EU Commission’s Fifth Annual Report on Foreign Direct Investment Screening

In its fifth annual report on the application of the Screening Regulation (EU) 2019/452 (“REG 2019/452”), the European Commission provides an overview of trends in foreign direct investment in the EU, as well as the practices of national investment screening authorities and the European cooperation mechanism during the 2024 reporting year. In particular, the data highlights the authorities’ continued focus on critical technologies as well as Germany’s central role.

1. Trends in foreign direct investment in the EU

The report paints a mixed picture of trends in foreign direct investment in the EU. While the number of cross-border M&A transactions remained largely stable in 2024, totalling 1,954 transactions, the downward trend in greenfield investments seen in recent years continued. The European Commission attributes this development in particular to the investment environment, which continues to be shaped by geopolitical tensions, trade conflicts, and macroeconomic uncertainties.

Nevertheless, the EU remains an attractive target market for foreign investors. The United States and the United Kingdom remained the most important source countries for foreign investment in 2024, accounting for more than 40 % of the recorded M&A transactions.

Also, Germany remained the most important destination country for foreign direct investment in 2024. Of the total 1,954 foreign direct investment transactions recorded in 2024, 412 transactions (21 %) involved German target companies. Germany thus once again ranked well ahead of France (264 transactions) and Spain (230 transactions). The number of transactions involving German target companies thus increased by 17 % compared to the previous year. The practice of the German Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie – “BMWE”) regarding the cases it screens is laid down in BMWE’s annual reports published on its website.

2. Clearance remains the norm

In 2024 again, the vast majority of the transactions screened were cleared by the national competent authorities. 86 % of the transactions formally screened were cleared without conditions (2023: 85%). Another 9 % were approved with conditions or other mitigating measures (2023: 10%). In a further 4 % of cases, as in 2023, the filing was withdrawn before the screening procedure was concluded. Only 1 % of cases resulted in a prohibition, in line with the average of previous years.

The low number of formal prohibitions should not obscure the fact that national competent authorities are prepared to prohibit transactions in individual cases. This is demonstrated by recent decisions in several Member States, including the prohibition of the acquisition of Konrad Zippel Spediteur GmbH by the Chinese shipping company COSCO in Germany, as well as the most recent prohibitions in Belgium (acquisition of the NHV Group by GD Helicopter Finance Limited) and the Netherlands (acquisition of Solvinity Group B.V. by Kyndryl).

As a rule, however, foreign direct investment screening procedures primarily serve to identify and manage security-related risks and only lead to prohibitions in exceptional cases. For transactional practice, the relevant implications therefore typically lie elsewhere. Investors must take potential reporting obligations, extended closing deadlines, regulatory information requests, and, where applicable, conditions or other restrictions into account early on in their planning.

3. EU cooperation mechanism firmly established

In addition to national procedures, the report examines the application of the cooperation mechanism under Art. 6 REG 2019/452. This mechanism requires Member States to notify the European Commission and the other Member States of certain investments so that potential implications for security or public order can be assessed across the EU.

In 2024, a total of 477 transactions were notified under this cooperation mechanism. This figure was on par with the previous year (488) and confirms that the cooperation mechanism is now firmly established. Of all cases notified in 2024, 19 % of the notifications concerned transactions that were subject to screening in two or more Member States. These notifications primarily concerned transactions in the manufacturing sector, accounting for 26 % (2023: 23 %), as well as in the information and communications technology sector, accounting for 20 % (2023: 21 %).

Noteworthy is the concentration of notifications in a small number of Member States. Germany, Spain, Austria, Italy, France, the Netherlands, and Lithuania together accounted for 84 % of all notifications. At the same time, 21 Member States were actively participating in the cooperation mechanism in 2024, compared to just 13 Member States in 2021.

4. Critical technologies shape Phase 2 of the EU cooperation mechanism

Of the 477 transactions notified in 2024, the European Commission was able to close 92 % during the first screening phase (“Phase 1”) within 15 calendar days. Only about 8 % of cases were subjected to an in-depth screening (“Phase 2”). The main sector in Phase 2 in 2024 was manufacturing, which accounted for 50 % of all transactions (2023: 39 %), followed by information and communication technology at 19 % (2023: 24 %).

Just under half of all cases subject to in-depth screening in the manufacturing sector involved critical technologies. The focus here was particularly on defence and security technologies (37 %), semiconductor technologies (21 %), and aerospace technologies (16 %). Other critical technologies, including artificial intelligence and robotics, accounted for 26 %. Another 26 % of the transactions examined in depth involved critical infrastructure (2023: 34 %), 20% involved critical resources (2023: 13 %), and 5 % involved sensitive information or personal data (2023: 2 %).

5. Conclusion

Although the statistical probability of a prohibition remains extremely low, the European Commission’s report confirms once again that issues related to foreign direct investment screening are now among the key regulatory aspects of cross-border transactions.

This trend is likely to intensify in the coming years. The European Commission explicitly views foreign direct investment screening as an integral part of the European Economic Security Strategy and is increasingly using it as a tool to protect critical technologies, infrastructure, and supply chains.

The amended Screening Regulation (EU) 2026/1386, adopted in June 2026, underscores this development. It will replace the currently applicable REG 2019/452 as of 17 January 2028, and further harmonise the European investment screening framework. Through the introduction of mandatory screening mechanisms in all Member States and a more harmonised assessment standard, the control of foreign direct investment in security-relevant sectors will be even more closely coordinated at the EU level in the future.