The EU’s foreign direct investment screening mechanism two years after implementation

Abstract

Foreign direct investment (FDI) is widely welcomed as it can improve the standard of living in the recipient country. However, depending on the target sector and/or the nationality of the investor, FDI may pose a risk to national security; this is why some countries have adopted screening procedures. Since 2020 the European Commission has coordinated its member states in screening FDI, but not all EU members have national screening mechanisms in place. Moreover, those mechanisms that do exist are not homogenous, for example, in their identification of protected sectors. This incompleteness and heterogeneity are weaknesses that undermine the security of the EU due to the high level of integration within the single market.