Annual report also shows jump in European Commission’s in-depth national security reviews.

EU countries handled 52 per cent more foreign direct investment screening procedures in 2025 than the year prior, with absolute numbers rising to a new record high as the European Commission expands its role scrutinising inbound investments across the bloc.

The sixth annual report on the Screening of Foreign Direct Investments into the EU, which was published on October 14, reveals that in 2025 national governments across the bloc assessed 4,773 transactions by foreign investors on national security grounds — which follows a 73 per cent surge the year prior.

Figures for 2025 are boosted by screening regimes taking effect last year in four member states — Bulgaria, Croatia, Greece and Ireland (which is one of the EU’s biggest FDI magnets) — plus the bloc recording a 4 per cent increase in inbound M&A.

But these changes alone do not fully account for an increase of 1,637 notifications.

“There is a clear indication that there is more screening going on at the member state level,” says Floor Doppen, a postdoctoral researcher at the Centre for Security and Defence Studies in Brussels.

The data suggests the level of scrutiny at national level is broadly on par with the year prior. Thirty-eight per cent of transactions notified to member states were formally screened, 87 per cent of those were approved unconditionally, 9 per cent approved with conditions, 1 per cent prohibited, and 3 per cent withdrawn.

However, there has been an uptick in scrutiny at the Commission level. The number of deals referred to the Commission via the co-operation mechanism, which requires member states to request input from Brussels on complex cases while leaving the final decision with the national government, grew 40 per cent last year — from 477 to 667.

This was outpaced by changes to the number of deals needing an in-depth review by the Commission, which more than doubled from 38 in 2024 to 80 last year. “This increase in the share of ‘Phase 2’ cases indicates that more transactions were assessed as sensitive for security and public order,” states the report.

The proportion of those deals on which the Commission ultimately issued a formal opinion remained at around 2 per cent. However, Romain Girard, a lawyer at Covington & Burling in Brussels, notes that the increase in referrals portrays “a growing Commission role” in screening and that it is “gathering more information” on transactions reviewed by member states.

This comes ahead of the Commission’s more influential role in national security reviews from January 2028 via the revised EU FDI Regulation. Under these new rules, Brussels’ opinions will carry more weight by requiring member states to justify when they disagree on a national security determination. The Commission will also be empowered to call in transactions that were not notified through the co-operation mechanism.

Clemens York, a partner at Dechert in Brussels, says the increase in Phase 2 investigations also “likely reflects” an uptick in transactions involving sensitive sectors in line with the “shift in investor activity . . . towards tangible-asset, infrastructure-type targets”.

Indeed, the sectors attracting the most scrutiny by the Commission continue to be manufacturing and ICT, in line with the EU’s focus on protecting its industrial base and stopping technology leakage.

Manufacturing accounted for the biggest share referrals to the Commission (27 per cent) and in-depth investigations (53 per cent), followed by ICT which had a 19 per cent share at each stage.

In determining whether an in-depth investigation was needed, the involvement of critical technologies or critical infrastructure continues to be the most commonly cited factor.

However Laurie-Anne Grelier, of counsel at Covington & Burling, notes there is “a clear shift in attention to sensitive data as a factor” demanding deeper review. This was the reason for 12 per cent of in-depth reviews in 2025, up from 5 per cent the year prior.

Heightened attention to sensitive and personal data potentially being jeopardised by foreign ownership is part of the EU’s broader shift towards more abstract risks posed by FDI. Grelier also notes that the latest report justifies prohibitions on the grounds a transaction presents “serious risks [which] cannot be mitigated”, a softer standard than the “very serious threats” required by last year’s report.

“This seems to suggest a lower intervention threshold to negotiate soft or formal remedies, perhaps reflective of the convergence between national and economic security,” she adds.

The three biggest source countries for referrals to the Commission continued to be the US, UK and China.