Foreign direct investment screening explained
EU rules on screening foreign investment enable member states to control foreign investments in the EU and address any risks to security or public order. This is done in cooperation with other member states and the Commission.
What is foreign direct investment?
Foreign direct investment (FDI) is when an investor acquires effective participation in or control of an EU company. FDI differs from portfolio investment, in which an investor buys shares in a company without participating in the management or control of the company.
Like international trade, FDI typically contributes to economic growth and can facilitate the cross-border transfer of goods, services and capital.
Inward and outward FDI
Foreign direct investment can be either inward or outward. Inward FDI is when foreign investors invest in a country or region and outward FDI is when domestic investors invest in foreign markets.
FDI is typically measured by two main indicators: stocks and flows.
Stocks
FDI stocks give a snapshot of how much foreign investment exists at a given moment, showing the total accumulated value.
Outward FDI stock is the value of EU investors’ equity (ownership interest in a company) and net loans to companies abroad.
Inward FDI stock is the value of foreign investors’ equity in and net loans to companies resident in the EU.
Flows
FDI flows is a movement indicator, showing the value of new investments in a given time period. It consists of equity transactions, reinvestment of earnings and debt transactions between companies.
Inward FDI flows is the value of new foreign investments entering the EU in a given period.
Outward FDI flows is the value of the investments the EU’s companies make abroad within the same period.
FDI in numbers
The EU is the world’s main provider and the top global destination of foreign investment.
By the end of 2023, outward investments from the EU amounted to €13.4 trillion and inward investments to the EU amounted to €11.51 trillion. These figures include intra-EU investments (when a company from one EU country invests in another EU country).
If only non-EU investments are taken into account, then outward investments from the EU amounted to €9.16 trillion and inward investments to the EU amounted to €7.45 trillion.
EU residents and companies invested the most in:
- United States
- United Kingdom
- Switzerland
- Brazil
- Singapore
In the other direction, the most foreign direct investment to the EU comes from:
- United States
- United Kingdom
- Switzerland
- Cayman Islands
- Singapore
Alluvial chart with top 10 FDIs sources:
- United States: €2 299 billion, 30.9%
- United Kingdom: €1 314 billion, 17.7%
- Switzerland: €620 billion, 8.3%
- The Cayman Islands: €353 billion, 4.7%
- Singapore: €314 billion, 4.2%
Alluvial chart with top 10 FDIs directions:
- United States: €2 437 billion, 26.6%
- United Kingdom: €1 765 billion, 19.3%
- Switzerland: €755 billion, 8.2%
- Brazil: €312 billion, 3.4%
- Singapore: €263 billion, 2.9%
Special purpose entities
A special purpose entity (SPEs) is a legal entity - such as a subsidiary, holding company, or financing vehicle - created in a country mainly for financial, tax, or regulatory purposes rather than to carry out real economic activities there.
SPEs play a significant role in FDI. At the end of 2023 they accounted for 29% of the total EU FDI stocks held abroad, and for 33% of the FDI stocks held by the rest of the world in the EU.
EU investment objectives
The EU is one of the most open places to invest in the world and pursues a coordinated policy on FDI. The EU also negotiates and implements investment rules in trade agreements or in separate investment agreements.
The main aims of the EU’s investment policy include:
- securing a level playing field so neither EU nor foreign investors are discriminated against or mistreated
- enabling investments in the EU through a predictable and transparent business environment
- encouraging investments that support sustainable development and respect for human rights, labour and environmental standards
Rules on screening
The EU has rules in place on the screening of FDI, to enable member states to check foreign investments in the EU and address any risks to security or public order risks. They do so in cooperation with other member states and the European Commission.
EU-wide cooperation and exchange of information on investments from abroad is needed because FDI in one member state could pose security or public order risks in another member state or even throughout the EU.
The Council first adopted a regulation on FDI screening on 5 March 2019, and the rules have applied since October 2020. Among other things, the regulation created a cooperation mechanism for raising and discussing concerns related to specific investments, set requirements for screening mechanisms at national level and enabled the Commission to issue opinions on any investment that threatens the security of more than one member state.
To better respond to challenges generated by growing geopolitical tensions and technological developments, while also maintaining the EU’s position as one of the world's most open areas for investment, the Commission tabled a proposal in 2024 to improve the rules on FDI screening. Building on a review of 1200 cases of FDI that took place between 2021 and 2024, the new rules will:
- ensure that all member states have a screening mechanism in place, with more harmonised national rules
- extend EU screening to include investments by EU investors ultimately controlled by individuals or businesses from a non-EU country
In June 2026, the Council formally adopted the revised regulation. Among other things, the new rules will introduce a minimum sectoral scope, requiring all member states to screen foreign investments in:
- dual-use items and military equipment
- hyper-critical technologies
- critical raw materials
- critical entities in energy, transport and digital infrastructure
- electoral infrastructure
- a limited set of financial system entities
The rules will start to apply 18 months after the revised regulation enters into force.
The revised FDI screening arrangements are part of the EU’s strategy to strengthen its economic security and to protect strategic industry sectors from risky investments by foreign investors.
Letzte Überprüfung: 8. Juni 2026