The FDI Screening Regime in Denmark in 2025

It has been nearly four years since Denmark implemented its foreign direct investment (FDI) screening regime. Over the past few years, as the number of foreign investments has surged drastically, this regime has become a crucial tool in the authorities’ ability to prevent, as and if needed, the completion of foreign investments and the entering into of special financial agreements from posing a threat to national security and public order.

Since its implementation during the summer of 2021, the Danish regime has undergone significant changes, including the broadening of the scope of application and the introduction of a two-phase screening process, similar to that used in other EU member states. As these rules have evolved, the regulatory environment for cross-border mergers, acquisitions, and other transactions involving a Danish business within one or more particularly sensitive sectors has become increasingly complex.

While the screening process remains confidential, reports from the Danish Business Authority (the DBA) provide valuable insights for identifying the emerging trends and evolving enforcement practices within the framework. The following analysis sheds light on the key trends and strategic approaches shaping the Danish FDI landscape, incorporating relevant data and observations.

Since the introduction of Denmark’s FDI regime, there has been a steady increase in the number of cases reviewed. During the period from 1 July 2021 to 30 June 2023 (the cut-off date of the most recent statistics available), the DBA received a total of 358 cases, reflecting the high interest in Denmark as an investment destination and making Denmark among the leading countries with regards to the number of cases under FDI screening.

However, the DBA and the Minister of Industry, Business and Financial Affairs have only intervened in two cases. In one case, approval was granted under specific agreed conditions, while in the other case, the investment was denied as the Minister assessed that the investment could pose a threat to national security or public order, which could not be mitigated by specific terms. The latter investment was subsequently approved by the Danish authorities, and, therefore, the current status is that no foreign investment has been banned under and pursuant to the Danish screening regime.

The Danish Investment Screening Act in numbers (as of 30 June 2023):

Additionally, the DBA has processed more than 1,000 investment screening cases notified by other EU member states under the EU FDI regulation.

Based on the numbers, it is evident that the Danish mandatory application regime applies to a broad scope of transactions. The high volume of mandatory applications, voluntary notifications, and pre-screening requests indicates that investors are proactively seeking approval to ensure their investments comply with Denmark’s FDI regime. This proactive approach suggests that investors are aware of the importance of adhering to the screening process and are taking precautionary steps when ensuring compliance.

Despite the high volume of applications, the Danish regime has only imposed prohibitions or conditions on significant investments in very few (two) cases, indicating a generally positive reception towards foreign investments and that the majority of the investments are not deemed to pose a threat to national security or public order.

This may also lead to considering whether the scope of the FDI regime in Denmark should be further clarified, making the application process more efficient for applications and notifications, resulting in fewer administrative burdens for both applicants and the DBA, regarding the number of cases it has to review.

The DBA has initiated an evaluation of the Danish FDI regime and will prepare a report on the experiences of the regime so far. The report will be submitted to the Danish Parliament, and it is generally expected that Denmark will maintain its relatively strict stance toward foreign investments (or even further broaden the scope of application).

The report is expected to outline the Danish approach to FDI screening and set the direction for future policy in this area.

In parallel, the global landscape for investment screening is evolving. The US has recently introduced a regime for outgoing investments, aimed at preventing US capital from supporting foreign entities that could pose a threat to national security. This new regime reflects a growing trend among nations to not only scrutinise incoming investments but also to monitor and regulate outbound investments.

Similarly, the EU is currently reviewing whether an outbound investment screening regime is required. This review is part of a broader effort to ensure that EU investments do not inadvertently support activities that could undermine the security and strategic interests of the member states. The outcome of this review could lead to significant changes in how outbound investments are managed and regulated within the EU.

These developments indicate a shift towards a more comprehensive approach to investment screening, encompassing both inbound and outbound investments. As Denmark continues to refine its FDI screening regime, the authors expect that the DBA, and ultimately the Danish Parliament, will likely consider these international trends and align policies to maintain a balance between national security interests and fostering a supportive environment for foreign investments. No doubt the current geopolitical situations in the world and political tensions will further fuel this development.

In conclusion, while the Danish FDI screening system is evolving and the high volume of cases continues to rise, it remains a relatively open environment supportive of innovation and foreign investors. With increased awareness, a growing number of screenings, and a strategic focus on critical sectors, Denmark will continue to balance national security interests with its commitment to fostering foreign investment. The global trends towards outbound investment screening further underscore the importance of a holistic approach to investment regulation, ensuring comprehensive protection of national interests.