EU FDI: State of The Union

November 22, 2023

On October 19, 2023, the European Commission (“Commission”) published its third annual report on the screening of foreign direct investments (“FDI”) into the Union (the “Report”), following previous editions published in September 2022 and November 2021.

Notable findings include the following:

  • The vast majority of M&A and greenfield FDI into EU have originated from the U.S. and the UK, while FDI from China has steadily declined in the last three years.
  • EU FDI lands primarily in Western Europe, and targets 5 main sectors -- Information Communication and Technology, Manufacturing, Professional, Scientific and Technical activities, Finance, and Retail.
  • 22 EU Member States now have an active FDI regime, while the remaining 5 EU Member States are expected to join the EU FDI block next year.
  • 55% of FDI filings in EU led to screening and decision, up from 29% in 2021 and 20% in 2020.
  • 423 FDI filings were reviewed under the EU screening cooperation mechanism, up from 414 in 2021 and 265 in 2020; 90% of the 423 filings originated from only 6 countries – Austria, Denmark, France, Germany, Italy, and Spain.
  • The vast majority of notified deals in the EU continue to be cleared unconditionally – 86% in 2022, 73% in 2021, and 79% in 2020. Prohibitions and deal abandonments were limited to 4-5% of the notified deals in 2021 and 2022, a noticeable drop from 9% in 2020, and in line with the Commission’s message that the EU is open to FDI and that “Member States only deny transactions that pose very serious threats to security and public order”. The remainder (c. 10-20%) of cases required remedies, primarily of a behavioral nature.
  • Phase II in-depth reviews focused primarily on the manufacturing and IT sectors. Within manufacturing, FDI agencies targeted energy, cybersecurity, data processing and storage, health, semiconductors, communications, transport, defense, and aerospace.
  • Semiconductors remain the most prominent FDI sector likely to attract in-depth scrutiny and potential prohibition (depending on the investor’s origin).

These findings are addressed in more detail, here.