Five Key Points on FDI Screening in the EU Defence Sector

The war in Ukraine, and other recent geopolitical conflicts, have underscored the need for EU-based defence capabilities to scale up to face these challenges. Several EU initiatives which have sought to stimulate investment are starting to bear fruit, as the European Defence Agency recently reported record high defence spendings in the EU (€350bn for 2024, a 19% increase to 2023). Political support for the sector has been demonstrated by Commission President Von Der Leyen proclaiming “a new era for European Defence and Security” in her latest State of the European Union address.

In this context, understanding the regulatory framework applicable to investments in the EU defence sector is proving increasingly important. Foreign direct investment (“FDI”) screening regimes represent one of the most important regulatory checks to clear for investors.

This blog post reviews five key points for investors to consider when making investments in the defence sector, given the current geopolitical context.