The EU’s Foreign Direct Investment Trilemma

Abstract In an era of heightened geopolitical tensions and evolving security challenges, the European Union (“EU”) faces a fundamental trilemma in its approach to foreign direct investment (FDI). How can the Union simultaneously maintain its attractiveness as a global investment destination, preserve the integrity of its single market, and safeguard its security and strategic autonomy? This article examines the EU's evolving FDI screening framework through the lens of this trilemma, tracing the journey from the Union’s foundational commitment to free markets to the emergence of “open strategic autonomy” as a guiding principle. By analyzing both the 2019 EU FDI Regulation and the 2024 Draft EU FDI Screening Regulation, this article explores how the EU is attempting to navigate these competing objectives through an incrementalist approach of cooperation and harmonization, while revealing persistent tensions that continue to shape the future of European investment regulation.