CELIS Update on Investment Screening and Economic Security – May 2025
by Helene Schramm
INVESTMENT SCREENING MECHANISMS
European Union – European Parliament approves proposal for a wide framework for screening of foreign direct investments
On 8 May 2025, the European Parliament adopted the proposal of a major reform of the Foreign Investment Screening Regulation, aimed at protecting strategic EU sectors from foreign threats. The proposed rules make screening mandatory for investments in sensitive areas like media, critical raw materials, and transport infrastructure. For the first time, the European Commission would gain the power to intervene directly in problematic cases or mediate disputes between member states. The proposed regulation targets indirect control by foreign investors via intra-EU deals, a loophole often used to conceal authoritarian funding sources. Member states can block or condition foreign investments that endanger public order or security, marking a shift from free-market norms to economic sovereignty.
The proposal was adopted by 378 votes in favor, demonstrating strong political backing. Lead MEP Raphaël Glucksmann called the previous system fragmented and ineffective, arguing for a more unified and defensive stance. Critics, however, warn the proposed new rules lean toward protectionism, possibly deterring much-needed foreign capital. The reform also targets opaque ownership structures, especially from Chinese state-linked entities. By harmonizing rules across the bloc, the EU aims to close legal loopholes and send a clear message: foreign direct investment is no longer just business – it’s geopolitical.
The Council of the EU adopted its own position on June 6, 2025, which we will report on in the next update.
European Union – European Commission publishes updated Frequently asked questions on the EU framework for FDI screening
On 14 May 2025, the European Commission published an updated Frequently asked questions on the EU framework for FDI screening (Regulation (EU) 2019/45), which governs the screening of foreign direct investment (FDI) into the EU. The update reflects developments since 2021, including the Commission guidance on FDI from Russia and Belarus of 6 April 2022, and the Xella judgment of the CJEU of 13 July 2023, which clarified that investments by EU entities with indirect non-EU investors are not FDIs under the Regulation unless intentionally circumventing it – though Member States like Belgium may still screen such cases nationally.
The FAQ also addresses the Directive on the resilience of critical entities of 14 December 2022, and the Communication on European Economic Security 2024, which proposed a revised FDI Regulation. Clarifications include that non-EU nationals may qualify as foreign investors regardless of EU residence status, that the Regulation neither targets nor exempts specific countries, and that greenfield and brownfield investments undergoing screening must be notified under the cooperation mechanism – though Belgium and many others do not yet screen greenfield FDI. Notifications must also cover FDIs under sectoral regimes but exclude informal assessments. The FAQ outlines how the cooperation mechanism affects review timelines and notes that a new Delegated Regulation listing Union interest projects is expected in 2025. Notably, the FAQ’s release closely follows the European Parliament’s adoption of amendments to the Commission’s Proposed Revised Regulation of 8 May 2025.
Greece – Hellenic Parliament introduces mandatory FDI screening regime
On 22 May 2025, Greece has implemented a mandatory and suspensory FDI screening regime targeting foreign investments in designated sensitive and highly sensitive sectors: Law 5202/2025 implementing Regulation (EU) 2019/452. The law applies to Greek-incorporated entities and non-Greek entities “subject to Greek jurisdiction,” extending its extraterritorial scope. A two-tier sectoral classification governs thresholds: sensitive sectors (e.g., energy, IT, healthcare) trigger notification at 25%, 30%, 40%, 50%, and 75% ownership; highly sensitive sectors (e.g., defence, AI, cybersecurity) begin at 10%, with escalating steps up to 75%.
Exemptions apply to intra-group restructurings and non-controlling portfolio investments by individuals, reflecting EU distinctions between capital movement and establishment under TFEU law. CJEU rulings, including Test Claimants in the FII Group Litigation, affirm differential treatment of non-EU investors under freedom of establishment. The law also targets indirect non-EU control via EU-based intermediaries (10%+ ownership or significant influence), inspired by the German model of indirect scrutiny.
Screening is managed by the Interministerial Committee for the Control of FDI (ICC-FDI) and the Ministry of Foreign Affairs, involving a Phase I review (30 days) and a possible Phase II (up to 140 days). The EU Cooperation Mechanism under Regulation (EU) 2019/452 may be triggered during Phase II. Failure to notify can result in fines up to €100,000, and completed transactions may be unwound, underlining the regime’s suspensory effect.
The framework aligns with Commission Delegated Regulation (EU) 2023/2450, which defines essential services and mirrors Greece’s sectoral classifications. The regime reflects CJEU jurisprudence affirming that FDI restrictions are valid when proportionate, justified by public security, and not protectionist (Église de Scientologie, Commission v Italy). Ultimately, Greece’s law balances national security with EU internal market freedoms, embedding the principles of proportionality and necessity.
France – Publication of the evaluation report on the control of foreign investments in France
On 22 May 2025, the Evaluation and Oversight Committee (CEC) authorized the publication of the “Évaluation du contrôle des investissements étrangers en France” (evaluation report on the control of foreign investments in France), with Mr. François Jolivet and Mr. Hervé de Lépinau serving as rapporteurs.
France has strengthened its economic security policy with the goal of protecting strategic national assets from foreign influence strategies. Eligibility for control under the IEF (Investment Examination Framework) is now determined by the presence of a foreign investor, an investment operation in a French entity, or a shareholding threshold. This threshold was lowered to 10% in 2023 for listed companies. It also includes entities performing strategic activities defined in the Monetary and Financial Code. The eligibility criteria have been broadened further to cover the French branches of foreign companies, and the threshold triggering review has been reduced to 10%. Sanctions have been reinforced, with significant penalties such as fines of up to 1 million euros for individuals and criminal penalties of up to 5 years in prison. This policy shift recalls the ICSID arbitration case Orange Middle East and Africa v. Republic of Iraq (ARB/12/6). In that case, the termination of a telecommunications license granted to Orange’s Iraqi subsidiary was challenged. The tribunal found jurisdiction under the France-Iraq Bilateral Investment Treaty (BIT), stating that the conduct of Iraq – despite involving a partially state-owned entity- was attributable to the state and breached obligations of fair and equitable treatment. France, however, could not intervene or assert jurisdiction directly, as BIT rights are conferred solely upon the investor. In this instance, the investor status was denied since the company, although present in France, was majority-controlled under Iraqi law. These developments underscore the importance of an IEF framework that aligns with both national interests and international legal standards.
The report notes that, despite successive adjustments aimed at strengthening its enforcement and scope, several major limitations persist. These shortcomings are illustrated by problematic divestment cases, revealing unshielded targeting by control now that is in need to be curbed through those measures.
The summary of the evaluation report on the control of foreign investments in France can be accessed here.
Japan – Revision to the exemption scheme for prior notification in the FDI screening system under the FEFTA
On 19 May 2025, Japan amended its Foreign Exchange and Foreign Trade Act (“FEFTA”) to revise the exemption criteria for prior notification of foreign direct investments, tightening scrutiny on transactions involving critical technologies, infrastructure, and sensitive data while easing requirements for non-sensitive sectors. The effected changes, aim to balance economic openness with national security, thereby reflecting global trends towards the protection of strategic sectors.
Under the revised framework, exemptions from prior notification now apply only to passive investments below a 10% voting rights threshold in non-strategic sectors, aligning with stricter EU and U.S. FDI screening norms. Investments in AI, quantum computing, energy, and defence-related industries face mandatory reviews, regardless of shareholding size.
The government cited risks of technology leakage and supply chain vulnerabilities, particularly by state-affiliated Companies. Analysts note that the revisions mirror concerns over China’s growing influence in advanced manufacturing and dual-use tech. However, critics warn that the ambiguous definition of “strategic sectors” could deter foreign investors in emerging fields like renewables.
ECONOMIC SECURITY STRATEGIES
European Union – EEA EFTA States and the EU meet at the 60th meeting of the EEA Council
On 21 May 2025, the EEA EFTA States and the EU met at Ministerial level for the 60th meeting of the EEA Council, the highest cooperation body under the EEA Agreement. Discussions focused on economic security and the European Economic Area (EEA) and the EEA Agreement’s functioning in a changing Europe. The 60th meeting of the EEA Council took place in Brussels, gathering EU and EEA EFTA ministers from Norway, Iceland, and Liechtenstein. This high-level body under the EEA Agreement focused on economic security and the evolving EEA landscape. Emphasis was placed on the agreement’s role in enhancing Europe’s resilience and competitiveness. The EEA EFTA States reaffirmed their commitment to strong partnerships grounded in shared values amid current geopolitical challenges. Ministers praised the EEA Agreement’s adaptability, noting effective incorporation of 65 legal acts since November 2024. This reflects strong cooperation between the EU and EEA EFTA States. The informal political dialogue covered Ukraine, the Middle East, and Arctic affairs, deepening mutual understanding. The Council, which meets biannually, ensures strategic alignment and responsiveness. The next meeting is scheduled for November 2025. Conclusions adopted by the EEA Council at its 60th meeting can be accessed here.
Furthermore, the Foreign Ministers of Iceland, Liechtenstein, and Norway joined the EU’s High Representative to issue a Joint Statement marking the EEA’s 30th anniversary. The statement reaffirmed the EEA’s strength in promoting democracy, human rights, and a rules-based international order. It cited the 1994 Declaration on Political Dialogue as the basis for robust foreign policy cooperation. The partners stressed unity in tackling global challenges, particularly in response to Russia’s war on Ukraine. Future cooperation includes regular informal ministerial dialogues, senior official meetings, and alignment with EU foreign policy positions. It also covers enhanced collaboration with EU Special Representatives, and the Framework for Implementation of Mutual Interests (FIMI). The statement supports deeper joint efforts in human rights and gender equality, and participation in relevant EU agencies. EEA EFTA States may join EU Foreign Affairs Council meetings on an ad hoc basis. Diplomatic cooperation will be expanded in third countries through coordination with EU delegations. New formats of collaboration will complement existing bilateral and EEA-wide mechanisms.
European Union & United Kingdom – First post-Brexit EU-UK summit
On 19 May 2025, EU leaders and UK Prime Minister Keir Starmer held the first post-Brexit EU-UK summit in London. They agreed on a renewed strategic partnership to strengthen cooperation in security, defence, and global issues, reaffirming commitments under existing agreements such as the Withdrawal Agreement, the Windsor Framework, and the Trade and Cooperation Agreement.
The EU-UK summit marked a cautious reset in post-Brexit ties, driven by shared challenges like Russia’s aggression, economic stagnation, and declining U.S. defense engagement. Leaders agreed on a strategic partnership, a defence pact enabling UK involvement in EU military procurement, and a common understanding to ease trade frictions and revive economic ties under the TCA. Talks also covered youth mobility, border management, and fisheries. Despite domestic political pressures and EU concerns, both sides signaled a pragmatic shift toward stability, security, and renewed cooperation.
A comprehensive EU-UK defence partnership was launched, covering crisis management, maritime and cyber security, hybrid threats, and joint missions under the CSDP. NATO remains central to collective defence. Both parties reaffirmed support for Ukraine and Moldova, backed a two-state solution for Gaza, and called for compliance from Iran on nuclear obligations.
Enhanced judicial and law enforcement cooperation was discussed, including data exchange between Europol and UK agencies. Plans were made for regular high-level dialogues and technical coordination on foreign policy, crisis response, cyber threats, and arms control. Coordination on global hotspots (e.g., Ukraine, Balkans, Indo-Pacific, and Africa), peacekeeping, maritime security, and sanctions enforcement was agreed.
Emerging areas of joint action include space, AI, hybrid threats, foreign interference, and critical infrastructure. Cooperation will extend to ESDC exercises, multilateral bodies (UN, NATO, G7), and global challenges such as climate-security, public health threats, and illicit finance.
United States & China – Joint Statement on U.S.-China Economic and Trade Meeting in Geneva
On 12 May 2025, the White House published a Joint Statement on U.S.-China Economic and Trade Meeting in Geneva.
In a step toward stabilizing U.S.-China economic relations, both countries have agreed to ease recent trade tensions and resume structured dialogue. Effective May 14, 2025, the United States will suspend 24 percentage points of new tariffs on Chinese goods, including those from Hong Kong and Macau, imposed under Executive Order 14257, for a period of 90 days. In addition, it will fully remove tariffs enacted through Executive Orders 14259 and 14266.
China, in parallel, will suspend 24 percentage points of retaliatory tariffs on U.S. goods, also for 90 days. Furthermore, it will completely eliminate tariffs listed in Announcements of the Customs Tariff Commission of the State Council No. 5 and No. 6 of 2025, and suspend or remove non-tariff countermeasures introduced since April 2, 2025.
Leaders from both sides stated that these measures are intended to promote mutual respect and cooperation. The aim is to resolve bilateral concerns through structured dialogue and to foster long-term stability in U.S.-China trade relations. This recent tariff rollback signals a temporary pause in the economic tensions between the two nations. Although some duties are being lifted, tariffs remain high, and the temporary nature of these suspensions highlights the fragility and unpredictability of current U.S. trade policy. U.S. tariffs on Chinese goods are expected to drop to approximately 40 percent, while China’s tariffs on American goods will fall to around 33 percent. While this easing represents a constructive step, it falls short of a full reset in economic relations.
Future negotiations are expected to address deeper issues beyond tariffs, including intellectual property theft, forced technology transfers, cyber espionage, and trade barriers. These talks will be complicated by China’s strengthened global position, diversified markets, and growing technological capabilities.
Japan – Introduction of new economic security clearance system
On 16 May 2025, Japan introduced a new economic security clearance system, expanding classified information to include critical infrastructure and advanced semiconductors.
Government officials and private-sector workers accessing this information must undergo background checks by the Cabinet Office. The vetting covers criminal records, foreign travel, mental health, and family ties, including foreign nationals and financial accounts. Thousands are expected to be vetted in the first year. The system promotes information sharing with the US and Europe, aligning with their security protocols. Private companies can now participate in sensitive international projects. Unauthorized leaks carry penalties of up to five years in prison or fines up to 5 million yen. The law requires individual consent for checks and restricts misuse of personal data. Opposition lawmakers warn of privacy violations. The law aims to balance economic security with privacy protections amid growing global risks.
