On 8 June 2026, the new EU Foreign Direct Investment Screening Regulation(1) was formally adopted by the Council, following the European Parliament’s approval on 19 May 2026. The Regulation was published in the Official Journal of the European Union on 26 June 2026. It will enter into force 20 days from that date and will apply from 17 January 2028.
The revision is part of the EU’s economic security strategy(2) and represents the most significant overhaul of the EU framework for the screening of foreign direct investments (“FDI“) since the first FDI screening Regulation,(3) which has been in force since 2020.(4)
- In brief
The Regulation brings welcome changes for investors, introducing a more harmonised review timeline, new procedural safeguards and increased transparency requirements on Member State authorities.
However, the overall structure of the EU framework remains largely unchanged. The Regulation sets new minimum common rules and strengthens the existing coordination mechanism between Member States, however it does not introduce an EU-wide “one-stop-shop” for investment screening.
As the Regulation is limited to minimum harmonisation, national differences will remain. Concerns around broad jurisdictional triggers, high administrative burdens in multi‑jurisdictional transactions, and legal uncertainty are therefore unlikely to disappear and may even increase.
Going forward, investors should expect more transactions to be notified, increased scrutiny of who ultimately owns and controls the investor, and stronger enforcement powers at national level.
- Key changes
- Mandatory national screening in key sectors. All Member States are now required to screen foreign investments in a defined minimum list of sensitive sectors or activities. As a result, more transactions are likely to be screened since Member States must cover the minimum list, although Member States remain free to include any other additional sensitive activity under their national regime.
- Mandatory list of risk factors to consider: The Regulation sets out an expanded list of factors that the Commission and national authorities must consider when assessing whether a foreign investment may pose risks to security or public order.
- Risk of call-in powers of non-notified transactions. Authorities will be able to call-in and review non-notifiable transactions for at least 15 months after closing (up to a maximum of five years). For notifiable transactions that are not notified, Member States will be able to review the transaction for at least two years after closing (with no upper limit set by the Regulation).(5)
- Stronger protection for investors. Compared to the 2019 Regulation, investors will now receive a larger set of protections across Member States. This includes not only a harmonized 45-day Phase I review period (Phase II timelines remain within national discretion), but also standard procedural rights such as access to effective judicial review, proportionality,(6) the right to be heard prior to a negative decision, and protection of confidential information.(7)
- Strengthened cooperation mechanism. The Regulation strengthens and streamlines the EU cooperation mechanism, while leaving final decision‑making with the Member States. Apart from clarifying which national notifications must be shared through the cooperation mechanism,(8) the Regulation also envisages (i) a non-public EU-level database between national authorities containing information on previous transactions and decisions and (ii) an optional single electronic filing portal for investors, if at least nine Member States request it.
- In more detail
a. Substantive Changes
Mandatory national screening regimes in EU. The Regulation now requires all Member States to operate a national screening regime. Given that all 27 Member States currently already have regimes in place there is no practical impact of this obligation.(9)
Mandatory list of sectors to be screened. Moving away from full Member State discretion to decide on which activities to screen, the Regulation introduces a minimum list of sensitive activities that a Member State must screen if national thresholds are met. The list covers activities relating to:
- dual-use items and certain defence-related goods and technologies;
- semiconductors, quantum technology and artificial intelligence technology;
- critical transport, energy and digital infrastructures;
- strategic raw materials;
- electoral operation management;(10) and
- certain financial market infrastructure and entities.(11)
However, Member States remain free to set a wider scope with additional sectors. In practice, this means more transactions will be caught by mandatory filing obligations across the EU.
Mandatory consideration of risk factors. The Regulation expands the list of factors that authorities must consider when assessing risks to security or public order, replacing the previous discretionary (“may”) suggestion with a mandatory (“shall”) obligation. Member States remain free to apply additional national criteria on top of this mandatory baseline.
The list of factors includes:
- Investment-related factors: effects on critical technologies, critical infrastructure, sensitive (including personal) data, media pluralism, electoral processes, public health and critical medicines, food security, and security of military or sensitive public facilities.
- Investor-related factors: connections to a third-country government or potential to support a third country’s military capabilities, being established in high-risk anti-money laundering jurisdictions, or having an opaque ownership structure.
Notifiability of specific investment types. The Regulation clarifies the treatment of certain types of investment, although the Member States still retain discretion as to expanding the scope of screening.
- Indirect investment by non-EU investors. The Regulation expands its scope to cover investments carried out by EU‑based entities that are ultimately owned or controlled by non‑EU investors. Under the 2019 Regulation, these indirect investments fall outside its scope, except where there is evidence of circumvention. Following the Xella judgment in 2023 exposing this gap,(12) the reform aims to bring indirect investments within the scope of the Regulation and the cooperation mechanism.
- Internal restructurings. The Regulation clarifies that internal restructurings are outside the scope of screening, unless they introduce a new non-EU entity in the upstream ownership chain.(13)
- Greenfield investments. Unlike in earlier proposals during the EU legislative process, the Regulation does not require Member States to screen certain greenfield investments.
b. Procedural Changes
A (partially) harmonized timeline. Transactions that will not go into an in-depth Phase II investigation(14) will benefit from a more predictable review period across Member States with a new uniform deadline of 45 days for Phase I review. In return, the Regulation requires investors to “endeavour” to submit filings simultaneously where filing requirements are triggered in multiple Member States for the same investment.
Call-in powers. All Member States will be required to introduce call-in powers to review non-notified transactions. The period during which authorities may still “call-in” and review depends on whether the transaction was subject to a notification requirement:
- For non‑notifiable investments: at least 15 months (and up to five years) after closing
- For notifiable investments that were not notified: at least two years after closing
The call‑in powers are likely to lead to more precautionary filings. Where no filing is made, investors should consider including appropriate safeguards in transaction documentation (e.g., around conditions precedent and long‑stop dates), particularly where jurisdictional triggers are borderline.
Strengthened EU cooperation mechanism. The EU cooperation mechanism is not new, however the revised framework makes it more effective and accountable. In particular, the Regulation:
- introduces tiered deadlines for sharing the notifications under the cooperation mechanism (15 or 45 calendar days depending on the risk category);
- increases accountability of the screening Member State, which must state its reasons where it does not follow comments or opinions received from other Member States or the Commission; and
- allows Member States and the Commission to comment on non-notified investments for up to 15 months after their completion.
Focus on digitalisation. The Regulation introduces new digital tools aimed at improving cooperation between authorities and streamlining the filing process. In particular:
- a secure, encrypted system for exchanges between Member States and with the Commission. It will be supported by a central (non‑public) EU database containing information on notified investments and their outcomes; and
- a potential single EU online filing portal for investors but only if at least nine Member States request it.(15) The portal must then become operational within 12 months of such a request. If established, the portal would allow electronic submission of filings and communication with the screening authorities. It would only apply to participating Member States.
Remedies and unwinding transactions. The Regulation clarifies that prohibiting or unwinding a deal should be a last resort. Authorities must first consider whether concerns can be addressed through targeted commitments, the indicative list of which is introduced in the Regulation (including governance changes, adjustments to voting rights, restrictions on access to sensitive technologies or information, cybersecurity measures and data localisation requirements).
Procedural safeguards. The Regulation strengthens procedural protections for investors, introducing the right to be heard before an adverse decision, an obligation for the authorities to explain their decision, and the right to challenge decisions in national courts.
4. Next Steps
- Having now been published in the Official Journal, Member States will have until 17 January 2028 to update their regimes as necessary.
- Don’t wait for the deadline. Some Member States are already preparing to revise their national FDI legislation and screening authorities may start adapting their guidelines ahead of the formal implementation date. Businesses planning acquisitions or investments in the EU over the next 12 to 24 months (particularly in sectors falling within the new mandatory scope) should already be assessing the impact.
- Practical advice for investors. Companies should:
- revisit their FDI filing strategies across EU jurisdictions in light of the wider mandatory scope and the new common assessment factors – country-by-country analysis will remain essential, as Member States keep discretion over additional triggers;
- factor the call-in risks into transaction documentation;
- conduct a thorough ownership and control analysis early, including for indirect investment routes and intra-group arrangements;
- engage proactively with FDI authorities in complex or sensitive transactions; and
- for private equity investors, assess whether fund structures and governance rights may give rise to notification obligations.
(1) Regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council, 2024/0017 (COD) (the “Regulation”). The consolidated text is available on the Council’s webpage here.
(2) European Commission, press release, Commission proposed new initiatives to strengthen economic security. See here.
(3) Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (the “2019 Regulation”). The text is available here.
(4) The 2019 Regulation will continue to apply to investments filed or completed before the Regulation takes effect.
(5) Setting this maximum remains at the discretion of the Member States.
(6) Proportionality will be a legally binding standard, such that screening decisions (e.g., commitments), information requests, and financial penalties, will need to respect this principle.
(7) Additional transparency obligations will also apply to Member States, including issuing guidance on their regimes and publishing annual reports on legislative developments and enforcement. While many already do so in practice, these rules formalise and extend such transparency across the EU.
(8) A Member State must share a filing where (i) the investment concerns a sensitive sector from the minimum list and (ii) the investor presents specific risk factors (e.g., third‑country government control, EU sanctions exposure, or prior non-compliance with a national FDI decision). Notification is also required if (i) a Phase II review is opened or (ii) there is an intent to impose conditions on or prohibit an investment that is (a) active in a project of Union interest; or (b) has subsidiaries in other Member States. A Member State must also share the notification if the security or public order of another Member State might be affected by the investment.
(9) Cyprus was the last Member State to introduce a screening regime, which entered into force in April 2026.
(10) Voter registration databases, voting systems and other information systems specifically designed to manage electoral operations such as the counting, auditing, and displaying of election results, and post-election reporting to certify and validate results.
(11) This includes: central counterparties, central securities depositories, operators of regulated markets, operators of payment system, certain important institutions, and/or a global provider of specialised financial messaging services.
(12) CJEU, Xella Magyarország, C-106/22, 13/07/2023, EU:C:2023:568. A Baker McKenzie blog post relating to this decision can be found here.
(13) This does not, however, harmonize the scope of national regimes: Member States remain free to determine whether and in what circumstances internal restructurings trigger a filing requirement under national law.
(14) The duration of Phase II review remains at the discretion of the Member States.
(15) At this stage, there is no public indication as to whether this threshold will be met.
