The European Commission’s Second Annual FDI Report

In September 2022, the European Commission issued its Second Annual Report under Article 5(4) of the Foreign Direct Investments (FDI) Screening Regulation, together with a Staff Working Document, which provides more details on the reported data.

The report shows that most of the EU member states decided to introduce FDI screening mechanisms, as only Bulgaria and Cyprus have not initiated any legislative proceeding in this respect, while the other member states either have a mechanism in place or are expecting to introduce it shortly (the latter refers to Belgium, Croatia, Estonia, Greece, Ireland, Luxembourg and Sweden).

The data from the reported cases show that a vast majority (73%) of investments were authorised without conditions, 23% of the decisions involved an approval with conditions or mitigating measures, while the national authorities ultimately blocked transactions in 1% of all decided cases and 3% of the transactions were withdrawn by the parties and no FDI decision was adopted.

In 2021, 13 Member States submitted a total of 414 notifications, pursuant to Article 6 of the FDI Screening Regulation, which in 86% of the cases were closed by the European Commission in Phase 1, with the remaining 11% proceeding to Phase 2 with additional information being requested from the notifying Member State.

The main sectors at issue in Phase 2 cases were Manufacturing, ICT, and Financial activities. Manufacturing and ICT accounted for 76% of all Phase 2 cases. The ICT sector rose quite drastically from 17% in the previous report to 32% in the current one.

Commission opinions pursuant to either Articles 6, 7 or 8 of the FDI Regulation have been issued in fewer than 3% of all cases notified and are issued only when and if required by the circumstances of a case, more specifically the risk profile presented by the investor and the criticality of an investment target. When issued, any recommended mitigating measures are proportionate and specific to the risks and criticality identified. Such opinions remain confidential pursuant to Article 10 of the Regulation and no information was published on individual opinions.

The main sectors at issue and origin of the ultimate investor (USA, UK, China, Cayman Islands and Canada) involved in cases notified under the FDI Regulation, largely reflects the overall investment trends in the EU.

The complete text of the Second Annual report is available here and the text of the Staff Working Document here.