European Union’s Foreign Investment Screening: Between Free Movement of Capital and National Security Interests

The COVID-19 pandemic has accelerated the global trend of tighter restrictions on foreign investments. The introduction of a new EU-wide foreign investment screening framework opens a new chapter in EU’s external relations with third states.

As a collective, the European Union (EU) prides itself for being the most open investment environment, with free movement of capital enshrined in the EU treaties as one of its fundamental freedoms. Foreign direct investment (FDI), in conjunction with smooth functioning of the EU internal market, has contributed to European economic growth. However, as Chinese FDI has been on the rise in Europe, peaking in 2016, concerns about the impact of these investments on national security interests have come into the fore.