The European Commission on Tuesday published its fifth annual report on the screening of foreign direct investments (FDI) in the EU, accompanied by a staff working document. The report highlights a continued upward trend in the use of the EU's FDI cooperation mechanism, as well as growing scrutiny of investment transactions posing potential security risks.
According to the findings, the number of FDI notifications shared under the EU screening mechanism rose by 15% compared to 2021, reflecting greater engagement by Member States since the relevant regulation came into force.
In 2024, EU Member States submitted a total of 477 FDI notifications. In around 10% of these cases, other Member States raised additional questions. The majority of the cases (92%) were concluded within two weeks, while the remaining 8% underwent a more in-depth risk assessment, primarily for reasons related to national security.
Nearly half of the detailed assessments focused on the industrial manufacturing sector, often due to concerns around potential technology leakage, the transfer of sensitive know-how, or risks to supply chain security. As in previous years, the Commission issued opinions in less than 2% of the total cases.
Cyprus lagging behind
By the end of 2024, 24 EU Member States had introduced national legislation to screen foreign direct investments. However, Cyprus remains among the few without a functioning national FDI screening mechanism, as confirmed by the Commission’s report.
A draft bill aimed at establishing a national FDI control framework was submitted to the House of Representatives in March 2024. After undergoing several amendments, the revised bill was resubmitted to the Law Office of the Republic in early 2025 for legal review.
According to a statement from the Ministry of Finance issued on 7 October, the bill, formally titled “Law on the Establishment of a Framework for the Control of Foreign Direct Investments 2025”,has since been discussed before the House Finance Committee. However, as the legislative process is still ongoing, Cyprus has yet to publish a national report on FDI screening, unlike other Member States.
Commission proposes tougher rules
In January 2024, the European Commission presented a legislative proposal aimed at strengthening the EU’s existing FDI screening framework. If adopted by the European Parliament and the Council, the revised regulation would make it mandatory for all Member States to adopt and maintain a national FDI screening mechanism.
In addition, it would introduce a minimum level of harmonisation across the EU, ensuring that all national systems meet basic standards in terms of scope, procedure, and transparency.
The proposal reflects growing EU-wide concerns about the security implications of certain foreign investments, particularly in strategic sectors such as defence, energy, technology, and critical infrastructure.
As foreign investment continues to grow in complexity and geopolitical significance, the Commission’s initiative aims to ensure that the EU remains vigilant and coordinated in protecting its strategic interests.