COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE EVALUATION of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council
Date: 2024-01-24
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: EU Member State, European security, direct investment, financial control, financial legislation, foreign capital, foreign investment, public order, third country, threat to national security

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.1.2024  SWD(2024) 24 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE EVALUATION  of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council {COM(2024) 23 final} - {SWD(2024) 23 final}  
 
 
1.  Introduction 

The  EU  framework  for  foreign  direct  investment  (FDI)  screening1  (the  ‘Regulation’)  was 
adopted  in  2019  and  entered  into  application  in  October  2020.  It  responded  to  growing 
concerns about certain foreign investors seeking to acquire control  of EU firms that provide 
critical  technologies,  infrastructure  or  inputs,  or  hold  sensitive  information,  and  whose 
activities are critical for security or public order at EU level, i.e. for more than one Member 
State. Due to the high degree of integration of the single market, an FDI in an EU company 
may create a security risk beyond the borders of the Member State hosting the FDI. Therefore, 
the  aim  of  the  Regulation  is  to  help  identify  and  address  security  risks  related  to  FDIs  that 
affect at least two Member States or the EU as a whole. 

To  achieve  this  objective,  the  Regulation  allows  Member  States  to  review  FDIs  in  their 
territory  on  grounds  of  security  and  public  order  and  to  take  measures  to  address  specific 
risks.  Furthermore,  the  Regulation  has  created  a  cooperation  mechanism  between  the 
European  Commission  and  Member  State  screening  authorities  for  individual  FDI 
transactions.  This  mechanism  makes  it  possible  to  exchange  information,  enabling  both  the 
Commission  and  other  Member  States  to  point  to  possible  security  or  public  order  risks  to 
other  Member  States  or  EU-level  programmes  arising  from  an  FDI  transaction,  allowing  to 
assess  and  mitigate  these  risks.  This  has  strengthened  the  assessment  of  FDIs  by  relevant 
Member State authorities and has facilitated the ultimate decision by the ‘host’ Member State 
on  whether  to  authorise  or  not  the  transaction,  and  if  the  transaction  is  authorised,  whether 
certain conditions are necessary.  

2.  Context of the evaluation 

This report is prepared in compliance with the Regulation, which requires the Commission to 
evaluate  the  functioning  and  effectiveness  of  the  Regulation  by  12 October 2023.  The 
evaluation covers the period from the entry into force of the Regulation2 until 30 June 2023. It 
builds  on  the  findings  of  a  report  carried  out  by  the  OECD3  and  the  views  of  stakeholders 
provided  to  the  Commission  in  various  consultation  activities  organised  for  the  evaluation4. 
Where relevant, the evaluation also integrates the findings of the very recent special report of 
the European Court of Auditors on the screening of foreign direct investments in the EU5. 

1  Regulation  (EU)  2019/452  of  the  European  Parliament  and  of  the  Council  of  19  March  2019 establishing  a 
framework for the screening of foreign direct investments into the Union. 
2 11 April 2019. 
3  Framework  for  Screening  Foreign  Direct  Investment  into  the  EU:  Assessing  effectiveness  and  efficiency. 
Published in November 2022 on the OECD’s website: https://www.oecd.org/investment/investment-policy/oecd-
eu-fdi-screening-assessment.pdf. 
4  These  consultations  include  a  targeted  public  consultation.  Its  summary  report  is  available  on  the 
Commission’s  website:  https://policy.trade.ec.europa.eu/consultations/screening-foreign-direct-investments-fdi-
evaluation-and-possible-revision-current-eu-framework_en#consultation-outcome  
5 https://www.eca.europa.eu/en/publications/SR-2023-27  

1 

 
 
 
 
 
 
 
Since the adoption of the Regulation, the issue of security and public order has only grown in 
importance. The COVID-19 pandemic, Russia’s war of aggression against Ukraine and other 
geopolitical tensions have underlined the need to better protect EU critical assets from certain 
investments. This has also played a role in a significant number of Member States deciding to 
adopt  a  national  screening  mechanism,  or  to  expand  the  number  of  sectors  subject  to 
screening6.  Nevertheless,  a  significant  share  of  FDIs  in  the  EU  still  goes  to  Member  States 
without  a  national  screening  mechanism7,  leaving  vulnerabilities  in  place  as  potentially 
critical FDIs remain undetected.  

The cooperation between all national authorities and the Commission has played a major role 
in raising awareness, identifying, assessing and addressing risky FDI transactions that would 
otherwise  have  been  missed8.  However,  its  implementation  has  presented  a  number  of 
challenges, such as the management of multi-jurisdiction notifications – meaning transactions 
involving the same business in several Member States. These challenges are explained in the 
next section. 

3.  Main findings 

Effectiveness.  The  evaluation  found  that  the  Regulation  has  had  a  positive  impact  on 
protecting  security  and  public  order  from  risky  FDI  in  the  EU.  It  also  showed  that  the 
Regulation itself has not had chilling effects on the flow of FDI into the EU. That said, several 
shortcomings were identified that result in blind spots in the system (such as the fact that there 
are still Member States without a screening mechanism or that foreign-controlled investments 
within  the  EU  fall  outside  the  cooperation  mechanism).  Ultimately,  this  undermines  the 
ability of the Commission and Member States to identify and address a potentially wide scope 
of risky transactions.  

Efficiency.  The  administrative  burden  related  to  the  implementation  of  the  Regulation  was 
found  reasonable,  both  by  Member  State  public  authorities  and  parties  to  screened 
transactions. However, certain aspects limit the efficiency of the FDI screening mechanism in 
the EU. These are, for example, the lack of harmonisation of Member States’ timelines, scope 
of  the  national  mechanisms,  the  lack  of  predictability  of  the  stage  of  national  screening  at 
which the EU cooperation is initiated, and the lack of an efficient cooperation procedure for 
transactions screened by multiple Member States. 

Policy coherence. The minimum requirements for national screening mechanisms were found 
insufficient  to  achieve  the  necessary  level  of  consistency  between  the  FDI  Screening 

6  When  the  Commission  tabled  its  legislative  proposal  for  the  FDI  Screening  Regulation  in  September  2017, 
only  14  Member  States  (including  the  United  Kingdom) maintained  a  screening  mechanism.  By  June  2023,  8 
additional  Member  States  had  adopted  screening  mechanisms,  and  2  Member  States  with  only  sectoral 
mechanisms had enacted cross-sectoral mechanisms.  
7 22.7% of the foreign acquisitions and 20% of the  greenfield projects were in Member States without a fully 
applicable investment screening mechanism. The European Court of Auditors estimates that about 42% of FDI 
stocks is located in these Member States. 
8  In  the  reporting  period,  the  Commission  and  relevant  Member  State  authorities  reviewed  more  than  1 100 
transactions. 

2 

 
 
 
Regulation  and  national  screening  mechanisms  (and  between  national  mechanisms 
themselves).  

Added  value.  The  Regulation  has  added  value  by  increasing  the  effective  protection  of 
security and public order in the EU beyond what would have been achieved by Member States 
each operating individually. 

Relevance. While the objective to protect security and public order in the EU from risky FDI 
remains  very  relevant  if  not  increasing,  the  relevance  of  the  current  system  is  limited  by 
certain shortcomings identified in the evaluation. 

The key lessons learned are the following: 

1.  The EU’s ability to identify and address risky transactions is undermined by the lack 
in  some  Member  States  of  screening  mechanisms  that  make  it  possible  to  scrutinise 
transactions before they are completed, and the divergence between existing  national 
mechanisms. 

2.  The  current  definition  of  FDI  is  too  limiting,  with  the  effect  that  the  cooperation 
mechanism does not cover investments within the EU. This means that investments by 
non-EU investors via an entity set up in the EU are not assessed under the cooperation 
mechanism,  even  though  the  security  implications  of  such  transactions  can  be  the 
same as when the foreign investor directly invests from abroad. 

3.  The requirement to notify all transactions ‘undergoing screening’ does not ensure that 
all risky transactions are considered  across the EU, as it may allow some  potentially 
risky transactions to remain undetected if these are not formally undergoing screening 
in the host Member State. 

4.  Differences  between  Member  States’  national  screening  mechanisms  can  seriously 
undermine  the  effectiveness  and  efficiency  of  the  cooperation  mechanism  and  risk 
creating obstacles in the internal market. 

5.  The information provided to the cooperation mechanism about individual transactions 

is not sufficient. 

6.  The  timelines  of  the  cooperation  mechanism  are  too  short  for  the  assessment  of 
potentially  critical  transactions.  They  also  are  suboptimal  for  effective  cooperation 
between the Commission and Member States because due to the identical timeframes, 
the Commission may not have time to factor in the security concerns of other Member 
States in its own assessment.  

7.  Member  States  do  not  have  sufficient  power  to  address  the  interests  or  concerns  of 

other Member States. 

8.  Member  States  and  the  Commission  are  not  formally  entitled  to  receive  any 
information  about  the  outcome  of  national  screening  procedures  notified  to  the 
cooperation  mechanism,  more  specifically  about  the  response  to  comments  or 

3 

 
 
concerns authorities of other Member States made regarding their own security to the 
host Member State, or to the opinion the Commission submitted.9 

On the basis of this evaluation, and recognising that the saying ‘the chain is only as strong as 
its  weakest  link’  also  applies  to  protection  against  risky  FDI  transactions,  the  Commission 
proposes  to  revise the Regulation. The main objectives of the revision are  to  ensure that all 
Member States have a screening mechanism that allows the assessment of transactions before 
they are completed, and to address key shortcomings of the cooperation mechanism identified 
in this evaluation.  

9    Note that there is one exception: Member States have to inform the Commission about their final decision 
where  the  EU  target  participates  in  a  project  or  programme  of  Union  interest  and  the  screening  Member 
State decides to deviate from the opinion. 

4