CELIS Update on Investment Screening and Economic Security – June 2025
by Helene Schramm with the help of intern Parth Aggarwal
INVESTMENT SCREENING MECHANISMS
European Union – Commencement of trilogue discussions on the revision of the EU FDI screening regulation
In January 2025, the European Commission unveiled a proposal to overhaul the EU’s Foreign Direct Investment (FDI) screening regulation (Regulation 2019/452), aiming to strengthen the Union’s ability to identify and mitigate risks to security and public order. Following the Council of the European Union’s adoption of its negotiating mandate in the Proposal for a Regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council of 6 June 2025, trilogue discussions with the European Parliament and Commission began on 17 June 2025.
A key area of debate is the scope of the updated FDI screening regulation. Stakeholders are divided on whether to exclude purely financial portfolio investments and internal restructurings that don’t alter beneficial ownership. Another contentious issue is the treatment of greenfield investments: while the Commission advocates for their inclusion, the Council prefers to leave that decision to individual member states. Divergences also exist around which sectors should fall under mandatory screening. The Council suggests a narrower scope focused on military and dual-use items, whereas the Parliament is pushing for a broader list that includes sensitive technologies. The draft regulation grants the Commission more flexibility to update annexes relating to Union-interest projects and sensitive sectors through delegated acts.
At the heart of the Council’s approach is the ambition to harmonize core elements. All member states would be required to set up national screening mechanisms, implement a uniform two-phase review process, ensure judicial recourse, and provide annual reports on their FDI screening performance. Improved coordination is also on the table, with proposals for a secure platform for cooperation and stricter deadlines for cross-border investment notifications. To ensure efficiency and legal clarity, the Council calls for streamlined procedures that avoid unnecessary notifications. Notably, the Council’s position reinforces the exclusive decision-making power of each member state over whether a specific investment poses a threat to national security. It explicitly rejects allowing other member states or the Commission to initiate reviews independently, preserving national sovereignty in this domain. Additionally, it proposes the creation of a centralized EU database of national screening outcomes to enhance transparency and coordination.
Representatives of the European Parliament, the Council, and the Commission will hold a series of interinstitutional negotiations (trilogues), with the aim of reaching an agreement on the final text of the revised regulation. If negotiations progress smoothly, a final agreement could be reached by the end of 2025 under the Danish Presidency of the Council. 
Hungary – Hungary tightens its grip on foreign direct investments
On 23 June 2025, Government Decree no. 163/2025 (VI.23.) amending Government Decree no. 561/2022 (XII. 23.) on the differing application during the state of emergency of certain provisions related to the economic protection of Hungarian companies was published in the Official Journal of Hungary. Hungary has undertaken significant measures to reinforce its FDI screening regime, indicating a more proactive and assertive role for the state in overseeing transactions within strategic sectors.
The amendments, which took effect the following day, extend the screening period significantly from 30 to 45 business days, with the possibility of three additional 30-day extensions, giving authorities more time to scrutinize transactions in strategically sensitive sectors. This move responds to concerns that the previous deadlines were too tight for thorough evaluations.
Second, the Hungarian state has expanded its right of pre-emption. Previously limited to solar energy deals, this right now applies broadly to any FDI transaction that is prohibited by the competent screening authority under the screening rules. In such cases, the state can step in and acquire the target company, on the same terms as the original deal, within 90 days of the prohibition. Unlike before, this can be done through various designated entities, not only via the Hungarian National Asset Manager Inc.
For a more detailed insight, take a look at the CELIS Blog post by Bálint Kovács: Blocked Deals and State Buy-ins: Legal Consequences and Policy Challenges in Hungary’s FDI Screening Regime.
United Kingdom – UK’s Modern Industrial Strategy addresses planned refinement of the NSIA
On 23 June 2025, the UK Government released its UK’s Modern Industrial Strategy, reaffirming its long-term economic vision while confirming that reforms to the National Security and Investment Act (NSIA) remain forthcoming.
The strategy identifies eight priority sectors for targeted public and private investment, including semiconductors, clean energy, defense, and advanced manufacturing. While the document focuses primarily on competitiveness and infrastructure, it also positions investment screening as a complementary tool that requires refinement. Planned amendments to the NSIA are expected to improve oversight, reduce procedural friction, and introduce greater precision in the definition and scope of sensitive sectors. The government has indicated that a 12-week consultation will soon begin to revise the list of 17 sectors currently subject to mandatory review. Possible adjustments include narrowing overly broad categories such as artificial intelligence, while adding areas like critical minerals and water infrastructure. At the same time, new exemptions are being considered for low-risk internal restructurings, and updated guidance is expected to provide clearer direction on filing requirements and review timelines. Together, these measures signal a move from a broadly precautionary framework to a more calibrated and transparent model that protects essential assets while supporting investment in strategic industries.
Global – UNCTAD publishes World Investment Report 2025
On 19 June 2025, UNCTAD released its World Investment Report 2025 – the forensic seismograph of global investment activity that annually captures the shifts, tremors, and underlying fractures in cross-border capital flows.
At first glance 2024 appeared to mark a modest recovery with FDI rising 4 percent from US $1.45 trillion to US $1.51 trillion, however, once the chaff of the inflated European conduit flows is separated from the grain of genuine investment, the true picture emerges: a like-for-like decline of 11 percent, from US $1.67 trillion to US $1.49 trillion. This marks the second straight year of double-digit contraction and exposes a persistent fragility in international investment, even as global GDP and trade have begun to rebound.
This contraction was most pronounced in Europe, where FDI collapsed by 58%, dragging developed economies down 22% overall. The United States defied the trend with a 23% surge, propelled by high-value M&A and clean energy investment. Inflows into Africa rose 75% from $55 Bn to $97 Bn, though this was largely propelled by the Ras El-Hekma megaproject in Egypt; without which, growth for the African region stood at a more tempered 12%. Asia remained stable overall, masking sharp internal contrast with China recording a steep 29% decline, while the ASEAN states reached a record high of $225 billion, up 10%. Altogether, developing economies saw a negligible 0.2% gain, with Latin America and West Asia weighing aggregate figures.
The sectoral breakdown reveals a concerning picture of sustainable development. FDI into developing countries’ infrastructure fell 35%, renewables dropped 31%, water and sanitation declined 30%, and agrifood systems shrank 19%. Only the health sector registered an uptick. In stark contrast, investment in semiconductors and the digital economy surged by 140% and 107% respectively, driven by the global AI boom.
ECONOMIC SECURITY STRATEGIES
European Union – Denmark’s EU Presidency 2025 under the banner “A strong Europe in a changing world”
As Denmark assumes the EU Council Presidency from July to December 2025 under the banner “A strong Europe in a changing world”, its Programme of the Danish Presidency of the Council of the European Union 2025 shows that economic security is elevated to a top-tier priority. Amid growing international competitive pressures, Denmark aims to bolster Europe’s resilience by safeguarding strategic assets, defending against economic coercion, and reinforcing supply chain security. To advance these priorities, Denmark seeks closer cooperation with the High Representative for Foreign Affairs and Security Policy.
Denmark supports the ongoing trilogue talks to make FDI screening mandatory for all Member States and to harmonize their mechanisms, aiming to establish streamlined frameworks for identifying and mitigating security-related investment risks. Strategic sectors such as semiconductors, AI, and critical infrastructure will be at the center of these discussions, with an emphasis on refining – not restricting – Europe’s openness to legitimate capital.
“To increase safety and ensure a level playing field in the internal market, the Presidency will continue negotiations on revising the regulation on the framework for screening foreign investments in the EU, aiming for final adoption.”
Within the Economic and Financial Affairs Council, Denmark seeks to mobilize private investment, especially in defence and dual-use technologies.
European Union – Briefing on a new EU Economic Security Doctrine
On 17 June 2025, The European Parliamentary Research Service (EPRS) released a briefing titled “New EU Economic Security Doctrine,” outlining the European Commission’s plans to establish a comprehensive framework for economic security by year-end. The doctrine is intended to address the structural limitations of the EU’s 2023 Economic Security Strategy, which centred on identifying risks but lacked the instruments to mitigate them. In a context shaped by Russia’s war in Ukraine, escalating US–China tensions, and deepening strategic dependencies on critical raw materials and dual-use technologies, the new initiative marks a deliberate shift from reactive posture to forward-leaning intervention.
At its core, the doctrine will be built around a three-pillar structure: promoting competitiveness through innovation and industrial capacity; protecting the Union from economic coercion via tools like FDI screening, export controls, and outbound investment review; and partnering with like-minded countries to secure global supply chains and set shared standards. While earlier measures, such as the 2024 Economic Security Package, enhanced screening and risk monitoring, they fell short of providing a coherent framework. The new doctrine aims to unify disparate instruments across trade, procurement, and strategic funding while aligning more closely with G7 counterparts.
The briefing underscores the doctrine’s ambition of embedding economic security as a horizontal priority across EU policymaking. However, its success hinges on reconciling the internal tensions between institutional competence and member state sovereignty, and between open market principles and strategic restraint. If coherently implemented, the doctrine could signal a long-term pivot in EU economic governance; anchoring resilience not through retreat, but through structured, rules-based control over its most vulnerable dependencies.
European Union & Canada – Widened economic and geopolitical framework for the strategic cooperation between the EU and Canada
On 23 June 2025, The European Union and Canada issued a joint statement under the title “Enduring Partnership, Ambitious Agenda”, renewing their strategic cooperation through a widened economic and geopolitical framework. Released alongside the inaugural EU–Canada Security and Defence Partnership, the declaration outlines an integrated vision that spans trade, digital policy, industrial development, and shared geopolitical priorities. The document repositions the transatlantic partnership not only as a commercial alliance but also as a platform for co-developing strategic capacity across sectors deemed critical to the green and digital transitions.
The partnership builds on two foundational frameworks: the Comprehensive Economic and Trade Agreement (CETA) and the Strategic Partnership Agreement (SPA). CETA, which has been provisionally applied since 2017, is credited with driving over 65 percent growth in bilateral trade. The statement confirms that these instruments will be used to advance cooperation in semiconductors, artificial intelligence, critical minerals, and clean technology, including through the launch of a dedicated Industrial Policy Dialogue and renewed coordination under the Canada–EU Strategic Partnership on Raw Materials. Both parties also committed to strengthening the EU–Canada Economic Security Dialogue as a mechanism for aligning approaches to supply chain resilience and regulatory compatibility.
The joint statement outlines a structured platform for cooperation across industrial, digital, and strategic domains. It confirms the establishment of an EU–Canada Industrial Policy Dialogue to coordinate approaches in critical technologies and manufacturing, and builds on the existing Strategic Partnership on Raw Materials to advance secure, sustainable value chains. A renewed Digital Partnership will focus on AI governance, cross-border digital infrastructure, and cybersecurity standards. Measures to facilitate trade, including SME platforms, joint standard-setting, and streamlined conformity assessments under CETA, aim to enhance market access while reinforcing regulatory trust. These initiatives form the foundation for a coordinated economic relationship that now extends beyond trade liberalisation to the joint construction of strategic capacity.
United States – Trump issues Executive Order on the proposed takeover of United States Steel Corporation by Nippon Steel
On 13 June 2025, President Trump invoked his authority under Section 721 of the Defense Production Act to review the proposed takeover of United States Steel Corporation by Nippon Steel and issued the Executive Order Regarding the Proposed Acquisition of United States Steel Corporation by Nippon Steel Corporation.
What appeared at first to be a straightforward cross-border acquisition – Nippon Steel’s $15 billion bid for U.S. Steel – soon evolved into a legal and geopolitical crucible, exposing the increasingly complex intersection of international investment law, national security, and industrial policy. The transaction’s path to closure was shaped not by commercial alignment alone, but by the reach of U.S. regulatory authority, particularly through the Committee on Foreign Investment in the United States (CFIUS), whose modern mandate reflects a broader transformation in how the United States defines and defends strategic interests.
The initial complete rejection of the transaction by the Biden administration on 3 January 2025 reflected not only economic security concerns, particularly those related to domestic supply chain integrity and the preservation of industrial sovereignty, but rather also a broader political imperative: no critical asset be permitted to slip beyond the grasp of national command.
The Executive Order of 13 June 2025 replaces the previous prohibition order issued by then‑President Biden and authorizes a full de novo review of the deal by CFIUS. It constitutes a conditional approval, which allows the transaction to proceed only if the parties sign a national security agreement (NSA) with the Treasury and relevant agencies before closing, consistent with a government draft. The NSA includes stringent safeguards such as an $11 billion investment commitment, majority-U.S. board and management, and a golden share granting the U.S. government veto power over key corporate decisions. This golden share grants the President the power to veto a range of strategic decisions, including plant closures, offshoring of operations, and any attempt to move the company’s headquarters or rebrand its identity. Without the NSA in place, the transaction remains prohibited by law and CFIUS is authorized to impose ongoing monitoring and enforcement measures, including those related to Section 721 powers and regulations. Sections 2(b) and 2(c) of the January 3 Order are repealed, aligning the legal framework with the new conditional approval structure.
The President clearly reserves the right to issue further orders if future developments threaten national security.
