The European Union (EU) and its 27 member states are members of the World Trade Organization (WTO).

The EU is also a member to several multilateral and plurilateral agreements, including:

• the Government Procurement Agreement;
• the Trade Facilitation Agreement;
• the Civil Aircraft Agreement;
• the Information Technology Agreement; and
• the Pharma Agreement.

The EU is party to several bilateral and multilateral trade and partnership agreements with third countries. The European Commission (the “Commission”) website (see here) provides an overview of the current bilateral and multilateral trade agreements concluded by the EU, as well as those which are being currently negotiated.

The EU has adopted special trade regimes under which it grants trade preferences to developing and least-developed countries. Examples include:

• the Generalised Scheme of Preferences;
• the African Caribbean and Pacific Partnership Agreement; and
• the Overseas Countries and Territories Decision.

The EU is currently negotiating free trade and partnership agreements with (inter alia) Australia, India, Indonesia, the Philippines and Thailand. It is also putting new agreements forward with countries in East and West Africa.

In March 2024, the EU and the Philippines formally relaunched trade negotiations for an ambitious, modern and balanced free trade agreement. The Philippines currently enjoys trade preferences under the EU’s Generalised Scheme of Preferences (GSP+). The EU and the Philippines are now making the preparations for the first round of the resumed negotiations, expected to take place this year.

The EU and New Zealand trade agreement entered into force in May 2024. The agreement was signed by both parties in July 2023 after negotiations were finalised in June 2022.

The EU and Kenya Economic Partnership Agreement (EPA) entered into force in July 2024. The negotiations for an EPA concluded in June 2023. In the future, the Agreement will be open to other members of the East African Community (EAC).

The EU is in the process of signing and ratifying the trade agreement with West Africa and EAC countries to ensure its entry into force, and continues negotiations on its agreements with Australia, India, Indonesia, the Philippines and Thailand.

In June 2019, the EU and Mercosur reached a political agreement on a modernised association agreement, and negotiations are still ongoing.

The EU’s current Generalised Scheme of Preferences has been extended until the end of 2027 as there has not been an agreement on the European Commission’s proposal for a new Regulation. In the meantime, the EU legislature continues to negotiate the proposal for an updated GSP Regulation, which aims to adapt the scheme to the needs and challenges of GSP countries, and to strengthen the scheme’s social, environmental and climate aspects.

Pursuant to Article 3 of the Treaty on the Functioning of the European Union (TFEU), the EU has exclusive competence with regard to its customs union and its common commercial policy.

Article 31 TFEU establishes that common customs tariff duties shall be fixed by the Council upon a proposal from the Commission. Furthermore, Article 33 TFEU foresees the European Parliament and the Council taking measures in order to strengthen customs co-operation between member states, and between the latter and the Commission.

The Commission’s Directorate-General for Tax and Customs Union (“DG TAXUD”) represents the EU in the World Customs Organisation (WCO) and is responsible for the negotiation and implementation of customs-specific agreements or other agreements with a customs component. This includes rules of origin, customs co-operation and trade facilitation chapters in free trade or partnership agreements, and customs enforcement provisions in relation to intellectual property rights.

In accordance with Articles 3 and 5 of the Union Customs Code (UCC), national customs authorities:

• implement the EU customs rules;
• impose and collect import and export duties;
• oversee goods in transit and under special customs procedures; and
• pursue customs and export violations.

National customs authorities are also responsible for issuing binding tariff information (BTI) and binding origin information (BOI) decisions upon a written request by an economic operator. The former determine the correct tariff classification of the goods, whereas the latter certify their origin.

A list of the competent customs authorities in the 27 EU member states is available on the DG TAXUD’s website here.

The core EU customs legislation is as follows:

• the UCC (Council Regulation (EU) No 952/2013);
• the UCC Delegated Act (Commission Delegated Regulation (EU) No 2015/2446); and
• the UCC Implementing Act (Commission Implementing Regulation (EU) No 2015/2447).

The EU Trade Barrier Regulation (Regulation 2015/1843) provides a complaint mechanism for EU exporters that experience discriminatory trade practices in third countries. EU companies can file market-access complaints via the Access2Markets portal (see here https://trade.ec.europa.eu/access-to-markets/en/contact-form#contact) on the website of the Commission’s Directorate General for Trade (“DG Trade”).

In June 2024, the latest version of the Combined Nomenclature (CN) was published in the European Union’s Official Journal. The CN 2024 applies from 1 July 2024.

The European Parliament and the Council advanced negotiations on the EU Customs Reform (see further 2.5 Pending Changes to Customs Measures).

The EU Customs Code reform is currently being negotiated by the European Parliament and the Council. The discussions are on the main pillars of the EU customs union reform, including the creation of a new EU Customs Authority and an EU Customs Data Hub. In February 2024, the European Parliament’s internal market committee adopted a report (see here) on the EU’s customs code reform. This report proposes:

• simplified procedures;
• clarifications on how to process data; and
• making the new data hub available earlier.

Additionally, the European Parliament wants to create a platform for whistle-blowers to report goods in cases where they are not compliant with EU standards.

Restrictive measures are adopted in the framework of the Common Foreign and Security Policy (CFSP) by unanimous decisions of the Council of the EU on the basis of proposals from the High Representative of the Union for Foreign Affairs and Security Policy, and following examination in the relevant Council working groups.

EU sanctions are either:

• implementations of UN sanctions;
• additional reinforcements of UN sanctions (by applying stricter and additional measures – eg, vis-à-vis North Korea); or
• autonomous sanctions (eg, vis-à-vis Syria, Venezuela, Ukraine/Russia).

Restrictive measures imposed by the EU can target:

• governments of third countries;
• non-state individuals and legal persons; or
• certain industry sectors.

They can take the form of restrictions on exports/imports or on engaging in certain activities or with certain natural or legal persons (see further 3.5 List of Sanctioned Persons and 3.6 Sanctions Against Countries/Regions).

Due to the division of powers between the EU and its member states, EU sanctions usually consist of a Council Decision and a Council Regulation. The Decision is binding for the member states and obliges them to implement those sanctions for which they have exclusive competences (eg, military sanctions and travel bans). The Regulation is binding on all EU citizens and implements those sanctions that are within the competence of the EU (ie, economic sanctions). The CFSP Council Decision and the Council Regulation are usually adopted together to allow both legal acts to produce their effects at the same time.

The enforcement of EU sanctions lies with member state competent authorities (customs, finance, export control). Member states are obliged to have effective, proportionate and dissuasive penalties in place, and to enforce them in cases of violations. The Commission is responsible for ensuring the uniform application of sanctions.

EU sanctions usually apply:

• within the territory of the EU, including its airspace;
• on board any aircraft or any vessel under the jurisdiction of a member state;
• to any person inside or outside the territory of the EU who is a national of a member state;
• to any legal person, entity or body, inside or outside the territory of the EU, which is incorporated or constituted under the law of a member state (this includes foreign branches of EU companies); and
• to any legal person, entity or body in respect of any business done in whole or in part within the EU.

Restrictions imposed on sanctioned parties usually include:

• a prohibition of travel to the EU (if they are not EU citizens);
• freezing of assets within the EU; and
• an obligation for all legal and natural persons located in the EU to not provide funds or economic resources to the sanctioned persons.

Parties are sanctioned via Council Regulation and/or Decision, and are notified of being sanctioned either through direct communication (ie, by letter, if their address is known) or by publication of a notice in the Official Journal of the European Union.

Sanctioned parties can appeal their listing to the European courts. Several listed individuals have already challenged the Council’s decisions to include them in the Annex I list, achieving occasional success before the General Court and the Court of Justice.

The EU sanctions map (see here) provides a comprehensive overview of the EU sanctions in force. The EU imposes thematic sanctions on persons engaged in or facilitating:

• terrorist activities (Regulation 2580/2001 and Regulation 881/2002);
• human rights violations (Regulation 2020/1998);
• cyber-attacks (Regulation 2019/796); and
• the proliferation of chemical weapons (Regulation 2018/1542).

In addition, sanctions imposed on a specific country usually also contain restrictions on specific individuals and companies.

The Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (“DG FISMA”) maintains a consolidated list of persons, groups and entities subject to EU financial sanctions.

The EU generally does not impose total embargoes, but targets selected products and sectors in a given country/region. Product groups frequently targeted include:

• military items;
• dual-use items;
• internal repression equipment;
• telecommunications and internet reception equipment; and
• equipment for key industries of the respective country.

Sectors often targeted include the finance sector and core industries of the subject country – oil and gas, mining, etc. The EU can also impose restrictions on investments and financing activities.

The sanctions against Russia, Syria and North Korea, for instance, are among the most comprehensive. The EU sanctions map provides an overview of the restrictions under each regime.

Please refer to 3.5 List of Sanctioned Persons and 3.6 Sanctions Against Countries/Regions.

Generally, the EU refrains from adopting legislative instruments with extraterritorial application. Thus, the EU restrictive measures only expressly apply in situations where links exist with the EU or EU persons (see 3.4 Persons Subject to Sanctions Laws and Regulations). However, in practice, it is possible for certain requirements (eg, licences or end user declarations, or anti-circumvention clauses) to have a secondary sanctions-like effect on the third-country end user or recipient.

The enforcement of EU sanctions lies with the member states. Depending on the specific sanctions regime and the national legislation of the EU member states, as well as on the gravity of the violation, penalties can be administrative or criminal, and range from warnings to fines and prison sentences.

At EU level, very severe or repeated violations of sanctions could lead to the designation of the violating party as a sanctioned party. The EU legislature is currently considering a proposal for a Directive on the definition of criminal offences and penalties for the violation of EU restrictive measures, which would make violating and circumventing sanctions punishable criminal offences subject to prison sentences and fines.

The competent authorities of the member states can grant specific exemptions or licences for otherwise prohibited activities if this is provided for in the relevant sanctions decisions and regulations.

Sanctions implemented in the form of EU Regulations (ie, secondary EU law) have direct effect and are binding law in all member states. EU citizens therefore have to comply with EU sanctions in the same manner as with any other laws.

Sanctions regulations, however, regularly provide that actions by natural or legal persons, entities or bodies shall not give rise to liability if they did not know, and had no reasonable cause to suspect, that their actions would infringe the measures set out in the sanctions regime. However, as there is a general expectation that EU citizens be acquainted with the laws that affect them, it would be difficult to rely on this defence in administrative or criminal proceedings.

The Commission is responsible for ensuring the uniform application of sanctions. Member states have an information exchange including regarding national (enforcement) measures and judicial decisions taken, as well as on the freezing of accounts and derogations granted.

Certain EU sanctions regulations require EU individuals and legal persons, entities and bodies to provide information that would facilitate compliance with the applicable sanctions (eg, information on accounts and amounts frozen) to the competent authority of the member state and (directly or through the member state) to the Commission. In particular, this obligation concerns banks, insurance companies and fund managers in relation to any accounts or assets held for sanctioned parties.

As a general rule, the EU does not recognise the extraterritorial application of laws adopted by third countries and considers such effects to be contrary to international law. In 1996, in order to protect EU operators from the extraterritorial application of certain third-country laws, the EU adopted the EU Blocking Statute (Council Regulation (EC) No 2271/96), which was last updated in 2018.

As a reaction to the Russian invasion of Ukraine on 24 February 2022, the EU adopted an unprecedented set of sanctions against Russia. The sanctions target import and export flows in a wide range of sectors, and put in place asset freezes on several hundred persons and entities as well as restrictions on different sectors.

In 2024, the EU adopted two additional sanctions packages (the 13th and 14th package). In the recent packages, the EU increased its efforts to prevent circumvention of its measures.

The EU’s General Court and Court of Justice decided on several challenges of the EU’s restrictive measures, including challenges of:

• listings of Russian individuals;
• the broadcasting prohibition;
• the restriction on the provision of legal services to Russian nationals; and
• interim relief proceedings.

The EU also listed additional individuals and entities under its country-specific (eg, Sudan, Belarus, Congo, Moldova, Guatemala) and thematic (Global Human Rights Sanctions Regime, terrorist list, chemical weapons list) sanctions frameworks. The EU also added several individuals and entities linked to the Israeli-Palestinian conflict.

As the war in Ukraine continues, the EU is expected to further tighten the sanctions on Russia and to put an increased emphasis on enforcement and anti-circumvention measures. Preparations of a 15th sanctions package are ongoing. New judgments from the EU’s General Court and the Court of Justice on sanctions are expected in the coming months.

Since 2021, the Commission has been working on a further amendment of the Blocking Statute, to expand deterrence of the unlawful extraterritorial application of sanctions to EU operators by countries outside the EU. This amendment would also streamline the application of the current EU rules, including by reducing compliance costs for EU citizens and businesses.

Under Article 263 of the TFEU and the UCC, goods intended for exportation are subject to an export declaration. In addition, certain goods require a licence before their exportation, such as:

• military items listed in the national military lists;
• dual-use items listed in Annex I to the Dual-Use Regulation (Regulation 2021/821);
• certain waste;
• chemicals; and
• endangered species.

Pursuant to Article 3 TFEU, the EU has exclusive competence with regard to its common commercial policy. Article 207(2) TFEU authorises the European Parliament and the Council to adopt regulations setting up an EU regime for the control of exports, including the brokering, transit and transfer of dual-use items and related technical assistance.

The Commission is responsible for:

• administering and managing the EU’s export controls regulation;
• proposing legislative changes and updates of control lists; and
• co-ordination between member states.

EU member states may also impose additional (stricter) export controls. Information on additional national rules is available on the DG Trade’s website (see here).

Under Article 25a of Regulation 2021/821, the Council may authorise the Commission to negotiate agreements with third countries providing for the mutual recognition of export controls of dual-use items covered by that Regulation, and in particular to eliminate authorisation requirements for re-exports within the territory of the EU.

Each member state has national export control authorities that are responsible for the national export control laws, policies and authorisation procedures. Export controls are usually enforced by the customs authorities of the member states. Information on the national authorities responsible for export controls is available on the DG Trade’s website.

EU export controls apply to all exports from the territory of the EU. EU persons might also be subject to EU or member states’ export controls outside the EU (eg, when providing technical assistance or brokering services).

Security-based export controls apply to the following.

• Military items.
• Listed dual-use items.
• All items subject to certain end uses – eg, use in relation to:
1. weapons of mass destruction or missiles carrying such weapons;
2. military uses in countries subject to military embargoes; and
3. terrorism and human rights violations.
• Cybersurveillance items.
• Certain brokering activities.
• Certain transit operations.
• Certain forms of technical assistance.

Member states may impose additional licensing requirements.

Please refer to 3.5 List of Sanctioned Persons.

Please refer to 4.4 Persons Subject to Export Controls.

At the core of the EU’s security-based export controls are the national/EU military lists and the EU dual-use list set out in Annex I of Regulation 2021/821. These lists reflect international control regimes (eg, the Wassenaar Agreement, Nuclear Suppliers List, Australia Group, Missiles Technology Control Regime).

Military items and highly sensitive dual-use items (Annex IV of Regulation 2021/821) also require a licence for intra-EU transfers from one member state to another (ie, not only for exportation outside the EU).

Additional restrictions on exports and intra-EU transfers exist for (inter alia) certain waste, endangered species, pesticides, biocides, food and chemicals.

Infringements of export controls can lead to administrative sanctions, criminal sanctions, or both, depending on the seriousness of the violation and the specific laws of the respective EU member state. Penalties should be effective, proportionate and dissuasive. Severe violations are therefore normally subject to high fines and could lead to prison sentences for the operators responsible, whereas less severe violations could imply revocation of export privileges (eg, global licences), fines and warnings.

The EU and its member states usually have three types of licences:

• individual licences, for one or more shipments related to a specific destination and third-country recipient;
• general licences, established by legislative or administrative act and useable by all exporters for exports of certain allowed items to certain allowed destinations, which can be subject to certain conditions such as the existence of an internal compliance programme; and
• global licences (“project licences”), which can involve several parties, products and destinations – these are usually only granted to very experienced exporters showing high compliance standards.

Companies engaging in exports of sensitive items are required to know and comply with the applicable controls, and to have a robust internal compliance system in place. While the latter is not a general legal requirement, it is a requirement for the use of certain general licences and regularly for the granting of global licences.

If an export requires a licence, companies must obtain approval from the national export control authorities prior to the exportation. The use of general licences must be reported periodically to the national authorities.

In January 2024, the Commission adopted five initiatives to strengthen the EU’s economic security. Among the initiatives are:

• the White Paper on Export Controls (which seeks greater co-ordination at the European level regarding export controls); and
• the White Paper on options for enhancing support of research and development (R&D) involving technologies with dual-use potential.

In both cases, the Commission launched public consultations.

Also in January 2024, the Commission published a White Paper on Export Controls, as well as new guidelines for the annual report on dual-use export controls regarding data gathering and processing on export controls.

In February 2024, the EU, in co-operation with the USA, UK and Japan, published an updated list of common high-priority items. This update added computer numerical control (CNC) machine tools to the list.

The evaluation of the Dual-Use Regulation was postponed to 2025.

In the meantime, the EU continues the implementation of new requirements and mandates under the 2021 Dual-Use Regulation. This includes work on:

• cybersurveillance technologies;
• enhanced information exchange and transparency;
• the enforcement of export controls;
• emerging technologies; and
• the development of EU capacity-building and training programmes for member states’ licensing and enforcement authorities.

Anti-dumping (AD), anti-subsidy (AS) and safeguards investigations (SG) (referred to jointly as the EU’s Trade Defence Investigations (TDI)) are conducted by DG Trade. TDI measures are imposed by Commission Regulation after consultation with the EU member states in the context of the EU Council. The Commission also reviews, adapts and extends trade defence measures.

The Commission’s Anti-Fraud Office (OLAF) can conduct investigations into potential avoidance of payment of conventional customs duties or trade defence measures, and can provide the results of those investigations to national authorities for enforcement and other follow-up actions.

The EU’s AD and AS rules are set out in Regulations 2016/1036 and 2016/1037, respectively. The EU’s safeguard rules are set out in Regulations 2015/478 and 2015/755.

The Commission monitors the application of TDI measures and can re-open investigations or initiate reviews if measures need adapting. The member states’ customs authorities enforce compliance with TDI measures upon importation, and collect TDI duties. National customs authorities can also conduct administrative and criminal investigations, and impose fines in cases of violations.

The Commission can initiate new investigations and certain reviews ex officio. However, investigations are usually initiated pursuant to a request from the EU industry.

New TDI investigations and reviews (eg, interim, expiry, anti-circumvention, absorption, newcomer and suspension) can be requested by interested parties. Certain reviews are subject to standing requirements and/or time limits.

Exporting producers, industry associations and government bodies of the country subject to the investigation can participate in EU TDI investigations. Other non-EU parties can participate if they can show a legitimate interest in the case. The notice of initiation of an investigation is published in the EU’s Official Journal and invites interested parties to come forward within a certain timeframe.

An AD/AS investigation is usually opened following a complaint/request by the EU industry to the Commission. Safeguard investigations are brought by member states upon request of the EU industry.

For new AD and AS investigations, expiry reviews and certain other procedures, a standing requirement exists to ensure that the investigation has sufficient support from the EU industry producing the subject product (at least 25% of total EU production must support the complaint/request and EU producers representing more than 50% of the EU production expressing a position must not oppose initiation).

A new AD/AS complaint must include prima facie evidence of dumping/subsidisation, injury, and a causal link between the allegedly dumped/subsidised imports and the alleged injury. A review request must contain sufficient prima facie evidence to support the underlying request. An SG complaint must contain prima facie evidence of serious injury to the EU industry caused by a sudden and unforeseeable sharp increase in imports.

Following the lodging of a new AD/AS complaint, the Commission has 45 days to initiate the investigation or reject the complaint. Provisional duties may be imposed no later than eight months (AD) or nine months (AS) from the initiation of the proceedings. The investigations must be concluded within 14 months (AD) or 13 months (AS). Reviews can have different or even no statutory deadlines for their opening. Usually, reviews must also be concluded within nine or 15 months, depending on the type of review.

Safeguards investigations normally take nine months. Provisional safeguard measures may be imposed in critical circumstances for a maximum of 200 days and can only take the form of an increase of the existing duty level. Safeguard measures apply to imports of the subject goods from all countries. Definitive safeguards measures are usually imposed for up to four years (including the duration of any provisional measures), with extension possible, up to a total maximum of eight years. If the duration of safeguards measures exceeds one year, they need to be progressively liberalised at regular intervals.

Regulations imposing provisional or definitive AD, CVD or SG duties, and regulations or decisions accepting undertakings or terminating investigations or proceedings, are published in the EU’s Official Journal.

Under the EEA Agreement (see here), the use of TDI measures between the parties is generally excluded for the sectors covered by the Agreement. Fishery and agriculture products are not covered by the exclusion.

AD and CVD duties are normally applicable for a period of five years. Before the end of the five-year period, EU producers may request an expiry review, which may result in measures being extended or repealed.

Definitive safeguard measures may last up to four years. Where they exceed three years, they must be reviewed at mid-term and can be extended once for up to a maximum of eight years in total.

Upon request or of its own motion, the Commission can review existing measures to ensure their continued effectiveness/need. The initiation of an interim review usually requires that there has been a lasting change of circumstances. An expiry review is usually initiated following a request by the EU industry, which must be made no later than three months before the expiry of the measures.

The request must contain sufficient prima facie evidence that the expiry of the measures would result in a continuation or recurrence of dumping/subsidisation and injury. Expiry review investigations must be concluded within 15 months of initiation. The measures remain in force pending the outcome of that review.

Regulations and Decisions on TDI measures can be appealed under Article 263 TFEU before the EU General Court within two months of their publication in the EU’s Official Journal.

The complainants (EU producers and their associations) and exporting producers in the country subject to the measures and that participated in the administrative proceedings generally have standing to bring a direct action. Judgments of the General Court can be further appealed to the Court of Justice of the EU (ECJ). Importers and users usually have to challenge TDI measures via national courts and a preliminary ruling request to the ECJ under Article 267 TFEU.

In April 2024, the Commission published an updated report on significant state-induced distortions in the economy of the People’s Republic of China. With this new report, the relevant EU industry will be able to use updated information on the Chinese economy when filing complaints. The previous report was published in 2017.

In May 2024, the EU decided that the safeguards setting a cap on how much steel can be imported duty-free into the EU will remain in place until the end of June 2026.

In July 2024, the European Commission imposed provisional anti-subsidy duties on imports of battery electric vehicles (BEVs) from China. The Commission initiated this investigation on its own initiative (ex officio) based on prima facie evidence of subsidisation, threat of injury and causation. The decision on definitive measures was expected by the end of October 2024.

In September 2024, The Commission published its annual report on its trade defence activities in 2023.  The Commission reports 182 measures in place, which protect close to half a million direct jobs in the EU. 

Also in September 2024, the Commission announced that it would henceforth register imports of all products at an early stage of trade defence investigations in order to fight unfair competition more effectively.

In November 2024, the European Court of Justice in the appeal against the General Court’s judgment on cross-border subsidies on imports of glass fibre fabrics was published. The case deals with subsidies granted by the government of China to subsidiaries of Chinese state-owned companies established outside Chinese territory. The European Court of Justice upheld the judgment from the General Court and rejected the appeals.

No significant changes are currently pending in this area.

EU member states are responsible for the adoption of mechanisms to screen foreign direct investment (FDI) in their territory on the grounds of security or public order.

At EU level, the Investment Screening Regulation (Regulation 2019/452) establishes a framework for the screening by member states of FDI into the EU on the grounds of security or public order, as well as a mechanism for co-operation between member states, and between member states and the Commission, with regard to FDI likely to affect security or public order.

Pursuant to Article 6 of Regulation 2019/452, member states must notify the Commission and other member states of any FDI in their territory that is undergoing screening, by providing information about (inter alia):

• the ownership structure of the foreign investor;
• the approximate value of the investment; or
• the funding of the investment and its source.

Furthermore, by March 31st of each year, member states must submit to the Commission an annual report covering the preceding calendar year, which is to include aggregated information on FDI that took place in their territory.

Further, Regulation 2019/452 allows the Commission to issue opinions when it considers that an investment poses a threat to the security or public order of more than one member state, or when an investment could undermine a project or programme of interest to the whole EU. Regulation 2019/452 also foresees the possibility for a member state, which considers that an FDI in another member state is likely to affect its security or public order, to provide comments to the member state in question.

A list of member states which had notified their screening mechanism to the Commission, together with links to the applicable norms and contact details of the competent authorities, are available on DG Trade’s website.

See 6.1 Investment Security Mechanisms.

Within the EU, the assessment of investments on grounds of security and public order is conducted by each member state pursuant to its applicable national law. The paragraphs below summarise, as examples, the rules governing the assessment of investments on the grounds of security or public order in Germany, France and Belgium.

Under Sections 55 to 62 of the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung), the German Federal Ministry for Economic Affairs and Energy can assess whether there will be a likely effect on the public order or security of the Federal Republic of Germany, of another member state of the EU or in relation to projects or programmes of EU interest, if a non-EU resident directly or indirectly acquires a domestic company or a stake in a domestic company.

The decision to clear or prohibit the investment depends on factors such as whether the domestic company recipient of the investment:

• operates critical infrastructure;
• provides cloud computing services;
• holds a licence for providing telematics infrastructure components; or
• is a company of the media industry that contributes to the formation of public opinion.

Since 2020, there have been a series of reforms to the German Foreign Trade and Payments Ordinance, including:

• notification requirements for health-related sectors;
• adjustments to procedural rules;
• changes to trigger thresholds; and
• general alignment with the EU’s FDI Screening Regulation (452/2019).

Similarly, under Article L 151-2 of the French Monetary and Financial Code (Code Monétaire et Financier), the establishment and liquidation of foreign investments in France may be subject to prior authorisation if considered appropriate to protect national interests.

Furthermore, under Article L 151-3, a foreign investment in France is subject to prior approval by the Minister of Economic Affairs if it relates to:

• the exercise of public authority;
• activities likely to jeopardise public order, public safety or national defence interests; or
• the production or marketing of arms, munitions, or explosive powders or substances.

Under Article 4 of the Belgian Co-operation Agreement establishing a mechanism for the screening of foreign direct investment, investments by a foreign investor resulting, directly or indirectly, in the acquisition of 25% or more of voting rights in undertakings or entities in Belgium engaged in specific fields of activities must undergo screening. Covered sectors include:

• critical infrastructure;
• military and security;
• sensitive information and personal data;
• freedom and plurality of media; and
• biotechnology.

The threshold is lowered to 10% or more for investments in large undertakings or entities active in extra-sensitive sectors such as defence, energy, cybersecurity and digital infrastructure.

EU member states such as Germany, France or Belgium require foreign investors to file an application for authorisation or notify the competent authority for the purposes of assessing the effect on public order or security of the investment in question.

Under Section 55a of the German Foreign Trade and Payments Ordinance, the conclusion of a contract governed by the law of obligations on the acquisition of a domestic company by a non-EU citizen must be reported to the Federal Ministry for Economic Affairs and Energy, in writing or electronically, without delay, following the conclusion of the contract. The report should provide information about the acquisition, the acquirer and the domestic company to be acquired, as well as the shareholding structures of the acquirer. It should also describe the main features of the fields of business in which the acquirer and the domestic company to be acquired are active.

Pursuant to Article L151-3 of the French Monetary and Financial Code, foreign investments likely to affect national interests are subject to an authorisation requirement (see 6.2 Agencies Enforcing Investment Security Measures). Furthermore, Article L 151-3-1 foresees that, when an investment has been carried out without prior authorisation, the Minister of Economic Affairs may order the investor in question to file an application for the authorisation of that investment.

The Regulatory Section of the French Monetary and Financial Code, Part V, contains a list of the investments subject to authorisation. The information to be provided in the application for authorisation is listed in the Order of 31 December 2019 relating to foreign investments in France.

Article 5 of the Belgian Co-operation Agreement requires foreign investors to notify covered acquisitions to the Secretariat of the Investment Screening Commission after signing – but before the closing of – the agreement. According to Article 11 of the Co-operation Agreement, the applicable standard of review is:

• national security and public order; and
• strategic interests of the federated entities in Belgium (ie, the regions and the communities).

EU member states such as Germany and France foresee exemptions from investment security measures in cases of transactions concluded by companies belonging to the same group or controlled by the same entity.

For instance, under Section 65 of the German Foreign Trade and Payments Ordinance, the investment assessment would not take place if the transaction leading to the acquisition of a domestic company is concluded between companies whose shares are held in full by the same controlling company and if all contracting parties have their headquarters located in the same third country.

Similarly, under Article 151-7 of the French Monetary and Financial Code, foreign investors are exempt from the obligation to file the application for authorisation in cases where:

• the investment is made between entities belonging to the same group;
• the investor exceeds 25% of the voting rights in the capital of an entity over which it has previously acquired control; or
• the investor acquires control of an entity over which it has previously exceeded the threshold of 25% of the voting rights.

The infringement of provisions governing investment security mechanisms can be subject to criminal and administrative sanctions.

For instance, Section 80 of the German Foreign Trade and Payments Ordinance categorises as criminal offences the unlawful exercise of voting rights by an acquirer or the disclosure of company-related information in violation of Section 59a of the same Ordinance.

Pursuant to Article 151-3-2 of the French Monetary and Financial Code, a failure to comply with investment security requirements may lead to the imposition of financial penalties.

Under Article 28 of the Belgian Co-operation Agreement, investors who fail to comply with the notification requirement may incur a fine of up to 10% – and in certain cases even 30% – of the investment.

Under the national law of each EU member state, foreign investors may be asked to cover certain costs arising from the authorisation procedure of their investments.

For instance, under Section 59 of the German Foreign Trade and Payments Ordinance, the costs of reports produced by independent experts assessing the foreign investors’ compliance with certain commitments or obligations are borne by the parties subject to those obligations.

In Belgium, no fee is due for the notification of investments for screening with the Investment Screening Commission.

In January 2024, as part of the initiatives adopted by the Commission to strengthen the EU’s economic security, the Commission put forward a legislative proposal for an improved screening of foreign investment into the EU. The aims of the proposal are to:

• ensure that all member states have a screening mechanism in place;
• identify the minimum sectoral scope where all member states must be screening foreign investments; and
• extend the scope to investments by EU investors that are ultimately controlled by individuals or businesses from outside the EU.

Currently, FDI screening mechanisms have been implemented in 24 member states.

The FDI Screening Regulation is now being complemented by the Foreign Subsidies Regulation (FSR). The FSR introduced notification obligations for companies receiving foreign financial contributions from a non-EU country in the framework of M&A transactions and public tenders. The Regulation also grants the Commission ex officio investigative powers against any foreign subsidies having distortive effects on the internal market and received by a company with activities in the EU.

The legislative proposal for an improved FDI Screening Regulation must still go through the legislative process and will not be final until the European Parliament and the Council adopt it.

Some member states will, nonetheless, still put their FDI screening mechanisms in place before the adoption of this new Regulation or extend their existing FDI screening mechanisms to the sectors required by the new Regulation. Other pending changes in the proposed revised Regulation include the harmonisation of national rules regarding FDI screening.

The Commission will continue evaluating and reporting on the effectiveness of the FDI Screening Regulation to identify and address security and public order risks of foreign investment in the EU.

The EU has very strict controls on state aid, which are set out in the TFEU. State aids are allowed only in strictly defined circumstances to pursue particular public policies, such as environmental protection, the strengthening of SMEs or regional development.

The EU state aid rules aim at protecting fair competition on the domestic market and not at reducing imports or encouraging domestic production.

The EU and its member states have special legislation on product (safety) standards. The European standardisation organisations (ESOs) and national standardisation organisations have also adopted ample standards for products and services.

EU standards and technical requirements are adopted in order to guarantee a certain level of quality, safety and reliability of goods and services, and do not aim to reduce imports and/or encourage domestic production.

The EU has high, strict and comprehensive sanitary and phytosanitary legislation – for example:

• the EU General Food Law Regulation;
• the REACH Regulation;
• the Plant Protection Products Regulation;
• the Biocidal Products Regulation; and
• the Classification, Labelling and Packaging Regulation.

The aim of the EU sanitary and phytosanitary measures is to reduce or eliminate the possible risks of animal, plant and public health threats, as well as animal and plant diseases being introduced into the EU by goods coming from non-EU countries. They are not aimed at reducing imports and/or encouraging domestic production.

This matter is not applicable in this jurisdiction.

This matter is not applicable in this jurisdiction.

This matter is not applicable in this jurisdiction.

In the EU, product names can be granted a geographical indication (GI) if they have a specific link to the place where they are made. The GI recognition enables consumers to trust and distinguish quality products while also helping producers to market their products better. Products that are under consideration or that have been granted GI recognition are listed in quality products registers. The registers also include information on the geographical and production specifications for each product.

Other EU quality schemes emphasise the traditional production process or products made in difficult natural areas such as mountains or islands.

The EU is also one of the main supporters of negotiations on geographical indications in the WTO’s Doha Development Agenda, and negotiates bilateral GI protection rules with its trading partners.

The purpose of the EU quality policy and GI protection measures is to protect the names of specific products to promote their unique characteristics, and does not aim at reducing imports from third countries and/or encouraging domestic production.

All relevant issues and recent developments have been detailed in previous sections. Please also refer to the EUTrends & Developments chapter of this guide here for more information.