The figures are fresh off the press: the European Commission published its Fifth Annual Report on the screening of foreign direct investments (“FDI”) into the European Union (“EU”) just a few days ago.[1] Like the previous editions, the Fifth Annual Report offers a statistical overview of the EU FDI framework’s activities in the previous year (2024 for the Fifth Annual Report). Based on submissions from all 27 Member States, the report surveys both the performance of Member States’s national screening regimes and the functioning of the EU cooperation process for FDI. FDI screening has expanded its reach in the EU, from 14 Member States having active FDI screening tools in 2019,[2] to 24 today, with the remaining three Member States in the midst of enacting similar tools. [3] This post distils the five key trends that have emerged in the past year highlighted by the Fifth Annual Report.
- Decline in FDI flow into the EU has slowed down. Following the trend of 2023, FDI into the EU[4] continued to slow down in 2024, though less sharply than in 2023: overall deal flow fell by 8.4% in 2024 compared to the 23% drop seen in 2023, remaining below pre-pandemic averages.[5] These figures arise from an overall decrease in greenfield investments into the EU that outpaced the increase in other M&A investments.[6] Once again, the U.S. and the U.K. ranked as the leading sources of both M&A and greenfield investments, together accounting for roughly half of all transactions.[7] Chinese investments rebounded by 23% after a sharp year-on-year decline of 20% in 2023,[8] which is surprising in the current geopolitical context. Looking at the receiving end of foreign M&A deals, the five largest national economies – Germany, France, Italy, Spain and the Netherlands – continued to attract the most FDI both in absolute terms (number of transactions), and in relative terms (compared to their share of EU27 GDP). In a clear contrast to 2023, Poland recorded a notable 39% uptick in receiving FDI, whilst Ireland experienced a 26% drop.[9]
- FDI screening activity surged to a record high. Member States collectively handled over 3,100 filings in 2024, which represents a 75% increase compared to the 1,800 filings reported in 2023.[10] This likely reflects the introduction of new national regimes that reported their figures for the first time (e.g. Ireland[11]) as well as the broadened scope of certain existing regimes (e.g. France, the Netherlands, Lithuania and Sweden).[12] Nevertheless, this remains a remarkable figure when seen in the context of the overall decrease in M&A activity.[13] The number of filings has increased year-on-year for the past few years, regardless of the underlying level of M&A activity. For example, 2023 saw a sharp decline (23%) in transaction volume but a 20% increase in FDI notifications. We expect this trend to persist until all 27 EU Member States’ FDI screening regimes are fully operational and have reached a level of maturity.
- Record high number of ineligibility determinations. Around 60% of FDI filings made by investors in 2024 were found to fall outside the scope of national FDI screening regimes.[14] This figure suggests that, in the absence of clear public guidance or precedent on the precise scope of screening regimes in many Member States, investors tend to “over-notify” when in doubt. The aggregate figure is driven by a very high number of out-of-scope cases in Sweden and hides a highly heterogenous picture at the national level, with three Member States recording both a high volume of cases and a high rate of out-of-scope determinations: Sweden (85% of domestic filings)[15], Italy (46%) and France (43%)[16]. That said, substantive outcomes across the EU remained largely stable compared to 2023: approximately 86% of in-scope cases was cleared unconditionally, 9% conditionally, and 1% was prohibited.[17]
- The overall operation of the EU’s cooperation mechanism remained largely stable. The FDI Screening Regulation[18] created a cooperation mechanism between the Commission and the Member States, allowing them to exchange information on specific investments and flag potential concerns or risks for security or public order to each other. This mechanism also allows the Commission to provide non-binding opinions to screening Member States. Although overall activity levels have remained relatively stable, the Fifth Annual Report highlights noteworthy patterns in both the types of activities screened and the volume of notifications: (i) 2024 saw slightly fewer notifications from Member States to the European Commission under the cooperation mechanism than in 2023, despite the significant overall increase in national FDI filings,[19] and (ii) several Member States (including Portugal, Ireland, Luxembourg, Poland, Hungary, Finland, and Estonia) have used the mechanism fewer than five times in total.[20] That said, the outcomes of the Commission’s involvement remained consistent, with roughly 92% of cases closed in Phase 1, with about 8% proceeding to Phase 2, and with approximately 2% of all notifications resulting in formal opinions.[21] By contrast, multi-country cases fell sharply from 36% to 19% of all cases processed through the cooperation mechanism. This appears to mark a return to the usual pattern following an unusually high figure in 2023, rather than the emergence of a new trend.[22]
- Investments in the manufacturing sector remain the most scrutinized under the cooperation mechanism. Manufacturing sector[23] investments accounted for half of all in-depth reviews by the Commission under the cooperation mechanism (up from 39% in 2023), followed by ICT (19%, down from 24% in 2023), and financial services (8%, as in 2023).[24] Within the manufacturing sector, the risk-factors considered in the screening process related to:[25] access to critical technologies (close to half of the investments, 49%), followed by access to critical infrastructure and inputs (26% and 20% respectively), and lastly access to sensitive data (9%).[26] These figures remain relatively stable compared to 2023. Perhaps unsurprisingly, the Fifth Annual Report records a sharp increase of deals raising risks associated with access to critical technology in the defence sector specifically (37%, up from 29% in 2023), and a smaller increase of similar deals that concerned semiconductors (21%, up from 17% in 2023).[27] This rise in defence-specific cases is largely expected, given the surge in defence-related spending across the EU over the last year. For further context, see our previous alert on FDI trends in the Defence industry.[28]
To conclude, the Fifth Annual Report indicates that the EU approach to FDI screening is becoming more established. However, the system could come under strain if filing volumes continue to rise at the same pace and authorities lack the resources needed to manage the growing workload within statutory review deadlines. That concern lies at the heart of the ongoing legislative debates over the revision of the FDI Screening Regulation, with the EU Parliament having tabled far-reaching proposals, including a unified review timeline and a centralized EU-wide screening platform. There is also ongoing debate on whether to grant the Commission ultimate decision-making power in certain multi-jurisdictional cases. Unsurprisingly, the Fifth Annual Report itself makes no detailed reference to the ongoing negotiations. Nonetheless, it is understood that a second round of technical meetings between Member States, EU Parliament and Commission officials took place behind closed doors in late September.[29] In its official communications, the Commission continues to express confidence that an agreement on the final text can be reached before the end of 2025.
With thanks to Cato Vermassen Steel for her assistance in researching and drafting this blog.
[1] Report from the Commission to the European Parliament and the Council, Fifth Annual Report on the screening of foreign direct investments into the Union, 14 October 2025, COM(2025) 632, hereinafter the “Fifth Annual Report”.
[2] When the EU FDI Framework entered into force. CIRCABC, List of screening mechanisms notified by Member States, version 1.0, 4 July 2022.
[3] Fifth Annual Report, page 23.
[4] Meaning, long-term investments by non-EU investors in EU companies or assets that confer lasting control or influence (such as acquisitions or the establishment of new operations), distinct from short-term portfolio holdings.
[5] Deal flow denotes the volume of such transactions completed within a specific period, in this case M&A and greenfield FDI into the EU throughout 2024.
[6] Fifth Annual Report, page 3.
[7] Fifth Annual Report, page 4.
[8] Report from the Commission to the European Parliament and the Council, Fourth Annual Report on the screening of foreign direct investments into the Union, 17 October 2024, COM(2024) 464, page 5. The Fourth Annual Report mentions a negative YoY trend of -9.1% for M&A activities originating from China in 2023. No source found for the number mentioned in the Fifth Annual Report.
[8] Fifth Annual Report, page 23
[9] Fifth Annual Report, page 5.
[10] Fifth Annual Report, page 12.
[11] Fifth Annual Report, page 9.
[12] Fifth Annual Report, page 10.
[13] Global M&A trends in consumer markets, 24 June 2025.
[14] This figure goes down to 33% when Sweden’s c 85% rejection rate is included. The Fifth Annual Report notes that Sweden is a clear outlier in the EU27.
[15] Inspectorate of Strategic Products, FDI Screening Statistics.
[16] https://www.tresor.economie.gouv.fr/Articles/1d11dddb-38a8-4452-94ca-eaf5fe74bc89/files/cdd21b0a-fab8-4537-bf81-cf47aabfe1e7, 30 July 2025, page 6.
[17] Fifth Annual Report, page 13.
[18] Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (“FDI Regulation”).
[19] See footnote 12.
[20] Fifth Annual Report, page 15 (map infographic).
[21] Fifth Annual Report, page 18.
[22] Fifth Annual Report, page 22.
[23] These sectors are defined by reference to the EU’s NACE rev 2 taxonomy and encompass many underlying activities. Fifth Annual Report, footnote 4.
[24] Fifth Annual Report, page 19.
[25] These rely on the list of factors identified in Article 4 of the EU FDI Regulation.
[26] The Fifth Annual Report only provides this type of breakdown for the manufacturing sector; it does not provide figures that would allow a comparison with other sectors.
[27] Fifth Annual Report, page 20 and 21, figure 12.
[28] Five Key Points on FDI Screening in the EU Defence Sector, 30 September 2025.
[29] European Commission, Staff Working Document – Evaluation of Regulation (EU) 2019/452, SWD/2024/23, 24 January 2024.