The EU screening mechanism for foreign direct investments potentially affecting security and public order in an EU Member State or in the whole EU became fully operational on 11 October 2020. Following the adoption of the EU Foreign Direct Investment Regulation, the European Commission (Commission) and the Member States have developed a coordination framework, consisting of various separate national screening mechanisms. The EU screening mechanism aims at enhancing cooperation and information sharing between the Commission and the Member States. Foreign direct investments (FDI) in sensitive industries will be scrutinized to avoid the loss of critical assets and technology (e.g. in health, energy, transport, media, defense, financial infrastructure sectors, etc.). This is part of the Commission's strategy to protect an increasingly vulnerable regional economy from hostile takeovers by non-EU players (see also European Commission Publishes White Paper Suggesting New EU Filing Obligations for Companies That Have Received Non-EU Subsidies).

  • It is important for non-EU investors to be aware that from now on deals in the EU will be systematically scrutinized not just with respect to merger control, but also from the perspective of foreign direct investment, notably if these have the potential to raise national security and public order concerns.

  • Unlike merger control, the Commission will not have the ability to block FDI. Rather, those Member States affected by the incoming FDI will inform the other Member States and Commission, which will provide their comments if they consider that the FDI is likely to affect their security or public order or a programme in the interest of the EU, or where they have relevant information.

  • The most imminent impact will be on the deal timetable as the national FDI procedures cater for the EU screening mechanism in the domestic procedural rules. In Austria, for example, the first investigation phase has been expanded from one to two months to allow for EU screening. Pending respective clearances the parties may not be able to close their deal as the national FDI rules often have similar standstill obligations as in merger regimes.


The March 2019 FDI Regulation did not establish a unified EU-wide screening mechanism enabling the Commission to block foreign investments, nor did it oblige Member States to adopt their own national screening systems. Rather, this Regulation established common standards for national screening mechanisms to provide for an EU cooperation mechanism including exchange information between the various stakeholders.

Over the last eighteen months, the Commission and Member States have developed a screening mechanism aimed to scrutinize incoming FDI potentially affecting security or public order. This includes:

  • the notification by EU Member States of their existing national investment screening mechanisms to the Commission;

  • the establishment of a framework to exchange the relevant information between Member States and the Commission, including deadlines for cooperation, as well as non-discrimination and confidentiality requirements; and

  • the development of procedures for Member States and the Commission to quickly react to FDI concerns and issue opinions if FDI threatens the security or public order of a Member State, or a project in the interest of the Union (e.g. Horizon 2020 or Galileo).

For further details, please refer to our earlier alerts available: 

EU: Foreign investment screening regulation approved

For further information and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.

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