Series
Blogs
17 January 2025
As foreign investment regimes have proliferated globally in recent years, there has been growing concern on both sides of the Atlantic regarding the potential parallel national security risk that could be created by outbound investments in the field of critical technologies.
In the US, these concerns manifested as a set of outbound foreign investment rules in October last year (see our earlier post). Following this direction of travel, the European Commission has this week put forward its own Recommendation on reviewing outbound investments in technology areas critical for the economic security of the Union.
The EC first suggested outbound investment measures in June 2023 when it published its European Economic Strategy identifying a range of complex challenges for the economic security of the EU and its Member States. The EC particularly noted the risk of technology leakage and weaponisation of economic dependencies in relation to technological advances that could enhance military and intelligence capabilities.
Following this, the EC established a dedicated Expert Group on Outbound Investments, which concluded that there was a significant knowledge gap, since data on outbound investments is not routinely collected and what is available had “significant limitations”. To address this knowledge gap, in January 2024 the EC published a White Paper and held a consultation inviting comments from interested stakeholders and those with EU outbound investment experience.
The Recommendation just published is the next step in the EC’s information-gathering process.
The Recommendation proposes the monitoring and review of outbound investments by Member States over the next 15 months, with the aim of enabling the EC to assess the risks related to these investments and informing its future policy response.
To help with the EC’s data-gathering endeavour, Member States have been asked to look at several factors – some of which differ from the factors considered under the US outbound investment rules.
Once Member States have gathered their data on outbound investment, they will need to work with the EC to perform an assessment of the transactions’ potential risks to “economic security”. Broadly speaking, economic security “is about using economic measures and tools for security purposes”.
This focus requires Member States to consider (among other things):
The focus on “economic security” is notably different to - and potentially broader than - US outbound investment rules, which focus on “national security”.
Member States will now coordinate with the EC and each other on the progress of the review, including through designating a single contact point for ongoing communications. They are also encouraged to create reporting systems for relevant transactions as early as possible.
Member States must provide a progress update on their review by 15 July 2025 and submit a report of their findings by 30 June 2026.
While the Recommendation is primarily a monitoring mechanism, it is envisaged that the learnings arising from the review will allow the EC to achieve a shared understanding of the risks related to outbound investment in critical technologies and provide a basis for future policy in outbound investments in the sensitive technologies space.
This is the first concrete step towards a potential outbound investment control programme – and the outcomes of these reviews will contribute to the ultimate shape of that programme.