FDI Screening in the European Union 4.0

The European Commission published its fourth annual report on FDI screening. In the following, we provide a brief overview of the most relevant figures and trends.

On 17 October 2024, the European Commission (EC) published its fourth annual report on the screening of foreign direct investments (FDI) into the Union (the “Report”), covering the year 2023. We have put together the key information, juxtaposing it with information from Austria where the relevant data was available:

1. Overall evolution

Net global FDI flows decreased for the second consecutive year. For the EU27, the net FDI inflows increased as compared to the previous year. However, the global downward trend is also mirrored in transaction numbers: Foreign acquisitions slowed down already in 2022 (-5.4%) and again in 2023 (-13%).

2. Introduction of screening mechanisms in the Member States

As expected, the EC’s efforts to encourage Member States in establishing FDI screening mechanisms is bearing fruits: While only 11 Member States had an FDI regime (sector specific or of broader scope) in place when the EC tabled its proposal for an EU FDI Screening Regulation in 2017,¹ 24 Member States had a screening mechanism in 2023. The remaining three (Croatia, Cyprus and Greece) have started a consultative or legislative process.

3. Top 5 origin countries of foreign investors

As in previous years, the US was the main foreign investor into the EU27 in 2023 followed by the UK and Offshore Financial Centres (OFCs), Switzerland and Canada. A comparison with Austria, shows a similar picture.

4. Top 5 destinations of foreign acquisitions

The number of foreign transactions into the EU showed generally a decline for most Member States in 2023 compared to 2022, with few exceptions (namely Poland, Finland and Ireland).

5. Decisions on FDI cases

The types of decisions on FDI cases in the EU and Austria show comparable results.

6. Main sectors of FDI notified to the EU cooperation mechanism (“EUCM”)

A reliable direct comparison of the main targeted sectors in the EU and Austria is not possible, since different categories are used as a reference. However, it is clear that ‘information technology’ is a heavily targeted sector.

7. Key takeaways

• More than one third of all notifications in 2023 concern multi-jurisdiction deals.
• The EC emphasizes the growing number of cases notified to the EUCM (+67 transactions in 2023 compared to 2022). However, it also noted that seven Member States draw responsible for 85% of all notifications to the EUCM.⁵
• Regulatory fragmentation across Member States’ FDI regimes is still an issue. There are large differences in terms of scope (e.g. activities and sectors covered), procedural requirements and timelines (e.g. time required for the EUCM to lapse under the respective national regimes; duration of review by national authorities; statutory time limits or clock-stop in case of requests for information).

¹ Report from the Commission to the European Parliament and the Council – First Annual Report on the screening of foreign direct investments into the Union, COM(2021) 714 final. Commission Staff Working Document – Screening of FDI into the Union and its Member States, SWD(2021) 334 final.

² These data are based on a parliamentary enquiry and a response from the BMAW and cover the period from 01 January 2023 to 30 November 2023.

³ These data are based on the second activity report of the BMAW and cover the period from 25 July 2021 to 31 December 2022.

⁴ These data are based on a parliamentary enquiry and a response from the BMAW and cover the period from 01 January 2023 to 30 November 2023.

⁵ As in the previous years, Austria was among these Member States – this year together with Denmark, France, Germany, Italy, Romania and Spain.