CELIS Update on Investment Screening and Economic Security – September 2025
by Helene Schramm with the help of intern Parth Aggarwal
INVESTMENT SCREENING MECHANISMS
Hungary – Update of Hungarian FDI Screening Framework with Adoption of Act L of 2025
On 19 August 2025, Hungary enacted Act L of 2025, repealing the government decrees that had established the ‘Special FDI Screening Regime’ during the national state of emergency and incorporating the relevant provisions into permanent legislation.
Hungary operates a dual FDI screening system with two parallel regimes. The first ‘General FDI Regime’, Act LVII of 2018 and Government Decree 246/2018. (XII.17.), introduced to implement EU Regulation 2019/452, covers a narrow set of sectors including defence, national security, public utility services, certain financial services, IT security, telecommunications, and insurance. The second ‘Special FDI Regime’, initially adopted in reaction to the Covid-19 pandemic, covers a broader range of sectors and activities and Act L of 2025 will apply only to filings made after 19 August 2025 and up to 31 December 2026. Transactions caught under either regime require acknowledgement by the competent authority before they can be implemented.
Under Act L of 2025, standard FDI transactions benefit from a 30-business-day review period, extendable by 15 calendar days. Transactions involving Hungarian solar power plants are subject to longer review periods, with the review period increased from 60 to 75 business days. The Hungarian state’s pre-emption right in the event of a blocking decision has been removed for most sectors, but remains applicable to solar power plant transactions, where the deadline has been extended to 90 business days. While the procedural reforms benefit investors by reducing review delays and limiting pre-emption rights, FDI screening remains complex and non-transparent, particularly for transactions involving natural resources, energy, or national security-related activities. Known vetoed cases include acquisitions of companies owning mineral water springs and the Aegon insurance business.
United Kingdom – UK Government Reveals Trends in Investment Screening Under NSIA 2021
On 22 July 2025, the UK Government published its fourth Annual Report (“Report”) on the operation of the investment screening regime established under the National Security and Investment Act 2021 (“NSIA”). Covering the period from 1 April 2024 to 31 March 2025, the Report provides the most detailed account to date of the regime’s application. Given the NSIA’s limited public transparency, the findings offer rare insight into how the UK is exercising its screening powers in practice.
During the reporting period, the Government received a total of 1.143 notifications, marking a 26% increase compared with the previous year. Of these, 954 were mandatory, 134 voluntary, and 55 retrospective validation applications. Fifty-six call-in notices were issued, up from 41 in the previous period, and 17 final orders were made, compared with five in the prior year.
The Defence sector accounted for the largest share of notifications to the Investment Security Unit (“ISU”), representing 56%, followed by Critical Suppliers to Government at 21% and Military and Dual Use at 19%. This pattern broadly reflects the previous reporting period, when Defence accounted for 48% of notifications.
Defence also recorded the highest proportion of call-ins, comprising 36% and nine of the 17 final orders issued during the period. Military and Dual Use followed, representing 29% of call-ins. While notifications linked to emerging technologies with potential security implications – such as Advanced Materials, Artificial Intelligence and Energy – have attracted increasing attention, the data shows that core sectors such as Defence and Military and Dual Use remain the principal focus of ISU scrutiny.
Greece – New Guidance Clarifies Scope and Procedures Under FDI Law 5202/2025
On 8 August 2025, the Interministerial Committee for the Screening of Foreign Direct Investments on grounds of security or public order (“ICSFDI”) issued its much-awaited initial interpretative guidance (“Guidance”) on the implementation of Law 5202/2025 (“FDI Law”), which entered into force on 23 May 2025. The Guidance provides the first authoritative indication of how the FDI Law will be applied in practice and clarifies its immediate scope.
Central to the Guidance is the introduction of a dual sectoral classification between “sensitive” and “highly sensitive” activities. Any investment exceeding the relevant threshold in either category will trigger the screening mechanism before the ICSFDI. Sensitive sectors are outlined in Part One of the Annex – namely energy, transport, health, information and communication technologies, and digital infrastructure. Highly sensitive sectors are listed in Part Two – covering defence and national security, cybersecurity, artificial intelligence, port infrastructure, critical submarine infrastructure, and tourism infrastructure in border regions. The Guidance also outlines a tentative structure for the application process, identifying the principal formalities and the categories of supporting documents that investors will be required to prepare for submission.
The Guidance however makes clear that it is only a preliminary step. The definitive procedural regime – including detailed application requirements, the scope of supporting documentation, and the enforcement mechanisms for administrative fines – will be established in the forthcoming Joint Ministerial Decisions (“JMDs”). These JMDs, reportedly in the final stages of preparation, are expected to complete the operational architecture of the FDI Law and provide investors with the necessary certainty for compliance.
United States – 2024 CFIUS Report Provides Insight into Foreign Investment Review Trends
The Committee on Foreign Investment in the United States (“CFIUS”) has released its 2024 Annual Report, revealing sustained high-volume activity in reviewing foreign investment transactions for national security risks. The report shows that CFIUS is increasingly identifying transactions that were not voluntarily submitted for review and is employing mitigation, monitoring, and enforcement measures to safeguard U.S. national security interests. Key developments in 2024 included the Treasury issuing new rules that expanded CFIUS’s jurisdiction over real estate transactions, enhancing its authority to require information and set timelines for mitigation proposals, and increasing civil monetary penalties for violations. CFIUS also announced its largest penalty to date and launched a dedicated enforcement webpage.
Over the three-year period from 2022 to 2024, Canada and Japan were the top two countries for foreign investors filing transaction declarations. In 2024 specifically, the highest number of transaction notices came from investors from China, followed by France and Japan. The majority of transactions reviewed or assessed by CFIUS in 2024 were in the Finance, Information, and Services sector, followed by Manufacturing. The average time for CFIUS to complete a review was 46.5 days, while investigations took an average of 87.5 days.
By the end of 2024, CFIUS was monitoring 242 mitigation agreements and conditions. The committee assessed four penalties for breaches of material provisions in mitigation agreements and one penalty for a notice containing material misstatements. The report notes that CFIUS identifies unnotified transactions through a variety of sources, including tips from the public, media reports, voluntary self-disclosures, and commercial databases.
ECONOMIC SECURITY STRATEGIES
European Union – European Commission proposes Mercosur and Mexico agreements for adoption
The European Commission has put forward its proposals for the signature and conclusion of the EU-Mercosur Partnership Agreement (“EMPA”) and the EU-Mexico Modernised Global Agreement (“MGA”) to the Council, aiming to diversify trade relations and strengthen economic and political ties.
The EU-Mercosur deal, covering Argentina, Brazil, Paraguay, and Uruguay, could increase EU exports to the region by up to €49 billion annually, particularly in industrial goods, while protecting sensitive agricultural sectors and Geographical Indications. EU agri-food exports to Mercosur are projected to rise by nearly 50%, with robust safeguards for critical EU products such as beef, poultry, wine, and olive oil.
The modernised EU-Mexico agreement will eliminate prohibitive tariffs on key EU agri-food exports, enhance competitiveness, and secure access to critical raw materials like fluorspar, bismuth, and antimony. Both agreements reinforce cooperation on sustainable development, crime, migration, gender equality, and supply chain security.
Before entering into force, the EMPA and MGA require approval by the European Parliament and all EU Member States, with interim trade agreements covering EU-exclusive provisions applicable until ratification. Overall, these deals aim to boost growth, jobs, and strategic trade partnerships while maintaining high environmental, labour, and safety standards.
European Union – European Commission Launches Public Consultation on Proposed Circular Economy Act
The European Commission has launched a public consultation on the proposed Circular Economy Act (“CEA”), publishing a call for evidence to collect views, data and opinions from stakeholders across the Union. The consultation runs from 1 August to 6 November 2025 and will form the basis of the impact assessment ahead of the Commission’s legislative proposal, scheduled for the fourth quarter of 2026.
The CEA is conceived as a regulation to reinforce the EU’s economic security and competitiveness by accelerating the shift to a circular economy. It seeks to remove barriers in the single market for waste and secondary raw materials, facilitate the free movement of circular products, and address the long-standing stagnation in Europe’s circularity rate. By creating stronger demand and supply for high-quality recycled materials, the initiative aims to reduce dependence on imported raw materials and strengthen Europe’s industrial resilience.
The Act is also linked to the broader Clean Industrial Deal and the Competitiveness Compass, positioning circularity as a driver of decarbonisation and innovation. Specific areas under consideration include reforms to e-waste management, end-of-waste criteria, and public procurement rules to support circular products. Contributions can be made in any of the EU’s official languages, with the consultation closing at midnight Brussels time on 6 November 2025.
France & Germany – Launch of Franco-German Economic Agenda and Trade Security Dialogue to Strengthen Bilateral Cooperation
On 29 August 2025, the President of the French Republic and the Chancellor of the Federal Republic of Germany presided over the 25th Franco-German Council of Ministers. The meeting reviewed progress on bilateral cooperation between the two countries under the “Franco-German reflex” and focused on advancing security and defence, competitiveness, and convergence. As part of this effort, the Council approved the Franco-German Economic Agenda (“Agenda”), developed through eight working groups covering energy, trade and economic security, industry, advanced technologies, digital sovereignty, single market simplification, labour and social policy, and finance. The Agenda sets out concrete operational projects and establishes processes to strengthen bilateral cooperation and coordinate joint initiatives.
On the trade and economic security front, the Council established a structured German-French Trade and Economic Security Dialogue. The Dialogue, to be held bi-annually in France and Germany and supported by three expert working groups, aims to improve coordination on trade agreements, support a rules-based EU trade policy, diversify trade partnerships, and ensure a level playing field for European companies. It will also promote better understanding of national interests and joint action at the EU level.
The Dialogue will focus on three core areas. First, negotiating and implementing pragmatic trade agreements, with safeguards for strategic sectors such as agriculture, supporting WTO reforms, and engaging with like-minded partners. Second, promoting a global level playing field for EU companies by coordinating on trade defence measures and monitoring non-market practices, such as industrial subsidies. Third, advancing the European economic security strategy, encompassing the pillars of ‘promote, protect, and partner’, and enhancing governance at both bilateral and EU levels, including coordination in forums such as the G7.
India & United States – India Responds to US Tariffs with 100-Day Reform Plan to Boost Trade, Investment, and Competitiveness
In August 2025, India faced escalating trade pressure from the United States due to its continued purchases of Russian oil. The US imposed a 25% tariff on Indian goods on 7 August 2025, followed by an additional 25% tariff which was to come into effect from 27 August 2025. These measures affected key export sectors, including textiles, gems, jewellery, and fish products, presenting a challenge to India’s broader strategy to position itself as an export-driven alternative to China.
In response, Prime Minister Narendra Modi launched a 100-day reform action plan on 15 August 2025, aimed at improving business conditions and facilitating economic growth. The plan prioritises simplification of India’s tiered goods and services taxes, easing regulatory procedures, and supporting domestic production. These measures are intended to mitigate the impact of US tariffs and reinforce India’s long-term trade and investment strategy.
The reform initiative builds on prior policy efforts to liberalise foreign investment in strategic sectors such as insurance, defence, and education, as well as to strengthen trade relations with partners including the UK and China. Additional measures focus on enhancing competitiveness in manufacturing and services, improving supply chain resilience, and promoting strategic sectors like semiconductors, defence, and electronics. The government emphasises that sustained reforms and coordinated policy implementation are critical to supporting India’s long-term growth and development objectives.
