CELIS Update on Investment Screening and Economic Security – April 2025
INVESTMENT SCREENING MECHANISMS
European Union – European Commission publishes first in-depth decision on the Foreign Subsidies Regulation in e&/PPF
On 4 April 2025, the European Commission issued its first conditional Phase II decision under Regulation (EU) 2022/2560 – the Foreign Subsidies Regulation (“FSR”) – in the acquisition of PPF Telecom by Emirates Telecommunications Group (“e&”), establishing a pivotal precedent for foreign subsidy scrutiny in EU merger control. The Commission’s decision confirmed that foreign financial contributions (“FFCs”), such as unlimited guarantees and state-backed credit facilities, can constitute distortive advantages under Article 5(1) FSR, especially when they reduce sovereign risk or alter post-closing competitive dynamics.
Under the dual-jurisdiction test – where the EU target’s turnover exceeds €500 million and the acquirer has received more than €50 million in FFCs – the Commission triggered a Phase II review, applying principles consistent with its Staff Working Document SWD(2024) 1 final. The Commission distinguished between FFCs presumed distortive (e.g., bankruptcy guarantees) and those subject to effects-based review, mirroring approaches seen in cases like CRRC/Škodaand borrowing legal logic from EDF v. Commission (2012) on state-backed capital cost advantages.
The EC’s distortion analysis was bifurcated into pre-closing and post-closing effects, finding no acquisition-phase distortion due to lack of rival bidders but identifying post-closing harm linked to e&’s structurally lower financing costs. Although Article 6 FSR allows public interest balancing, the Commission refused to offset competition concerns with policy-driven justifications, affirming that merger-independent, quantifiable benefits are legally required.
To remedy the distortion, e& submitted enforceable behavioral commitments, including the removal of the guarantee, restrictions on intra-group financing, and a forward disclosure duty for sub-threshold acquisitions, ensuring future oversight through a monitoring trustee. The ruling aligns FSR enforcement with the EU’s internal market logic and extends the substantive reach of competition law to non-EU sovereign capital, functionally closing the asymmetry left by the inapplicability of EU state aid rules to foreign entities.
For global investors, the case sends a clear legal signal: the FSR is not a symbolic measure but an enforceable regime integrating foreign subsidy control into the EU’s broader economic security and competition architecture. The Commission’s structured, jurisprudence-backed methodology – balancing presumptive distortion, effects-based tests, and tailored commitments – creates a legally durable blueprint that is now integral to deal planning, risk assessment, and long-term compliance across EU-inbound M&A transactions.
European Union – International Trade Committee adopted revised screening rules for foreign investment in the EU
On 8 April 2025, the European Parliament’s International Trade Committee adopted revised rules to strengthen the EU’s foreign investment screening process. The proposal was adopted by 31 votes in favour, 7 against and with 3 abstentions.
The new rules introduce mandatory screening for additional sectors like media, critical raw materials, and transport infrastructure to address security and public order risks. National screening mechanisms will be harmonised across member states, and the European Commission will gain the authority to intervene independently or in case of disputes between countries. Screening authorities will be empowered to block or impose conditions on foreign investment projects deemed harmful to EU security. This reform builds on the 2020 framework and aims to prevent foreign takeovers that threaten key EU assets and technologies. Rapporteur Raphaël Glucksmann emphasized that the changes will create a clearer, more consistent investment environment while safeguarding European interests.
After adoption in the International Trade Committee, the Parliament as a whole votes on the proposal in its plenary session, after which negotiations with member states on the final shape of the law can begin.
Netherlands – Dutch government proposes the expansion of its FDI screening regime
The Dutch government has proposed a decree to expand its investment screening regime, adding several advanced technologies, including certain applications of AI, biotechnology, and nanotechnology, to the list of those considered sensitive to national security.
Starting in the second half of 2025, acquisitions involving companies active in these areas will require mandatory notification and approval from the Bureau Toetsing Investeringen (BTI), even for minority investments as low as 10% voting rights. The existing regime, in place since June 2023, already applies to investments in Dutch companies vital to national infrastructure and technology.
The decree’s broad definitions mean even companies with minor involvement in these technologies may fall under the expanded regime, increasing complexity and risk for M&A deals. Non-compliance can lead to severe penalties, including fines of up to 10% of global turnover and possible reversal of transactions. While BTI offers general and informal guidance, the opaque nature of its reviews -based partly on classified information – means parties are advised to exercise caution and seek early clarification. This expansion reflects both national and EU-level efforts to safeguard critical sectors amid growing geopolitical and technological challenges.
Greece – Greece introduces Draft FDI Screening Framework in line with the EU economic security strategy
As part of the EU’s push to strengthen economic security, the European Commission has proposed revisions to the EU FDI Screening Regulation, requiring all member states to adopt national regimes. In April 2025, Greece published its long-awaited draft FDI screening law, marking a significant shift in foreign investment oversight.
The law introduces mandatory screening, requiring foreign investors to notify acquisitions involving:
- 25%+ shareholding in companies operating in sensitive sectors (energy, transport, digital infrastructure),
- 10%+ shareholding in highly sensitive sectors (defence, cybersecurity, AI, ports, and tourism infrastructure in border areas).
Notably, no financial thresholds (e.g., turnover, deal value) apply, except for start-ups. All qualifying investments, regardless of size, must be notified.
The law adopts a broad definition of “foreign investor”, extending to third-country investors, and EU-based entities controlled or significantly funded by non-EU countries. In highly sensitive sectors, even entities with only 10% foreign ownership may be deemed “foreign”—a threshold influenced by Safa v. Hellenic Republic, where investors—though indirectly linked to a Greek shipyard (HSY) via Privinvest — were denied protections under Greek norms. As indirect shareholders, they could not prove personal loss (only loss to HSY, a non-party in the arbitration). Their case was weakened as it relied on hypothetical profits, and because their indirect status positioned them as foreign investors acting against their own state through an investment treaty framework. This reflects a classic “round-tripping” scenario —where nationals use foreign structures to challenge state actions — often viewed by tribunals as an abuse of process if improperly structured to obtain treaty protection.
Clearing Procedure:
- Phase I: Initial review within 30 days.
- Phase II: In-depth investigation (60–140 days), with coordination at the EU level.
Penalties for non-compliance include fines up to €50,000 and potential unwinding of the transaction. Exemptions apply to Pprtfolio investments, internal restructurings, and mall start-ups (<10 employees or <€2M turnover).
The draft law is expected to significantly affect M&A activity in Greece’s strategic sectors. The absence of value thresholds and the expansive foreign investor criteria require early legal risk assessment and regulatory planning. Where applicable, parallel notifications under EU merger control and the Foreign Subsidies Regulation (FSR) may also be necessary. Though currently narrower than some EU screening regimes, Greece’s framework is expected to evolve further in line with the EU’s economic security strategy.
ECONOMIC SECURITY STRATEGIES
European Union – EU bolsters economic security with the Recommendation (EU) 2025/683 on exports controls
Pursuant to the Commission’s January 2024 White Paper on export controls and in implementation of Regulation (EU) 2021/821, Recommendation (EU) 2025/683 of 8 April 2025 seeks to address persistent fragmentation in national control lists for dual-use items by promoting closer alignment among Member States. Although the EU’s dual-use regulation provides a harmonized legal base, Article 9 permits Member States to impose additional controls on grounds of national foreign or security policy, which has resulted in regulatory divergence that undermines both legal certainty and the EU’s collective strategic posture.
Recommendation (EU) 2025/683 introduces a voluntary coordination framework whereby Member States are encouraged to align national controls with EU and multilateral standards, including those of the Wassenaar Arrangement, thereby fostering a uniform baseline for sensitive technology exports. To operationalize this, Section 2 of the Recommendation establishes structured mechanisms for the real-time exchange of planned national measures and their anticipated impact, enabling early-stage transparency.
In Section 3, a pre-adoption consultation system is proposed whereby draft national control lists are circulated for peer and Commission review, supporting mutual oversight and preemptive mitigation of regulatory inconsistency. This mechanism reflects the EU’s broader strategic goal of maintaining a unified export control regime capable of responding to geopolitical and technological shifts with speed and cohesion.
Though non-binding, the Recommendation has the legal and political effect of clarifying the Commission’s expectation that national measures must not conflict with overarching EU or multilateral commitments, particularly in the area of economic security and dual-use governance. It further reinforces the principle that discretionary national controls should not frustrate the functioning of the internal market or weaken collective EU leverage in international forums. In sum, Recommendation (EU) 2025/683 enhances regulatory predictability, strengthens resilience, and supports the EU’s pursuit of strategic autonomy by aligning export controls with a common vision of risk, reciprocity, and responsibility.
European Union & China & United States – The EU’s Economic Security Strategy addresses the dual challenge of China and the United States
On 11 April 2025, the European Commission adopted EU Economic Security: Confronting the Dual Challenge of China and the US, setting out a strategic legal and policy framework to defend the Union’s economic sovereignty amid escalating global power asymmetries. The strategy acknowledges the dual pressures of China’s state-capitalist model and the U.S.’s expansive extraterritorial economic governance, necessitating a balance between market openness and protective regulatory autonomy. In line with this, the EU has reinforced its Foreign Direct Investment (FDI) screening architecture under Regulation (EU) 2019/452, validated by recent CJEU jurisprudence affirming the proportionality and legality of national security-based investment restrictions under Article 65 TFEU.
France’s latest restrictions on foreign acquisitions in strategic sectors, and Germany’s obligations under the AWV, particularly the 30-million-euro threshold applied in cases like Hinkley Point C, demonstrate how national measures are converging with a broader EU doctrine of pre-emptive scrutiny to safeguard critical infrastructure and technologies. Comparatively, the U.S. uses the Committee on Foreign Investment in the United States (CFIUS) to systematically block transactions involving sensitive sectors, with court decisions such as International Longshore and Warehouse Union v. Department of Treasury affirming executive discretion in invoking national security. Complementing this is U.S. export control jurisprudence, e.g., United States v. Boeing, which endorses expanded restrictions on dual-use technologies subject to foreign interest or control.
The EU’s parallel development, notably Recommendation (EU) 2025/683, institutionalizes best practices in dual-use controls and FDI screening, promoting cross-border coordination in line with the Wassenaar Arrangement and other multilateral norms. This emerging legal ecosystem reflects a transatlantic convergence around economic security doctrines that prioritize sovereignty, resilience, and legal certainty without breaching international obligations. The Commission’s strategy seeks to codify this through a reinforced, interoperable legal structure for identifying and mitigating economic coercion, technology leakage, and systemic foreign influence. Recent CJEU decisions validate this direction, while mirroring jurisprudence from the U.S. and China confirms the necessity – and legality – of this strategic legal recalibration in global trade governance. United States – Justice Department implements critical national security program to protect Americans’ sensitive data from foreign adversaries
On 2 April 2025, the White House published a Fact Sheet on President Donald. J. Trump declaring national emergency to increase the competitive edge, protect sovereignty and strengthen national and economic security.
Invoking the International Emergency Economic Powers Act of 1977 (IEEPA), President Donald J. Trump has declared a national economic emergency in response to chronic trade deficits, deindustrialization, and systemic foreign trade abuses that, collectively, endanger U.S. economic and national security. Beginning April 5, 2025, a baseline 10% tariff applies to all imports, with a second phase activating on April 9 that imposes higher, country-specific tariffs on nations with the largest bilateral deficits, thereby establishing a system of proportional reciprocity on which rates will be adjusted based on foreign retaliation, improved compliance, or U.S. strategic interests.
This emergency regime targets conduct not merely objectionable under WTO norms, but violative of broader principles of international economic law—specifically coordinated efforts by foreign actors to manipulate market access and pricing against U.S. goods. Under both trade and antitrust law, as affirmed in Monsanto Co. v. Spray-Rite, lawful countermeasures require evidence of a “conscious commitment to a common scheme,” rather than isolated, parallel conduct—a standard now applied to identify impermissible foreign collusion that disadvantages the U.S. within the global trading system.
Accordingly, the tariff program will not serve as a workaround to the WTO dispute settlement system nor be used to impose countermeasures solely in response to technical WTO breaches, but will respond only where intentional, coordinated conduct undermines fair trade and national sovereignty.
Thus, exemptions apply to items safeguarded under 50 USC §1702(b), Section 232-covered sectors (e.g., steel, autos), and strategic commodities such as pharmaceuticals, semiconductors, and critical minerals, preserving lawful trade channels vital to U.S. resilience. Canada and Mexico remain subject to prior IEEPA orders concerning fentanyl and migration; USMCA-compliant goods are tariff-free, while non-USMCA imports face tariffs up to 25%, reinforcing regional trade alignment. Trump justifies the action on grounds that discriminatory VAT systems, intellectual property theft, and manipulated trade barriers have enabled a $1.2 trillion goods deficit while hollowing out U.S. manufacturing and defense supply chains.
