New screening rules for foreign investment in the EU

Identifying and addressing security risks relating to foreign investment

Mandatory screening for more sectors

European Commission to be able to act on its own initiative

On Tuesday, the International Trade Committee adopted revised rules for screening foreign investments in the EU.

Under the new rules, more sectors, such as media services, critical raw materials and transport infrastructure, will be subject to mandatory screening by Member States, in order to identify and address foreign investment-related security or public order risks. The procedures applicable to national screening mechanisms will also be harmonised and the Commission will have the power to intervene on its own initiative or where there are disagreements between Member States about potential security or public order risks emanating from a specific foreign investment.

If the screening authority finds that the planned foreign investment project is likely to have a negative effect on security or public order, it will either have to authorise the project subject to mitigating measures, or prohibit it.

The proposal was adopted by 31 votes in favour, 7 against and with 3 abstentions.

Background

The current foreign direct investment screening framework entered into force on 11 October 2020. It responded to growing concerns about certain foreign investors seeking to acquire control of EU firms that supply critical technologies, infrastructure or inputs, or hold sensitive information, and whose activities are critical for security or public order at EU level. The rules are designed to help identify and address security or public order risks relating to foreign direct investment involving at least two Member States or the EU as a whole. In January 2024, the Commission submitted a new proposal on the screening of foreign investment projects in the EU.

Quote by the rapporteur

Parliament’s rapporteur Raphaël Glucksmann (S&D, FR) said: “I am pleased that a strong pro-European majority has adopted an ambitious reform of the EU’s foreign investment screening mechanism. This reform will establish a more predictable system that ensures foreign investments do not compromise our security. Investors will benefit from greater clarity on procedures, while a harmonised scope and a reinforced role for the Commission will help ensure consistency across the Union."

Next steps

After adoption in the International Trade Committee, Parliament as a whole will vote on the proposal in an upcoming plenary session, after which negotiations with member states on the final shape of the law can begin.