CELIS Update on Investment Screening and Economic Security – August 2025
by Helene Schramm and Órlaith Higgins
INVESTMENT SCREENING MECHANISMS
Republic of Cyprus – Cyprus moves to align with EU by introducing FDI screening framework
Cyprus has finally begun to remedy the absence of its FDI screening regime amid efforts to harmonize European foreign direct investment (“FDI”) screening with its submission of the bill entitled “the Establishment of Framework for the Foreign Direct Investment Screening Law of 2025” (“the Bill”) before the Plenary of the House of Representative on the 10th July 2025.
The submission of the Bill follows increased pressure from the European Commission to establish FDI screening regimes, including the European Commission’s proposal to make the establishment of said regimes mandatory under the EU FDI Regulation 2019/452. The proposed Bill is applicable to foreign investors: all investors excluding EEA or Swiss natural or legal persons, investing in a strategic undertaking as defined in the Annex to the Bill. To fall within the scope of the regime, investments must result in the acquisition of 25% of shares in a strategic entity (or an otherwise decisive/controlling portion), the increase in existing shareholding from less than 25% to at least 25% or less than 50% to at least 50% and must hold a value of at least 2 million euros for initial acquisitions. Failure to meet these qualifying thresholds, however, does not unconditionally exclude investments from scrutiny, as the competent authority retains the right to screen any and all investments which it considers may affect public security and order.
Bulgaria – Bulgaria’s Investment Promotion Act fully operational with new FDI screening framework
The Bulgarian Investment Promotion Act (“The Act”), which entered into force earlier this year (March 2024), has become fully operational as of the 22nd July 2025, following the adoption of two subsequent implementing regulations.
The Act is modelled to a large extent upon EU FDI Regulation 2019/452, aiming to screen investments directed at the industries described in Art 4 (1) EU FDI Regulation, for example: those pertaining to the supply of energy and raw materials (critical inputs), a broad range of critical technologies and sectors affecting freedom of speech/pluralism. The Act encompasses within its scope the expansion of existing investments and “greenfield” or “new” investments which refer to the construction of a venture from the ground up in a foreign country, in addition to FDIs generally which establish or maintain a lasting and direct link to the conduct of business in Bulgaria.
Additionally, there are certain quantitative thresholds which FDIs should meet to become subject to the regime, namely: the investment should exceed 2 million euros or account for 10% of the capital of a company operating within Bulgaria. Certain categories of FDIs, regardless of their failure to meet the aforementioned thresholds, may be nonetheless subject to scrutiny, including but not limited to, those within or adjacent to critical energy sectors and those made by foreign direct investors from Russia or Belarus.
One aspect of the Act which has garnered interest and critique is the designation of “low-risk” states which may benefit from exemptions from the regime, which includes countries such as the UK, the United Arab Emirates, the US and members of the European Economic Area (EEA).
The screening process will be carried out by the Interministerial Council for Screening of Foreign Direct Investments during a period of 45 days, excluding possible extensions or derogations.
Poland – Poland’s foreign investment screening regime becomes permanent
The duration of the Polish FDI regime (“the Regime”), first introduced on a limited basis during the COVID-19 pandemic in 2020, has been made indefinite.
The decision follows the recent trend of increasing scrutiny by European Member States of FDI in key/strategic sectors. The novel permanent nature of the regime has been accompanied by a change in competent authority. The task of overseeing FDI in Poland has shifted from the Polish Competition Authority to the Ministry of Finance and Economy. Considering the scope of review of the regime, which includes monitoring FDI for endangerment of public order, public health and public security, commentary on the decision predicts increased political input to the screening process. In spite of the temporal and institutional changes to the regime, the scope and procedure of the regime remain relatively unchanged, save for the newly introduced exclusion of transactions relating to direct investment by the Polish State from the scope.
Prior to these recent amendments the regime had issued only 12 decisions since its introduction in 2020, thus, whether the revised structure will lead to increased activity in Polish FDI screening remains to be seen.
European Union – Draft Guidelines clarify distortion test under EU Foreign Subsidies Regulation
On 18 July 2025, the European Commission released its Draft Guidelines on the application of the Foreign Subsidies Regulation, providing important clarifications on how foreign financial contributions will be assessed within the internal market.
Central to the draft is a multi-dimensional test of “distortion”, under which the Commission evaluates not just the size of a subsidy but also its type, purpose, and market context – subsidies that enable loss-making bids or artificially low procurement prices are clear enforcement priorities. The burden of proof lies with undertakings to demonstrate any countervailing positive effects, such as advancing EU research, green objectives, or security of supply, though the guidelines make clear that such justifications will become increasingly difficult where the distortion risk is high. While EU policy priorities dominate the balancing exercise, the draft acknowledges that non-EU policy objectives – for example, contributions to global climate action or human rights – may be taken into account, but only insofar as they generate a tangible benefit within the EU. The framework draws explicitly on State aid concepts and case law, notably the Court of Justice’s approach to “abnormally low tenders,” in assessing whether advantages are undue or commercially unjustified.
In the field of public procurement, the Commission signals a granular benchmarking methodology, comparing subsidised bids both against competing offers and the contracting authority’s internal estimates to isolate the subsidy’s impact. The draft also contemplates cumulative assessments across multiple subsidies and along supply chains, thereby closing potential gaps from fragmented support schemes. Importantly, procedural safeguards remain: only the Commission is competent to determine whether a tender is “unduly advantageous,” preserving uniformity in application.
The guidelines reaffirm a case-by-case methodology, eschewing rigid checklists in favour of principles that will evolve with enforcement practice, with final adoption expected in January 2026. Interested parties may submit their comments on the draft until 12 September 2025 as part of the consultation process.
France – 2025 Annual Report confirms central role of FDI screening in safeguarding France’s strategic assets
The 2025 Annual Report on FDI Screening in France (see here in French), published by the Directorate General of the Treasury, underscores the system’s central role in safeguarding economic sovereignty while maintaining France’s appeal to foreign investors.
In 2024, 392 filings were made, a sharp increase from 2023, with 182 authorizations granted-over half subject to conditions aimed at protecting critical activities, sensitive know-how, and governance structures. Most cases involved essential infrastructure and critical technologies such as biotechnology, semiconductors, and cybersecurity, with the majority of investors originating from outside the EU, notably the United States, the United Kingdom, and Switzerland.
A comparative analysis of 2021–2023 shows a stable but maturing system, with conditional approvals increasingly calibrated rather than automatic. The report confirms that France applies a two-phase review process, with conditional approvals serving as the key mechanism to reconcile openness with national security. Importantly, the framework has proven flexible: in 2024, several authorization conditions were revised to reflect changes in ownership or economic circumstances. FDI screening also extended to distressed companies, with 17 cases involving insolvency proceedings, reflecting the State’s determination to secure strategic assets even in crisis situations.
At the European level, France played an active role in the EU cooperation mechanism, contributing to over 1,800 information exchanges, and reinforced its influence in international fora such as the G7. The 2025 priorities include new guidelines to enhance predictability, closer monitoring of emerging technologies tied to the energy and digital transitions, and further alignment with EU partners.
ECONOMIC SECURITY STRATEGIES
European Union – European Commission proposes 2028-2034 Multiannual Financial Framework
The European Commission recently unveiled its proposed Multiannual Financial Framework(“MFF”) for the period 2028-2034.
The MFF lays out the objectives and allocation of the proposed 2 trillion-euro budget with a marked increase in budget under the heading of “Competitiveness, Prosperity and Security”, with the combined fields meriting approximately 522 billion euros in 2025 pricing. In accordance with Recital 7 of the proposal, EU security encompasses economic security, particularly in light of the “challenging geopolitical and geoeconomic context” at present.
The proposed MFF highlights the strengthening of security through investment in key industries such as the energy, transport and cybersecurity sectors funded by 131 billion euros via the Competitiveness Fund. The proposal shall presently proceed to the negotiation phase before the European Parliament wherein the so-called “political volatility” of the plan will be tried and tested.
European Union & United States – Framework Agreement targets balanced trade and strategic sector tariffs
The details of the United States-European Union framework on an agreement on reciprocal, fair and balanced trade of 27 July 2025 have been revealed after much speculation as to the “winners” and “losers” of the negotiations.
According to the joint statement from the Union and the USreleased on the 21 August 2025, the deal aims to secure and strengthen the EU-US trade and investment relationship and resolve trade imbalances within the partnership. Notable aspects of the agreement in terms of investment include the EU’s commitments to 750 billion dollars of expenditure on US energy products and an additional 600 billion dollars’ worth of investment in the US market in light of the EU’s recognition of the US as the “most secure and innovative destination for foreign investment”.
As to the trading conditions between the markets, the US has agreed to an all-inclusive tariff rate of 15% towards a number of strategic EU sectors, including the pharmaceutical, automobile and automobile parts, semiconductors and lumber sectors. Moreover, US tariffs on EU strategic products such as aircraft and aircraft parts, natural resources and certain drug generics will be reverted to the rates pre-January 2025. The political agreement established between the parties is not binding, however, and will require further negotiation and implementation.
European Union & Japan – EU and Japan Strengthen Strategic and Economic Partnership at 2025 Summit
On 23 July 2025, EU-Japan Summit 2025 (“The Summit”) took place in Tokyo, Japan with a marked emphasis on security and defence, competitiveness and multilateralism.
The joint statement released on behalf of the parties by the Council of the European Union impresses the importance of the economic partnership between the EU and Japan and its foundation in the rules-based multilateral trading system established by the World Trade Organisation. Furthermore, the statement recognized the necessity for strategic cooperation in the field economic security, proposing an increase in dialogues and frameworks addressing issues such as economic coercion and the protection of critical and emerging technologies. Supply-chain resilience was also paid considerable attention with commitments announced to strengthen supply chains in strategic sectors and identify novel strategic goods and sectors for further cooperation, in line with the G7 Principles on Resilient and Reliable Supply Chains. The Summit launched the Japan-EU Competitiveness Alliance ensuring mutual economic growth with free and undistorted markets through cooperation between the parties.
United Kingdom & India – New UK-India Trade Agreement marks major step in economic integration
The UK–India Comprehensive Economic and Trade Agreement (“CETA”), formalised on 24 July 2025, marks a landmark pact designed to deepen economic integration between two of the world’s fastest-growing major economies. The agreement boasts sweeping tariff reductions: India will extend duty-free access to 99 % of its exports to the UK, while the UK will eliminate or reduce duties on 90 % of its tariff lines, with 85 % becoming zero-duty within a decade. Key beneficiaries include labour-intensive sectors such as textiles, apparel, chemicals, marine products, engineering goods, pharmaceuticals, and gems and jewellery, offering major growth prospects especially for Indian micro, small and medium enterprises (“MSME”). For UK exporters, favourable terms on whisky, gin, automotive components, cosmetics, medical devices, and aerospace goods stand to significantly enhance competitiveness in India.
Importantly, the agreement also facilitates services and professional mobility, including streamlined visa access for sectors like hospitality, engineering, architecture, and creative professions, along with a three-year social security exemption (Double Contribution Convention) for Indian professionals employed in the UK. These features combined are expected to double bilateral trade to approximately US $120 billion by 2030 and generate £4.8 billion in annual GDP gains for the UK, while simultaneously boosting job creation and MSME participation in both markets.
The agreement further broadens investment and public procurement avenues, creating scope for joint ventures and fostering competitive participation across both economies. Its implementation will proceed through rigorous finalisation steps, including legal scrubbing and ratification by both parliaments, before entering into force within the next 6 to 12 months.
