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01 February 2023

FDI: – A tool to protect local treasures?

In 2017, the European Commission (EC) under Jean-Claude Juncker unveiled a proposal for an EU-wide framework for foreign direct investment (FDI) screening. Confronted with new geodynamics and pressured by the the EC began to develop instruments that protect the EU's strategic autonomy and interests, focusing particularly on foreign state-backed acquisitions of critical European infrastructure and technology. These efforts resulted in the FDI Screening Regulation in October 2020 While this regulation does not mandate Member States to enact screening regimes, on the back of the legislative initiative the EC openly encouraged Member States to ramp-up their screening instruments.[2]

An overwhelming majority of Member States have since followed the EC's wake-up call.[3] Today, 25 of 27 Member States have FDI regimes in place or are in the process of enacting screening instruments. As FDI regimes are implemented across the EU, investors are being confronted with a new reality of regular and often protracted FDI screenings. As these screening tools are rooted in national security concerns, fears of a new era of protectionism have emerged. In this article, we explore whether Member States have been exploiting this tool for protectionist purposes.

A closer look at FDI enforcement trends

Whilst bolstering FDI screening tools naturally scales up enforcement, the steep increase and sheer number of FDI screenings is remarkable. In 2021, Member States reported 1,563 authorisation requests and ex officio cases, reaffirming FDI screenings as a new reality in the transactional world.

Meanwhile, data published by the EC[4] sheds a revealing light on the FDI screening regimes in the EU, suggesting that FDI screening is not guided by a protectionist agenda. The moderate number of in-depth investigations (Phase 2 cases) and very low number of blocked cases (1 % of decided cases) indicate a nuanced approach to FDI screening. In most cases, FDI screening remains an administrative process ruled by law rather than an investment threat, affirming the EU's continuous openness to FDI.

Nevertheless, these figures – while not pointing towards protectionist motivations – must be taken with a grain of salt. Remarkably, 23 % of screened cases in 2021 were cleared subject to mitigating measures typically in the form of commitments (compared to 12 % in 2020), but the substance of these commitments remains a "black box", as their provisions are typically confidential for security reasons. It would be unjust to identify a protectionist agenda based on these figures. However, the lack of transparency is troubling. The line between legitimate mitigating measures, which by definition seek to protect national security (such as site guarantees, supply guarantees, shielding technologies) and protectionist moves is a thin one that can often only be explained by the merits of the case. Transparency would add further justification to the FDI screening system and, in the same vein, contribute to ensuring a non-protectionist implementation.

Case landscape: outliers unwelcome

Whilst most FDI screenings run unhampered by protectionist intervention, there have been outliers. When Dutch AEGON Group decided to sell its Hungarian subsidiaries to Vienna Insurance Group AG (VIG), the Hungarian government vetoed VIG's acquisition of AEGON's Hungarian entities in April 2021, citing national security concerns. The EC, which in parallel unconditionally cleared the transaction under the EU Merger Control Regulation (EUMR), initiated an investigation into the concerning Hungarian move.

It was able to do this on the back of the "one-stop-shop" principle enshrined in the EUMR, which prevents Member States from intervening in transactions which are in the EC's jurisdiction. While the one-stop-shop allows Member States to take on a transaction for legitimate interests (e.g. for public security), the EC, in a remarkable move, did not believe that the veto aimed to protect Hungary's legitimate interests. It rejected the cited Hungarian security concerns as unfounded, as both AEGON and VIG were well-established EU insurance companies with an existing presence in Hungary, and ordered the Hungarian government to withdraw its veto.

By then, however, the parties had already brokered a compromise, with Hungarian state-owned investment fund Corvinus acquiring 45 % of all Hungarian AEGON subsidiaries for VIG's acquisition to be cleared. Though ultimately obsolete, the EC's decision is a stern warning to Member States, reinstating its authority in the wake of increasingly diverging national regimes.

This could point to further EU centralisation of FDI enforcement. Indeed, we believe a "checks and balances" system – beyond the one-stop-shop principle, which applies only to transactions within the EUMR jurisdiction – would mitigate the risks of protectionist interventions on the national level.


Whilst fears of the FDI Regulation becoming a protectionist vehicle should be assuaged, the lack of transparency around the many cases with commitments and not knowing what they contain leaves Member States with a convenient outlet to advance their protectionist interests. This is all the more concerning, as ramped-up FDI regimes across the EU have proven their potency, paving the way for intensifying FDI enforcement in the future. Greater transparency in FDI screenings is thus welcome. This would not only constrain protectionist tendencies but also provide greater certainty for investors in what remains a complicated regulatory regime to manoeuvre through. 


[1] See here:

[2] Source: Guidance to the Member States concerning Foreign Direct Investment, COM(2020) 1981 final; available here:

[3] See our FDI info corner for the CEE, available here:

[4] Source: Second Annual Report on the Screening of Foreign Direct Investments, COM(2022) 433 final; available here:


authors: Volker Weiss, Sascha Schulz, Jan Kupčík


Office Managing Partner

belgium / EU