Strengthening the EU’s economic security: The European Commission’s recommendation on outbound investments
The European Commission (“Commission”) is taking significant strides to safeguard the EU’s economic security with the recently published Commission Recommendation (EU) 2025/63 on so-called outbound investments. The recommendation calls on Member States to establish a comprehensive system to review outbound investments in key technology areas that are critical to the EU’s economic stability and resilience: semiconductors, artificial intelligence (AI), and quantum technologies. The Commission thus aims to assess the risk of sensitive key technologies and know-how leaking to third countries through outbound investments, which could potentially undermine the EU’s strategic interests.
I. Background: Outbound investment screening as part of the EU’s new economic security strategy
The newly published recommendation is part of the Commission’s Economic Security Strategy. The Commission introduced the Economic Security Strategy in June 2023 as a response to risks and vulnerabilities exposed by rising geopolitical tensions in the wake of the COVID-pandemic, Russia’s war of aggression against Ukraine as well as the increase in hostile economic actions, cyber and infrastructure attacks, foreign interference, and disinformation campaigns. To strengthen the EU’s economic security in light of these challenges, the Commission proposed to introduce a package of measures that concern five areas:
- screening of foreign direct investments in the EU,
- export controls of dual-use technologies,
- support for research and development into dual-use technologies,
- strengthening of research security at national and sectoral level, and
- assessing the risks of outbound investments.
EU Expert Group on Outbound Investments identifies lack of information
In July 2023, the Commission set up a dedicated Expert Group on Outbound Investments, composed of the Commission and Member States experts, to examine the risks of critical technology and know-how leaking from the EU to third countries. The Expert Group found that Member States lack systematic data collection and review processes for outbound investment transactions, making it difficult to identify or assess potential security risks.
White Paper on Outbound Investments
The Commission concluded that there was a need for further insight into individual transactions, associated technologies, and sectoral trends. In January 2024, the Commission therefore published a White Paper to outline its initial work and to gather feedback from stakeholders to support the development of the recommendation in cooperation with Member States.
II. The guiding compass: Main features of the recommendation
Against this backdrop, the Commission recommendation on reviewing outbound investments is geared towards collecting information from the Member States. The recommendation highlights the vulnerability of three emerging technology sectors:
- Semiconductor technologies.
- Artificial intelligence (AI) technologies.
- Quantum technologies.
The Commission considers these three sectors critical due to their transformative potential and strategic importance. Hence, Member States are to review transactions in these sectors including M&A, asset transfers, greenfield investments, joint ventures, and venture capital.
This includes indirect investments by EU investors, e.g., through third-country entities, existing subsidiaries, or joint ventures in third countries. Gradual asset transfers during the review period and investments designed to bypass trade and investment controls or EU sanctions are also encompassed. Non-controlling strategic investments are expressly excluded from the review process.
The review process will apply to all ongoing and past transactions completed after 1 January 2021. If Member States identify transactions of particular concern, the review may extend to activities prior to this date.
Member States are encouraged to establish comprehensive mechanisms to collect and analyse detailed data on outbound investments. These review systems may provide for voluntary or mandatory provision of information on transactions. The information to be provided should include information on the parties to the transaction, type and value of the investment, goods/technologies involved, contractual agreements on intellectual property, date of completion, previous transactions between the parties and information on public funding.
On this basis, Member States should assess the risk of each transaction, focusing on technology leakage. By addressing the current knowledge gap, Member States and the Commission shall be enabled to design a proactive response to security threats.
The assessment is to be “country-neutral”, avoiding any bias regarding specific destinations and instead focusing on high-risk profiles, such as countries with a track record of violating the UN Charter.
To ensure the effectiveness of the proposed measures, the recommendation highlights the importance of enhanced cooperation between Member States and the Commission by sharing relevant data, aligning review processes, and collaborating on identifying and mitigating risks. With this unified approach, the Commission aims to reduce administrative burdens on businesses by creating consistent standards across the EU.
III. Next steps: Call for action by the Member States
Following the Commission’s non-binding call for action, it is now up to the Member States to review outbound investments and provide an update on the progress of the review to the Commission by 15 July 2025. By 30 June 2026, Member States should submit a comprehensive report to the Commission and other Member States on the implementation of the recommendation, including the outcome of the review and risk assessment.
From a practical perspective, this timeline means that the introduction of an EU outbound investment screening regime is likely to be off the table until the end of 2026, as the Commission will have to review the findings and adjust its approach accordingly. In addition, by then, first lessons of the recently introduced U.S. Outbound Investment Security Program may be available, which could further shape the debate — especially given that the U.S. program includes strong incentives for the EU to follow suit (see our earlier post).
IV. Implications for businesses
While the recommendation is non-binding, it marks another step towards the potential introduction of an outbound investment screening program in the EU. It lays the groundwork for a more comprehensive and coordinated approach to securing the EU’s economic security, resulting in a potential outbound investment control framework. The results of these reviews should help in designing a proportionate and targeted framework, either by amending existing tools or by introducing new instruments. For businesses operating in these advanced technological sectors, this may lead to a new era of regulatory considerations when pursuing opportunities abroad.
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