EU to follow suit: Outbound investment control at the gates – Recommendation (EU) 2025/63

While the focus in recent years has been on regulating inbound investments, discussions around the introduction of outbound investment screenings are gaining pace. As already demonstrated in the US with the newly introduced outbound screening regime at the beginning of this year, a further regulatory regime – on top of merger control, FDI and FSR – would yet add another layer of regulatory burden.

Why screen European outbound investments?

On 15 January 2025, the European Commission (Commission) published a recommendation[1] for EU Member States to review investments made between January 2021 and June 2026 by EU investors into third countries related to a “narrow set of technological advances that can enhance military and intelligence capabilities of actors that may use them to undermine international peace and security”, i.e., semiconductors, quantum computing, and artificial intelligence. The premise of the recommendation is that outbound investments by EU companies may lead to disclosure of sensitive technologies or support of related supply chains in third countries with adverse interests – a concern that is not backed by any data or explained in more detail. The Commission acknowledges that it will be challenging to “assess […] whether they create or aggravate clearly identifiable collective risks to economic security”. While not currently proposed, the recommendation may ultimately lead to the introduction of a screening regime for outbound investments. 

The scope of the Commission’s fact-finding mission

The scope of the recommended review covers transactions that meet the following five criteria:

• Technologies. The review covers transactions relating to semiconductors (including various levels of the supply chain), artificial intelligence, and quantum technologies. See a more detailed table at the end of this post.
• Type of investment. The review covers transactions that result in sole or joint control over a company or the acquisition of a stake that enables an effective participation in the management of a company. This includes greenfield investments, joint ventures, venture capital instruments and indirect acquisitions, and excludes non-controlling investments that are limited to seeking a return on invested capital. The Recommendation also covers the transfer of certain tangible and intangible assets, IP or know-how.
• Destination. The Recommendation applies to investments into any countries outside the EU. The Commission does, however, encourage EU Member States to prioritize the review based on the “risk profile of individual countries,” including based on past behavior such as violations of the UN Charter.
• Origin. Investments by any natural or legal persons resident or established in the EU, including through third-country entities, are in scope.
• Temporal scope. The review period covers new and ongoing transactions and those completed since 1 January 2021 or, if a Member State finds it necessary, earlier.

How will Member States react?

The Commission suggests that Member States introduce voluntary or mandatory notification obligations. The Commission expects Member States to collect detailed information about the parties, type and value of the investment (including public funding and timeline), and any related intellectual property or contractual arrangements. In addition, for each transaction Member States should identify potential economic security risks and link them to accelerated developments of critical technologies in countries that may use to it to threaten international peace and security. 

The administrative burden on Member States and companies will be high. At the same time, the Commission has not yet identified any specific concerns in relation to outbound investments. It therefore remains to be seen if and how Member States will react to the Recommendation and, thus, if there will be any practical impact on EU outbound investments.

A partial alignment with the US approach?

Potential outbound screening was first considered by the US government who lobbied other jurisdictions to follow their lead. The recently introduced US regime entered into force on 2 January 2025 and targets an almost identical set of technologies, i.e., semiconductors, supercomputers and quantum information technology as well as artificial intelligence. Unlike the EU, the US instrument exclusively aims at China. 

Unlike the US, a suspensory or restrictive regime for outbound investments is not on the table in the EU. But the Commission’s review of the Member States’ reports in 2026 may result in such a proposal. 

For more details on the US regime, please refer to our recent blog posts highlighting the key takeaways for investors here and here.

What’s next?

The next weeks and months will show whether Member States adopt voluntary or mandatory notification regimes for investors. The Commission expects Member States to act quickly as the calls to present an update on their efforts in July 2025 and the final report in July 2026 show. 

Time will tell whether the Commission and the Member States agree to adopt an outbound investment screening regime at EU level or whether certain Member States will create national rules.

As of now, businesses will have to keep an eye on the developments in all Member States, especially considering that past transactions may also be on the radar for the outbound fact-finding exercise. We will closely follow the Commission’s call to support the review and data gathering exercise with a view to introducing an EU outbound screening mechanism, and are very excited to discuss this at our event, Navigating Geopolitical Challenges in Technology, Trade and Investment, at the 2025 Munich Security Conference.

Annex:

[1] European Commission, Recommendation (EU) 2025/63 of 15 January 2025 on reviewing outbound investments in technology areas critical for the economic security of the Union, OJ L, 2025/63, 15.1.2025 (the Recommendation).