance of Commission opinions 
pursuant  to  either  Article  6,  7  or  8  of  the 
Regulation, 
confidential  pursuant  to  Article  10  of  the 
Regulation.  

opinions 

such 

remain   

Opinions have been issued in less than 3 % of all cases notified and are issued only when and if 
required by the circumstances of a case, more specifically the risk profile presented by the investor 
and the criticality  of an investment target. When issued, any recommended mitigating measures 
are proportionate and specific to the risks and criticality identified.  

Commission opinions may also consist of sharing relevant information with a screening Member 
State, and may also suggest potential mitigating measures to address identified risks.  

It will ultimately be for the screening Member State to decide on the transaction being screened, 
including in the light of any Commission opinion. 

The data above allows for a number of preliminary conclusions to be drawn.  

First and foremost, the cooperation mechanism is functioning well with Member States submitting 
notifications pursuant to the Regulation. Of the 265 notifications received, the vast majority (80%) 
were closed in Phase 1, i.e. very quickly, with only 14% of the cases proceeding to Phase 2, and a 
much lower number of cases resulting in a Commission opinion. 

Second, while most cases are assessed rapidly in Phase 1, within the prescribed 15 calendar days, 
the  duration  of  cases  entering  Phase  2  shows  significant  variation  given  the  time  needed  by 
Member  States  to  provide  answers  to  a  Commission  request  for  additional  information,  often 
depending on the investor for the requested information. 

Third, the main sectors (manufacturing, ICT, and wholesale and retail) at issue and origin of the 
ultimate  investor  (the  US,  UK,  China,  Canada  and  United  Arab  Emirates)  involved  in  cases 

26  

“Multi-jurisdiction FDI transactions” refers in this context to FDI transactions where the investment target is a 
corporate group with a presence in more than one  Member States (and possibly also third countries), either by 
way of subsidiaries in more than one  Member State, or by the target company providing goods or services in 
more  than  one  Member  State.  Depending  on  the  circumstances,  and  also  the  particularities  of  the  screening 
mechanism of the relevant Member States such deals are notified by more than one Member State, albeit rarely 
in a coordinated and synchronised manner. 

14 

 
 
                                                           
notified  under  the  Regulation,  largely  reflects  the  findings  in  Chapter  1  and  Section  2  of  the 
accompanying Staff Working Document regarding main sectors and origin of the ultimate investor. 

Fourth,  a  significant  number  of  cases  notified  by  Member  States  involved  one  or  more  of  the 
factors  for  consideration  listed  in  Article  4  of  the  Regulation,  including  but  not  only  critical 
infrastructure,  technology  and  dual  use  items,  and  access  to  sensitive  information,  as  well  as 
possible government ownership or control of, or influence over, the foreign investor. The cases 
notified have also included a number of health-related investments. i.e. investments into a sector 
warranting careful scrutiny in light of the current pandemic.  

2.  Observations by EU Member States on the value and functioning of the FDI 

Screening Regulation 

For this first Annual Report, Member States were invited to offer their views on three subjects: a) 
the  value-added  of  the  FDI  Screening  Regulation  and  the  cooperation  mechanism,  b)  any 
significant  procedural  issues encountered, and, c) possible ways of addressing any such issues. 
The quotes set out below are quotes from a range of Member States, some with – and some without 
– a national screening mechanism. 

Value of the FDI Screening Regulation and the cooperation mechanism 

All Member States uniformly pointed to the Regulation and the cooperation mechanism as a very 
valuable  tool  for  gaining  a  comprehensive  overview  of  FDI  into  the  EU,  including  particular 
investment targets and investor profiles.   

“The cooperation mechanism is a very useful instrument as it challenges Member States (MS) 
to consider the implications for itself of investment operations in other MS, which has the effect 
of  increasing  the  awareness  of  the  implications  for  the  other  MS  of  the  FDI  operations 
happening on its own backyard. As such the added value should not be, in our view, measured 
quantitatively in the short term, but qualitatively in the long run through better considered and 
prepared policy and decision-making”.  

More  specifically,  several  Member  States  have  pointed  to  the  option  of  asking  questions  and 
offering comments to a screening Member State as a positive feature of the Regulation. Several 
Member States also highlighted the benefits of the formal and informal cooperation, including the 
Expert  Group  composed  of  relevant  Member  States  and  Commission  officials  and  established 
under the Regulation, which allows for an exchange of views and best practices among Member 
States.  

As noted by several Member States, the Regulation and the cooperation mechanism is providing a 
valuable  learning  experience,  including  as  regards  the  approaches  and  tools  deployed  by  other 
Member States for especially critical sectors. This has been directly applicable and of significant 
importance for several Member States when devising or updating their own screening legislation, 
including any sectoral focus of that legislation.  

“[…] as multinational companies grow and spread, FDI screening mechanisms are becoming 
more dependent on the reporting from other States with a similar regulation. The coordination 
mechanism has become an efficient procedure to react to FDI concerns and to issue opinions 
in this regard”.  

15 

 
 
One Member State emphasised that notifications under the FDI Screening Regulation can provide 
“awareness” of transactions that may not have been notified under a given national mechanism, 
but rightly should have been, or, which may prompt “ex officio” action on the part of a screening 
authority. Another Member State noted that the exchange of information allows Member States to 
detect potential risks from an FDI transaction at an earlier stage, while another Member State noted 
that for larger or wider transactions with implications in several Member States, the cooperation 
mechanism “supported the final decision-making process and a better common and coordinated 
response”. 

“The information about FDIs undergoing screening in other Member States have contributed 
significantly to the design of our own analytical capabilities and deepened and broadened our 
situational awareness with the very beneficial international context”.  

“The cooperation mechanism facilitates discussions and exchange among Member States on 
horizontal topics of FDI screenings, such as semiconductors”.  

Significant procedural issues encountered 

One,  more  general,  issue  raised  by  a  number  of  Member  States  is  the  impact  of  the  renewed 
attention to FDI screening on staff levels. Several pointed to resource constraints, especially for 
smaller  Member  States  and  screening  authorities,  also  given  the  complex  multi-jurisdiction 
transactions notified under the FDI Screening Regulation, as well as the very tight deadlines set 
therein. Other Member States pointed to a perceived inconsistency of what is notified under the 
FDI Screening Regulation, suggesting that too many FDI transactions are notified, including FDI 
transactions  with  no  relevance  for,  or  impact  on,  other  EU  Member  States,  thereby  tying  up 
resources. 

“To limit the number of notifications within the cooperation mechanism that have no cross-
border impact, it may be reasonable to discuss a common set of criteria – which lead if met – 
to the decision to not notify that specific FDI screening case. This would not only reduce the 
overall number of notifications but free up additional resources to focus on critical FDI’s”.  

Another issue raised by several Member States is timelines. Several have noted that the timelines 
established under the FDI Screening Regulation are too short, including to assess complex FDI 
transactions  properly  and  ask  questions  or  make  comments.  One  Member  State  noted  that  the 
different  timelines  between  Member  States’  national  mechanisms  and  the  FDI  Screening 
Regulation create additional complications. 

While the possibility for Member States to provide comments is seen as positive, some Member 
States noted that they are simply informed that comments have been provided and that there is no 
information  provided  about  the  content  of  such  comments,  and  no  obligation  for  the  notifying 
Member State receiving the comments to explain how comments received have been taken into 
account in their final decision. 

One Member State noted that some requests for additional information are “overly burdensome”, 
and that Member States and the European Commission should remember that such requests should 

16 

 
 
 
be  duly  justified,  limited  and  proportionate  to  the  purpose  of  the  request,  and,  not  unduly 
burdensome for the Member State from whom the information is requested.  

Possible ways of addressing significant procedural issues 

As for suggestions for addressing significant procedural issues encountered, on the issue of staff 
levels/human  resources,  suggestions  included  discussion  –  and  possible  guidelines  –  on  what 
requires  notification  under  the  FDI  Screening  Regulation  to  sharpen  the  focus  and  avoid 
“overloading”  the  system.  One,  more  concrete,  suggestion  is  a  practice  whereby  the  more 
important FDI transactions among those notified would somehow be flagged for the attention of 
other Member States. Suggestions also included clarification of time-lines and monthly statistical 
overviews  produced  by  the  European  Commission,  including  comments  provided  by  Member 
States under the Regulation.  

“There is a risk that the requirement to notify the Commission and the other Member States of 
any foreign direct investment that is undergoing formal screening may dilute the cooperation 
mechanism  and  affect  its  effectiveness”  […]  “propose  that  the  Commission  initiates  a 
discussion among Member States on the potential for developing guidelines on which cases 
shall be notified and if Member States can avoid notifying some cases e.g. if the cases clearly 
do not have any cross border effects”.  

One Member State suggested additional clarification or articulation of some key aspects  of the 
FDI Screening Regulation, i.e. the trigger date for notifications, the definition of foreign investor 
and foreign direct investment, and, the scope of Opinions or comments. The same Member State 
encouraged the European Commission to look at the “broader picture” (i.e. the European impact 
of  a  transaction),  regardless  of  any  confirmed  interest  of  more  than  one  Member  State  in  the 
transaction, and also  noted that the  FDI Screening  Regulation  would have an increased  added-
value  if  synergies  could  be  created  between  the  FDI  Screening  Regulation  and  other  relevant 
current or future tools.  

Finally,  one  Member  State  suggested  joint  notifications  where  an  FDI  transaction  has  been 
submitted for authorisation in more than one Member State.  

European Commission reactions to Member States’ views 

The European Commission shares the views of Member States that the FDI Screening Regulation 
and the cooperation mechanism provides a unique tool for monitoring and assessing FDI into the 
European Union for the possible risk that such FDI may pose to the security or public order of 
more than one Member State, or to projects or programmes of Union interest. 

As for the specific challenges raised – and suggestions made – by Member States, the European 
Commission notes that: 

- 

In terms of resource constraints, the Commission is conscious of these constraints which it 
shares. It has already taken a number of concrete steps to facilitate work, including appropriate 
electronic  means.  Discussions  in  the  Expert  Group  also  serve  to  address  issues  raised  by 
Member States in seeking a common understanding on certain issues within the limits of what 
is  possible  without  changing  the  Regulation,  including  eligibility  of  transactions  and  the 
calculation  of  time-lines  under  the  Regulation.  The  Commission  has  already  allocated 
additional resources to its services for the purpose of conducting FDI screening, and Member 

17 

 
 
States  are  strongly  encouraged  to  do  likewise.  This  is  all  the  more  important  as  new  or 
amended  national  screening  mechanisms  are  expected  to  enter  into  force  over  the  coming 
months.  

-  As for agreeing possible limitations, or filtering  criteria, on which transactions are notified 
under the Regulation, what may not seem to be a sensitive transaction to one Member State 
could well be sensitive to another, just as some Member States are legally obliged under their 
respective national legislation to notify all screened transactions. The Commission recalls that 
Article 6.1 of the Regulation obliges Member States to notify “any foreign direct investment 
in their territory that is undergoing screening”.  

-  On further clarification of concepts such as foreign direct investment and foreign investor, the 
Commission has provided an updated Frequently Asked Questions document which provides 
further detail on the concepts under the Regulation. The Commission stands ready to update 
this document as necessary. 

-  As  regards  differing  timelines  –  between  Member  States’  legislation  and  between  the 
Regulation and Member States’ legislation – the Commission notes that the Regulation did 
not  harmonise  timelines  and  that  Member  States’  national  screening  mechanisms  contain 
significant  variations. The cooperation mechanism, and both  formal and  informal contacts, 
can  help  minimise  the  unintentional  consequences  of  these  differences,  but  adjusting  the 
formal timelines under the Regulation that may be considered excessively tight would require 
a change to the Regulation. 

-  On the further clarification of the interplay between various instruments, e.g. the more exact 
interplay  between  the  Regulation  and  other  policy  instruments  and  regulators,  e.g.  merger 
control and prudential controls, for example, in relation to financial services, the Commission 
agrees that this is an issue that could be discussed further, inter alia, within the Expert Group.  
-  Finally, on the issue of multi-jurisdiction FDI transactions, i.e. where the investment target 
has a presence in several EU Member States (either as a result of subsidiaries in more than 
one EU Member State, or because it provides goods or services in more than one Member 
State), these transactions are likely to give rise to multiple screenings by different Member 
States and an exchange of questions/comments between them. Such cases raise a number of 
challenges,  including  differing  timelines  under  different  national  legislation  which  may 
prevent synchronisation of notifications and assessment under the Regulation. The Regulation, 
at present, does not explicitly address the issue. However, experience has already shown scope 
for  closer  informal  coordination  between  relevant  Member  States  and  the  Commission,  as 
already done for a number of notified FDI transactions. However, given the significant share 
(29%) of such multi-jurisdictional FDI transactions and related challenges, the Commission 
believes that it warrants careful consideration in the future. 

3.  Steps taken after 11 October 2020, and looking further ahead 

Despite the FDI Screening Regulation only having been fully applied since 11 October 2020, some 
preliminary conclusions can be drawn based on the experience so far, just as  certain steps have 
already been taken to support the effectiveness of the Regulation and cooperation mechanism. 

Specifically,  in  order  to  facilitate  the  effective  implementation  of  the  Regulation  and  ensure  a 
higher  degree  of  conformity  and  completeness  of  notifications  submitted  by  Member  States 
pursuant  to  Article  6  of  the  Regulation,  the  Commission  has  provided  updated  versions  of  the 
notification form for investors and the Frequently Asked Questions document. The notification 
form,  which  has  also  been  published  by  several  Member  State  screening  authorities  on  their 

18 

 
 
websites, serves to provide more detailed information by an investor about a notified transaction, 
including the elements required by Article 9(2) of the Regulation. This serves a dual purpose of 
allowing a more detailed assessment of notified transactions in Phase 1, as well as limiting the 
need for requests for additional information and Phase 2 assessments for some transactions. 

More  generally,  and  as  confirmed  by  Member  States,  the  Regulation  and  the  cooperation 
mechanism have already proven a valuable and efficient tool. They have been reliable, with no 
reported leaks regarding notifications, opinions or other action under the Regulation. Appropriate 
handling and protection of any information submitted for purposes of Article 6, 7 and 8 of the 
Regulation is vital to ensure the necessary trust and confidence between all parties involved, i.e. 
the parties to an investment transaction, the notifying Member State, the 26 other Member States 
and the Commission. The Regulation and the cooperation mechanism have also proven useful and 
effective  for  the  overriding  policy  objective,  namely  safeguarding  our  collective  security  and 
public order, as well as projects and programmes of Union interest.  

However, the experience so far also shows that there is scope for further improvement, including 
in areas identified by Member States.  

As indicated above, the Commission has launched a comprehensive study. The overall objective 
of  the  study  is  to  ensure  that  the  Member  State  FDI  screening  mechanisms,  as  well  as the  EU 
cooperation mechanism, are effective and efficient, including their interaction27.  

In  due  course,  the  Commission  will  give  serious  consideration  to  the  possible  issuance  of 
guidelines  for  the  benefit  of  Member  State  screening  authorities  and  investors.  The  concept  of 
guidelines has proven valuable in other areas of regulation and enforcement, including competition 
policy. The Commission would envisage consultation of the broader  public with respect to any 
proposed guidelines for the area of FDI screening.   

The steady increase in Member States with a national FDI screening mechanism along with an 
expected increase in FDI into the EU will inevitably result in an increase in notifications under the 
Regulation.  The  Commission  will  carefully  consider  ways  to  streamline  procedures  to  utilise 
Commission and Member State resources in the most optimal manner, including a clear focus on 
those FDI transactions that are more likely to pose a risk to the security or public order of more 
than  one  Member  State,  or  to  projects  and  programmes  of  Union  interest.  This  will  include 
consideration of how, given the current Regulation, multi-jurisdiction FDI transactions are best 
handled, including possible alignment of notifications by two or more Member States. 

As for any future amendments to the Regulation itself, this is still early days. However, Article 15 
of  the  Regulation  provides  an  obligation  for  the  Commission  to  “evaluate  the  functioning  and 
effectiveness  of  this  Regulation  and  present  a  report  to  the  European  Parliament  and  to  the 
Council”  by  12  October  2023,  and  for  the  Commission  to  recommend  amendments  to  this 
Regulation,  where  required.  In  light  of    further  experience  gained  in  the  application  of  the  

27   The specific objectives of the study are (i) to present an overview of the existing legislation of the Member States 
which currently have a screening mechanism; (ii) review how the national legislations and the FDI Screening 
Regulation regulate the interaction between national authorities and with the European Commission within the 
cooperation mechanism set up by the FDI Screening Regulation; (iii) identify any significant problems in the 
current system of national laws and the FDI Screening Regulation which may lead to less effective and/or less 
efficient  outcomes  in  light  of  the  policy  goals  of  the  FDI  Screening  Regulation,  and,  (iv)  the  need  to  keep 
administrative burden for investors and other stakeholders proportionate to the policy goals and relevant security 
or public order concerns. 

19 

 
 
                                                           
Regulation,  the  Commission  will  be  ready  to  make  proposals  for  amendments    if  and  when 
required, as  also  made clear in  the recent Trade  Policy Communication (February 2021): “The 
Commission  will  continue  implementing  the  cooperation  mechanism  with  Member  States’ 
authorities to protect security and public order from risky foreign direct investments and consider 
enhancing the cooperation mechanism established by the FDI Screening Regulation.” 

This  not  only  makes  clear  the  intention  of  the  Commission  to  continue  implementing  the  FDI 
Screening Regulation with Member States and to consider enhancing the cooperation mechanism. 
The  Communication  also  stresses  the  fundamental  policy  objective  of  the  FDI  Screening 
Regulation,  i.e.  to  contribute  to  safeguarding  the  collective  security  and  public  order  of  all  27 
Member States and the EU. The FDI Screening Regulation and the cooperation mechanism are 
important tools to increase the EU’s resilience. While the EU remains open to FDI, as also clearly 
evidenced by the data in Chapter 3, it is vital that all Member States actively and directly contribute 
to the attainment of this shared security objective. The Commission firmly expects that by the next 
Annual  Report  additional  Member  States  will  have  adopted  and  strengthened  national  FDI 
screening legislation and related mechanisms for potentially risky foreign investments from non-
EU  countries  and  that  it  is  merely  a  question  of  time  before  all  27  Member  States  have  such 
legislation and mechanisms in place. 

20