LawFlash

FDI Enforcement Trends in EU, EU Member States, and UK: Q1 2025

May 09, 2025

In the first quarter of 2025, the approach of the European Union, EU member states, and the United Kingdom toward foreign direct investment (FDI) reviews continues to be cautious and is increasingly linked to security concerns reflective of broader geopolitical tensions. This has resulted in a continued focus on Chinese investors and ongoing scrutiny of investments from prima facie allied countries. While certain FDI regulators are introducing or extending the scope of their reviews, others are considering how to refocus their level of enforcement.

The European Commission has begun the process to determine whether the EU should also screen outbound investments by liaising with EU member states to assess the national security risk (if any) associated with EU outbound investments and the need for further controls. This demonstrates that the EU’s focus may in the future extend beyond just inbound risks. This assessment is unfolding amid escalating global trade tensions, including US Section 232 investigations and growing pressure on key global players, which may have implications on global supply chains.

Across EU member states, countries like Ireland and Greece are moving to establish full screening systems, while Italy and the Netherlands are continuing to refine their existing mechanisms.

The UK has also remained engaged under its National Security and Investment Act, with major decisions on Chinese investors in sensitive sectors. These developments demonstrate a shift towards a stronger emphasis on strategy and national security.

KEY TAKEAWAYS

  • The first quarter of 2025 has shown that both the UK and EU remain open to foreign investments. However, they are cautiously screening FDI to protect their strategic interests. This may be the defining theme for 2025: to promote investment and economic growth, but without compromising national security or fair competition.
  • Recent enforcement activities show that investments involving Chinese investors or foreign government–backed investors continue to face intensified reviews, especially in sensitive sectors like semiconductors, critical infrastructure and defence.
  • The EU is no longer focused only on inbound FDI risks. The EU is discussing with member states on the need to screen outbound investments in sensitive technologies, which would be a shift toward a more security-focused strategy that looks at capital flows both into and out of the EU.
  • European regulators are becoming likely to assess investments from allied or neighbouring countries—especially if the sector is sensitive of whether there are indirect risks involved.

EUROPEAN COMMISSION – RECOMMENDATION TO EXPLORE MONITORING OUTBOUND INVESTMENT BY EU COMPANIES

On 15 January 2025, the European Commission (Commission) released a non-binding Recommendation (EU 2025/63) advising all member states to monitor and review outbound investments by EU companies, in particular in sensitive sectors (semiconductors, artificial intelligence (AI), and quantum technologies). Member states must update the EC on their progress by 15 July 2025, and by 30 June 2026 submit a comprehensive report on their findings.

This recommendation demonstrates that the EU’s FDI agenda in 2025 is focused not only on scrutinising foreign investors in Europe, but also on overseeing European investments in potentially sensitive projects abroad. Unlike the US efforts on outbound investment, the EU recommendation is neutral to the location of the outbound investment.

IRELAND’S FDI SCREENING LAW IS NOW IN FORCE

Ireland’s long-anticipated FDI screening law officially took effect on 6 January 2025, [1] focusing on critical technologies and allowing the review of transactions completed up to 15 months earlier. Ireland has implemented the Screening of Third Country Transactions Act 2023. The act applies to any acquisition, transaction, or other economic activity which may result in a change of control of an asset in Ireland or the acquisition of all or part of any interest in an undertaking in Ireland.

This legislation establishes a mandatory and suspensory FDI screening mechanism, whereby non-EU, non-European Economic Area, and non-Swiss investors must undergo screening if they meet specific criteria. Such criteria include investors’ shares or voting rights increasing from 25% or less to over 25%, or from 50% or less to over 50%.

NETHERLANDS - EXPANSION OF THE FDI SCREENING LAW

In December 2024, the Netherlands announced plans to amend its existing FDI screening law under the Vifo Act to include emerging technologies such as AI and biotechnology. The proposed change identifies six new technologies as “highly sensitive”: AI, biotechnology, nanotechnology, advanced materials, sensor and navigation technology, and nuclear technology for medical use.

Investors may be required to notify the Bureau for Investment Screening (BTI) if they acquire 10% of voting rights in companies operating in these sectors. The amended law is expected to be implemented in the second half of 2025.

GREECE – NEW FDI LAW

On 2 April 2025, Foreign Minister Georgios Gerapetritis launched a public consultation on a draft law implementing the EU FDI Screening Regulation. Its main goal is to create a screening regime for foreign investments in sensitive sectors, such as energy, transportation, digital infrastructure, defence, cybersecurity, artificial intelligence, ports and undersea infrastructure, and tourism infrastructure in border areas. The proposal was open for public consultation until 17 April 2025, and we expect the new law to come into effect shortly thereafter.

ITALY – REVIEW OF GOLDEN POWER LAW

Italy’s “Golden Power” law may be amended, as the government is considering changes to allow intervention on mergers and takeovers. In the first two months of 2025, FDI filings have increased by approximately 30% more compared to the same period in 2024. As many notifications do not lead to intervention, officials were open to streamline the process to “cut red tape.”

The golden power law was also under scrutiny in the banking sector. The Italian government is currently using the golden power law to review a takeover bid by UniCredit for rival Banco BPM. The European Commission in response, has questioned Italy’s use of golden power screening through the EU Pilot process.

The EU Pilot process is a pre-infringement regime, which was established to facilitate informal dialogue between the Commission and member states for potential breaches of EU law. It is the first step before formal infringement proceedings take place, which seeks to resolve issues in order to comply with EU laws. The EU was concerned that applying the “Golden Power” law in this case may disrupt the free movement of capital in the EU.

The EU can initiate infringement proceedings if Italy’s response is deemed unsatisfactory. However, reports suggested that the Italian government is likely to conditionally approve the transaction by the end of May. The Italian government may ask for guarantees in connection to bank branches to maintain customer service and indirectly help safeguard jobs.

THE UK’S NATIONAL SECURITY AND INVESTMENT ACT

The UK’s use of the National Security and Investment Act (NSIA) has continued to demonstrate a clear trend: increased scrutiny of foreign (specifically Chinese) investments in sectors linked to national security and critical infrastructure. The government has shown how it is willing to impose stringent conditions and to revisit existing foreign ownership arrangements.

Prominent cases in the first quarter of 2025 include the acquisition of Advanced Manufacturing (Sheffield) Ltd by a Taiwanese investor, ESCO’s purchase of Ultra Electronics PMES, and the FTDI case, which involved a Chinese investor.

ADVANCED MANUFACTURING (SHEFFIELD) LTD

On 6 March 2025, the UK government approved the acquisition of Advanced Manufacturing (Sheffield) Limited (AML) by an investment entity of a Taiwanese company. AML is a precision engineering company which specialises in components for gas turbine engines, a technology that can be used in defence applications. The approval came with a final order enforcing strict conditions to safeguard UK national security, which includes the following:

  • AML must meet “certain operational requirements,” including keeping specific precision-engineering capabilities and defined operations in the UK.
  • AML must appoint a chief security officer to ensure compliance and enforce safeguards around information technology systems, intellectual property, and data handling.
  • Employment terms must also retain confidentiality and intellectual property rights.

The UK government considered these measures “necessary and proportionate” to address these risks—specifically, the potential transfer of sensitive know-how and intellectual property in relation to turbine engineering overseas, which could boost the capabilities of potential adversaries, and also threaten the UK’s defence supply if the company’s operations were disrupted. The UK allowed this foreign investment to proceed but under stringent monitoring and UK-based operational conditions to ensure that sensitive information remain protected.

This case demonstrates the UK’s approach to FDIs in sectors with national security risks. The UK is more likely to impose stringent conditions rather than block foreign investments outright. This decision also shows the UK’s intention in controlling critical technologies which are considered important to national interests and defence, in particular. Companies which are involved in similar sectors should be prepared for extensive scrutiny and the imposition of conditions to protect national interests.

ESCO/Ultra Electronics PMES

On 3 March 2025, the UK government issued a final order approving the acquisition of Ultra PMES Limited by ESCO Maritime Solutions, a subsidiary of US-based ESCO Technologies Inc., with extensive conditions. The acquisition of Ultra PMES, a UK-based supplier of power and control system for naval defence, gave rise to concerns under the National Security and Investment Act (NSIA) due to the sensitive nature of its technology and the implications of foreign ownership without adequate safeguards.

To reduce these risks, the UK government cleared the transaction on the condition that a comprehensive security framework is implemented.

Key measures include the following:

  • All work on UK defence contracts must be conducted within the UK to ensure “sovereignty” in relation to UK defence programmes
  • Implementing a UK government-approved Internal Control Plan under US International Traffic in Arms Regulations (ITAR) to control any sensitive defence technology transfers
  • The requirement to have board members with UK security clearances, an HM government-appointed Non-Executive Director and a Chief Security Officer.
  • The establishment of a security sub-committee to oversee issues related to UK national security
  • The ability of the UK government to require the ESCO to divest the company or its assets in the future in case any national security risks arise

This case demonstrated how the UK will grant conditional approval to secure investment while also protecting against sensitive data threats.

UK HIGH COURT DEVELOPMENTS – NATIONAL SECURITY LIKELY TO OUTWEIGH EXISTING BUSINESS INTERESTS

On 7 February 2025, the High Court of Justice in London declined to grant interim relief to a Chinese investor to delay a divestment order issued under the NSIA. The case involved FTDI Holding Ltd, a Chinese-controlled entity which was ordered in November 2024 for national security reasons to sell its 80.2% stake in FDI, a Scottish semiconductor company specialising in USB technology. FTDI Holding applied for an injunction to delay the forced sale while it pursued a judicial review of the UK government’s decision.

The judgment effectively confirmed that continued Chinese ownership presented an ongoing threat to UK national security, which the court deemed unacceptable. This meant that FTDI Holding has to divest immediately, even as the judicial review of the NSIA order continues. The court mentioned that “it may be difficult to find interests sufficiently weighty to outweigh the public interest in national security.” The judgment reinforced the government’s authority to act under the NSIA and made it clear that national security outweighs business interests. This case sets an important precedent, in which foreign investors subject to divestment orders will have limited scope to postpone enforcement through litigation.

Similarly, the UK government has recently used emergency powers to control British Steel’s day-to-day operations from Chinese owner Jingye Group, which demonstrates the UK’s commitment to safeguarding critical infrastructure. The UK was concerned about the plant’s future after Jingye stopped ordering iron ore and coking coal. These are key raw materials needed to keep the blast furnaces running and to produce virgin steel, which is critical for defence and construction projects.

These cases demonstrate the UK’s willingness to intervene where foreign ownership—especially companies connected to geopolitical rivals—is seen as a threat to the UK’s control over key infrastructure. It marks a clear shift from the UK’s historically open attitude towards foreign investment, showing that national interests outweigh commercial considerations.

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[1] Ireland has implemented the Screening of Third Country Transactions Act 2023.