The European Union's approach to Foreign Direct Investment (FDI) screening has evolved in response to national security concerns and the need to protect critical technologies. While the EU doesn’t have a centralized FDI screening mechanism, Regulation (EU) 2019/452 has established a coordinated framework, encouraging Member States to implement their own regimes. A significant recent development is the European Commission’s 2025 Recommendation on outbound investment screening, which urges Member States to control EU investments in sensitive sectors outside the EU, including AI, semiconductors, 5G, and biotech. 

This aligns with the Commission's 2024 Investment Screening Report, which expands the definition of "critical" sectors. In parallel, the Netherlands has introduced the Vifo Act, effective from 2023, which specifically targets sensitive sectors like semiconductors, quantum computing, and critical infrastructure. The Vifo Act applies to both EU and non-EU investors, with low thresholds for mandatory filings, adding scrutiny for companies in these sectors.

As businesses in critical tech industries look to invest internationally, both into and from the EU, navigating this complex regulatory landscape is key. This article examines the latest developments in EU investment screening, with a focus on the 2025 Commission Recommendation, the 2024 Investment Screening Report, and the Netherlands' Vifo Act, offering insights on how companies can comply with these evolving regulations.

This article is written by Kristi Rutgers ([email protected]) and Sefa Geçikli ([email protected]) Kristi and Sefa are part of RSM Netherlands Business Consulting Services, specifically focusing on International Trade and Strategy.  

EU Screening Framework: Coordination Without Centralization

While the EU does not operate its own centralized FDI screening mechanism, the European Commission (EC) plays a pivotal role in shaping investment review practices. Under Regulation (EU) 2019/452, the EU established a formal coordination mechanism in 2020, encouraging Member States to adopt and harmonize FDI screening regimes. This regulation outlines a framework of cooperation, allowing Member States and the EC to exchange information and submit comments on transactions that may pose security or public order risks.

Crucially, the regulation does not require Member States to introduce a national screening mechanism, but many have done so. As of early 2025, 25 of the 27 EU Member States have either adopted or are preparing to adopt national FDI screening regimes. The EC continues to influence these national frameworks, promoting convergence in approach and encouraging review of critical technologies, even for intra-EU investments where indirect foreign control may be present.

The framework established under Regulation (EU) 2019/452 has succeeded in creating a structured mechanism for Member States and the European Commission to exchange information and raise awareness of cross-border investment risks. However, recognizing that certain types of investments remain outside the current regulation’s scope and significant amount of cross-border investments, the European Commission has proposed a new legislative measure to enhance its efficiency and harmonization.

Despite the EU coordination framework, Member States maintain discretion over their screening regimes. This has led to significant divergence:

  • Scope and thresholds: Some countries (e.g., Germany, France) impose mandatory filings at low voting thresholds (10-25%), while others use revenue or sector-specific triggers.
  • Investor nationality: Some regimes focus exclusively on non-EU/EFTA investors; others include all non-domestic acquirers.
  • Review structure: Proceedings range from one-phase to two-phase reviews, with durations and stop-the-clock mechanisms varying widely.
  • Standstill obligations: While many countries require suspensive filing (no closing before clearance), others allow non-suspensory or voluntary filings.

In Germany, for example, mandatory filing applies to non-EU acquisitions of critical infrastructure firms at thresholds as low as 10%. The government also reserves ex officio rights to review transactions not formally notified. France, on the other hand, mandates filings for acquisitions of control by any non-French investor, but minority stakes are only captured if the investor is non-EU/EEA-based. Spain extends mandatory filing obligations to certain intra-EU investments if value thresholds are met or national security concerns arise.

In this regard, the proposed regulation aims to ensure that all Member States establish national screening mechanisms, addressing gaps where certain sensitive investments or greenfield operations are not adequately covered. In particular, it targets:

  • Investments in Member States without screening regimes;
  • Investments falling outside current national scopes, such as those via EU-based subsidiaries controlled by third-country entities;
  • Greenfield investments, where foreign investors establish new facilities or operations in the EU.

The proposal complements national regimes like the Dutch Vifo Act, which mainly covers acquisition activities. By bringing greenfield investments under its umbrella, the new framework seeks a comprehensive approach to screening, ensuring that all relevant foreign investments—whether through acquisition or establishment—are assessed for their impact on EU security and public order.

The Netherlands: Vifo Act and critical tech sectors

The Netherlands introduced its own FDI screening regime through the Vifo Act, effective June 1, 2023. Administered by the Bureau for Investment Screening (BTI), the law mandates prior notification and approval for transactions in:

  • Vital infrastructure sectors (e.g., ports, financial infrastructure, energy)
  • Sensitive and highly sensitive technologies (e.g., semiconductors, photonics, quantum computing, military and dual-use items)
  • Strategic business campuses involved in critical research or innovation

Unlike some other regimes, the Vifo Act is country-neutral, applying to EU and non-EU investors alike. The thresholds include both acquisitions of "control" and situations of "significant influence" (e.g., 10% or more of voting rights for sensitive tech sectors). The Act is also retrospective, meaning deals closed after September 8, 2020 may still be subject to review if deemed sensitive.

Toward outbound investment screening and increasing focus on critical tech sectors
A growing frontier in EU investment control is outbound investment screening. Under the EC's European Economic Security Strategy, the Commission has initiated exploratory work on mechanisms to control outbound flows of capital, technology, and expertise to foreign jurisdictions of concern. While still in development, such controls could eventually target EU investments in non-EU countries involving sensitive tech or national security implications. 

On 15 January 2025, the European Commission issued a legally non-binding Recommendation (EU) 2025/63, urging Member States to adopt screening mechanisms for outbound investments by European investors to third countries in especially sensitive sectors. Member States are expected to report initial implementation measures by 15 July 2025, and submit comprehensive updates by 30 June 2026. This marks a pivotal step in operationalizing outbound screening as part of the broader European Economic Security Strategy.

On the other hand, according to the Commission's report for 2024 investment screening activities, the definition of "critical" or "sensitive" sectors has already expanded well beyond traditional defense, energy, or telecom. Now, biotech, AI, quantum computing, 5G, semiconductor manufacturing, data infrastructure, and health tech are all under scrutiny. For example:

  • France and Germany have added critical raw materials and 5G infrastructure to their screening lists.
  • Italy requires prior authorization for contracts involving non-EU 5G suppliers.
  • Many Member States have added healthcare and food security to their regimes following the COVID-19 pandemic.

This broadening of scope reflects global concerns about "adversarial capital," as well as strategic competition over control of next-generation technologies.

Forward Thinking

As companies in critical technology sectors—ranging from semiconductors and AI to quantum computing and biotech—look to expand or invest internationally, particularly into or from the European Union (EU), they must navigate an increasingly complex landscape shaped by evolving regulations and national security concerns. The EU’s foreign direct investment (FDI) screening frameworks, particularly the recent developments in investment control and the growing focus on outbound investment, add layers of scrutiny and compliance for companies operating in sensitive sectors.

These developments signal an era where investment planning must go hand-in-hand with regulatory screening strategies. Companies and investment firms must:

  • Identify early whether an investment may fall within a screening regime
  • Understand thresholds and obligations across multiple jurisdictions
  • Prepare for longer deal timelines due to regulatory approvals
  • Consider filing even where thresholds are not met, to reduce risk of ex officio intervention

Importantly, even where transactions are formally outside the scope, Member States may still intervene—via state-owned entities or other tools—to preserve control over strategic assets.
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