CELIS Update on Investment Screening and Economic Security – March 2025
by Helene Schramm with the help of intern Surbhi Gupta
INVESTMENT SCREENING MECHANISMS
European Union – EU consults on Foreign Subsidies Regulation Guidelines
On 5 March 2025, the European Commission published a Call for Evidence seeking feedback on the upcoming Guidelines regarding the implementation of the Foreign Subsidies Regulation (“FSR”).
The FSR, effective since July 2023, empowers the Commission to investigate and address distortions caused by subsidies from non-EU countries, particularly in mergers and public procurement. The forthcoming guidelines will elucidate key concepts such as market distortion criteria, the balancing test, and the Commission’s authority to assess transactions below notification thresholds.
Stakeholders can provide feedback on the draft guidelines through the “Have Your Say” portal until April 2, 2025, contributing to the refinement of the regulatory framework. The final guidelines are scheduled for publication by January 13, 2026, following a draft release and further public consultation anticipated later in 2025.
This initiative is part of the EU’s broader effort to maintain a level playing field, ensuring that foreign subsidies do not undermine fair competition within its internal market.
For more detailed information, you can read the full press release here: European Commission Press Release IP/25/685.
Czech Republic – Czech Government blocks Chinese investment citing espionage risks
On 21 March 2025, the Czech government has halted a Chinese investment in a strategic sector, citing national security risks linked to potential espionage, marking its first formal veto under the country’s updated foreign direct investment screening framework. The move aligns with the EU’s 2019 FDI Screening Regulation, which empowers member states to scrutinize non-EU investments in critical infrastructure, technology, and sensitive data.
Czech Prime Minister Petr Fiala emphasized that the decision reflects heightened vigilance against “hybrid threats” from state-backed entities, echoing similar actions in Germany and Sweden targeting Chinese firms in telecom and energy sectors. The blocked entity, reportedly linked to China’s Belt and Road Initiative, had sought access to Czech transportation or energy infrastructure, raising concerns about dual-use data exploitation.
China’s Foreign Ministry condemned the veto as “politically motivated”, warning of retaliatory measures under WTO rules. Legal analysts note the case underscores growing tensions between EU de-risking strategies and China’s economic statecraft, as rejections of foreign direct investment in the EU have risen by 40 % since 2021.
The Czech Republic’s veto of a Chinese investment marks a significant shift toward prioritizing national security over economic engagement, aligning with broader EU efforts to screen foreign influence in critical sectors. This move reflects growing concern over hybrid threats and data exploitation tied to state-backed entities, particularly from China. As tensions rise, the EU continues to balance economic openness with strategic autonomy in an increasingly polarized global landscape.
Canada – Canada expands national security reviews including “economic security”
On 5 March 2025, Canada has updated its National Security Review Guidelines for Investments under the Investment Canada Act (“ICA”), formally integrating economic security into its foreign investment assessment framework, effective immediately. The revised guidelines prioritize scrutiny of transactions involving critical sectors such as advanced technology, critical minerals, and sensitive personal data, reflecting global trends toward “de-risking” strategic supply chains.
The policy update empowers Innovation, Science and Economic Development Canada to evaluate investments based on risks like espionage, sabotage, and economic coercion, particularly targeting state-owned enterprises or entities linked to adversarial governments. This aligns with Canada’s Indo-Pacific Strategy, which identifies China and Russia as primary sources of systemic competition and hybrid threats.
Legal experts note that the guidelines introduce ambiguity, as “economic security” lacks a statutory definition, potentially broadening discretionary rejections of deals in AI, quantum computing, and energy transition sectors. Industry groups warn the changes may deter foreign capital, citing a 31% rise in ICA national security reviews since 2020.
ECONOMIC SECURITY STRATEGIES
European Union – European Commission unveils the White Paper for European Defence – Readiness 2030 and the ReArm Europe Plan/Readiness 2030
The European Commission has launched its White Paper for European Defence – Readiness 2030 and the ReArm Europe Plan/Readiness 2030, outlining a roadmap to bolster EU defense integration, industrial capacity, and crisis response by 2030.
The White Paper for European Defence – Readiness 2030 prioritizes seven critical areas—including missile defence, drones, and space asset protection—to strengthen Europe’s military and industrial base amid rising global threats. It supports collective procurement to reduce fragmentation and aims to rapidly increase military aid to Ukraine, integrating its defence industry into the European ecosystem as part of Europe’s security. By promoting joint investments, regulatory simplification, and innovation in disruptive technologies, the plan seeks to unlock up to €800 billion in defence funding and boost the competitiveness of the European defence sector. Finally, the EU will enhance partnerships with NATO and other allies, improve military mobility, stockpile resources, and secure borders with Russia and Belarus to ensure readiness for worst-case scenarios and safeguard Europe’s stability.
The ReArm Europe Plan/Readiness 2030 introduces the Security Action for Europe, offering up to €150 billion in EU-backed loans to help Member States acquire key defence capabilities like air defence, drones, and cyber tools, while encouraging fiscal flexibility through the National Escape Clause.
France – France’s National Defense and Armed Forces Commission publishes report on the challenges and prospects of the war economy
On 20 Mars 2025, France’s National Defense and Armed Forces Commission has published the “Rapport d’Information portant receuil d’auditions de la commission sur les enjeux et perspectives de l’économie de guerre”, outlining policies to strengthen defense-industrial preparedness amid escalating geopolitical tensions. The report calls for rapid industrial mobilization, reduced reliance on non-EU suppliers, and enhanced civilian-sector resilience to support prolonged conflict scenarios, mirroring EU-wide “de-risking” imperatives.
Key recommendations include expanding state-controlled stockpiles of critical materials (e.g., semiconductors, rare earths), incentivizing dual-use technology, and streamlining defense procurement under France’s Loi de Programmation Militaire 2024–2030. The plan aligns with the EU’s Critical Raw Materials Act but prioritizes national sovereignty over Brussels-led initiatives, raising questions about coherence with EU defense integration efforts.
Analysts highlight tensions between France’s push for “strategic autonomy” and its reliance on U.S. and Asian tech imports, particularly in aerospace and cybersecurity. The report also urges stricter FDI screening in defense-adjacent sectors, reflecting concerns over Chinese acquisitions in energy and AI infrastructure. Industry groups warn that forced reshoring could inflate costs and delay modernization, citing France’s 18-month backlog in artillery shell production.
United States – U.S. expands Entity List with 80 entities targeting AI and advanced computing
The U.S. Department of Commerce’s Bureau of Industry and Security has added 80 entities across China, Russia, the UAE, and other jurisdictions to the Entity List, citing activities that threaten U.S. national security, including AI development for military use, drone production for Russia’s war in Ukraine, and advanced computing capabilities. The designations, effective immediately, bar U.S. firms from exporting controlled technologies without licenses, expanding restrictions under the Export Administration Regulations.
Over half of the listed entities are Chinese firms linked to AI infrastructure, semiconductor manufacturing, and quantum computing, reinforcing U.S. efforts to curb China’s access to cutting-edge dual-use technologies. The move aligns with the CHIPS and Science Act’s objectives to limit China’s military-civil fusion strategy, targeting firms like Huawei-backed chipmakers and drone component suppliers aiding Russian forces.
Legal experts warn that the expanded Entity List intensifies compliance burdens for global supply chains, requiring enhanced due diligence on third-party distributors and end-users. China’s Ministry of Commerce condemned the action as “economic coercion,” signaling potential retaliatory measures against U.S. tech firms under its Unreliable Entities List.
