Under the revised framework, decision-making power will remain at the national level and substantial differentiation will remain. Nevertheless, investors can expect a more harmonized, structured, digitally enabled process and greater accountability in multi-jurisdictional cases.
The regulation will now be published in the Official Journal of the European Union and enter into force 20 days after publication. The new rules will start to apply 18 months later.
However, EU foreign investment reforms will not stop there: for example, in March 2026, the EC submitted a legislative proposal—the Industrial Accelerator Act (IAA)—that will allow it to set conditions on foreign investment in specific strategic sectors.
Why this matters
The upcoming changes aim to strengthen and protect the EU’s security and public order “at a time of growing geopolitical competition,” and to create a more consistent system of cooperation across EU member states.
In theory, this should make cross-border investment planning more predictable, with reduced regulatory fragmentation and greater certainty about which investments will trigger screening obligations. However, final decisions will continue to be taken at member-state level, and national differences will remain.
Therefore, despite some improvements, the EU foreign investment screening landscape is likely to remain complex. Investors should carry out early risk assessments, develop a multi-jurisdictional filing strategy, and build sufficient time into transaction timetables.
Key features of the revised framework include:
- requirement for mandatory screening regimes in every member state
- a common minimum sectoral scope, prioritizing defense and dual-use goods and technologies, semiconductor, quantum and artificial intelligence (AI) technologies, transport, energy or digital infrastructure sectors, strategic raw materials, certain financial market entities and voting systems
- inclusion of intra-EU acquisitions by EU subsidiaries of non-EU investors in the EU cooperation mechanism and common minimum sectoral scope of application
- enhanced cooperation and transparency between member states
- procedural harmonization, including on review deadlines plus the introduction of digital tools to streamline processes
- a common set of assessment criteria that must be considered, and a common list of mitigating measures that may be considered to resolve likely negative effects on security and public order.
Member states remain in control
The regulation confirms that screening decisions remain the exclusive responsibility of the member state in which the investment is made. The institutional balance therefore remains unchanged: member states retain the final decision over whether to authorize, condition, or prohibit an investment, and the EC does not gain veto power.
At the same time, the EU cooperation mechanism will be reinforced to improve coordination without undermining national authority.
Screening member states will need to give due consideration to comments from other member states and any EC opinion and notify the relevant member states and/or EC of the operative part of its screening decision, including reasons for disagreement where national security sensitivities apply. We anticipate that this enhanced obligation will increase accountability and may encourage further convergence in sensitive cases.
Common minimum scope: a new baseline for all EU member states
Under the revised framework, every member state will be required to operate a suspensory investment screening regime. While important, the practical implications of this will be limited—all member states have now adopted their own mechanism.
Crucially, however, the EU has imposed a common minimum sectoral scope across national regimes, ensuring that the most sensitive areas are consistently covered across jurisdictions.
The member state screening regimes must cover foreign investments in EU targets active in:
- military equipment and dual-use items
- certain semiconductor, quantum, and AI technologies
- strategic raw materials
- critical entities in energy, transport, and digital infrastructure, identified through risk-based assessments by the member states
- electoral infrastructure, such as voter registration databases, voting systems, and election management systems
- a limited set of financial market entities, including central counterparties, central securities depositories, operators of regulated markets and payment systems (excluding central banks), systemically important institutions, and global providers of specialized financial messaging services.
General-purpose AI models in the frame
Notably, while the definition of AI is aligned with the EU AI Act’s broad definition of AI systems, screening will be focused on research or development of general-purpose AI models (or AI systems based on such models): (i) suitable for the development of space or defense application; or (ii) with systemic risk within the meaning of Article 51 AI Act (i.e., with high-impact capabilities, whether evaluated or based on an EC decision).
This keeps the mandatory scope reasonably narrow, but implementation by member states will determine the true reach of screening.
Critical infrastructure to be determined by member states
A risk-based targeted assessment framework, tied to national security and the maintenance of vital societal functions, will determine which entities in the transport, energy, and digital sectors fall to be screened. This assessment will be performed by the member state in which the target entity is established.
References to the Critical Entities Resilience Directive reinforce the focus on continuity of essential services in the internal market. Examples of potentially critical entities include: energy storage facilities, gas transmission system operators, airports, port managers, and providers of cloud computing services or public electronic communications networks.
Greenfield investments, portfolio investments and internal restructurings
With institutional views diverging during the regulation’s negotiation procedure, the final text of the regulation sets out a balanced compromise for the treatment of greenfield investments. Greenfield projects may be screened by member states, but are explicitly excluded from mandatory prior authorization. Member states thus remain free to impose greenfield investment screening at national level but will not be obliged to do so.
The regulation applies to foreign investments that enable “effective participation in the management or control” of the target. Purely passive portfolio investments—acquisitions of company securities intended purely for financial investment without any intention to influence the management or control of the company—are therefore out of scope.
This is a welcome easing of exposure for asset managers. However, it remains to be seen whether the limitation will change much in practice: in some member states, similar definitions already exist at national level, yet screening authorities tend to focus on notification triggers (acquisition of control and/or voting rights in excess of the applicable thresholds) without considering the stated purpose of the investment. More broadly, national regimes currently feature significantly varying initial investment thresholds which, depending on the nationality of the investor, may even differ within one jurisdiction. This is unlikely to change.
Notably, the regulation also introduces a broad definition of “beneficial owner.” While the definition is not relevant to determining the scope of transactions caught by mandatory screening, it does impact, for example, the information that may be required in notifications and the risk assessment.
The regulation also clarifies that internal restructurings are excluded from scope, unless a new legal entity, established in a third country that is not already represented in the upstream ownership chain of the target, is introduced in that chain. “Internal restructurings” are defined as a reorganization of a corporate group to which an EU target belongs that does not result in a change of the beneficial ownership of the EU target. Taken together, these caveats could limit the practical implications of this exception and divergent approaches between member states may continue to apply.
A common set of criteria for substantive assessment
The regulation introduces greater harmonization of the criteria that members states and the EC should consider when assessing whether a foreign investment is likely to negatively affect security or public order.
The common set of criteria includes the security, integrity, resilience and functioning of critical entities, the availability of critical technologies and IP, the continuity of supply of critical inputs, the protection of public health and food security, the protection of sensitive information, the freedom and pluralism of the media, the security of military facilities, and projects or programs of EU interest.
Again, member states retain some discretion: they are free to factor in additional criteria.
Procedural harmonization and more focused EU cooperation
Improved cooperation mechanism
To reduce administrative burden, the EU cooperation system will use filtering criteria so that only potentially sensitive cases are reviewed. Cooperation on unnotified investments will be strengthened, and the EC may assist in gathering information where cross-border implications arise.
The revised framework will expand the cooperation mechanism to intra-EU acquisitions where the acquirer is an EU subsidiary ultimately owned or controlled by a non-EU investor. While investments by EU subsidiaries of non-EU investors already require screening in most member states, the EU cooperation mechanism only applied to direct foreign investments. The revised screening regime addresses this inconsistency.
Not covered, however, is the issue of intra-EU investments that are owned or controlled by EU persons/entities. Various member states already screen such investments and, in a number of cases, have imposed mitigating measures or even decided to prohibit transactions. These types of intra-EU investments will remain outside the scope of the EU screening framework.
Digitalization is another key feature of the reform. The regulation foresees an optional single electronic filing portal (the “online EU portal”), if requested by at least nine member states, and a mandatory secure EU-level database for national authorities containing information on previously notified cases and screening outcomes (and potentially significant or repeated non-compliance with mitigating measures). These tools are designed to streamline multi-jurisdictional filings, reduce duplicative requests, and create a more predictable review experience.
National review procedures strengthened
The amended framework introduces a two-phase review architecture (in line with many national screening regimes) that commences after a determination on the completeness of a filing, and harmonized deadlines (including a maximum 45 calendar day initial review).
In multi-country transactions, the person making the filing must endeavor to file in all member states concerned on the same day. This requirement aims to ensure that the two-phase review and cooperation mechanism processes of the different member states run—as much as possible—parallel to each other. Consequently, alignment of the filing strategy in multi-country transactions will become even more important.
To improve predictability, member states will be required to publish guidance clarifying the scope and operation of their regimes as well as an annual report on relevant developments and activities.
These measures aim to make reviews more consistent for investors while enhancing authorities’ ability to manage risks related to knowledge leakage and supply chain security and resilience.
Retroactive reviews subject to a minimum requirement
The regulation requires member states to introduce a call-in right, and to ensure minimum post-completion review periods:
- For authority-initiated screenings of foreign investments not subject to a prior authorization requirement, authorities will have at least 15 months (and up to five years) to adopt a decision.
- For foreign investments subject to prior authorization but not filed or filed after completion, authorities will have at least 24 months.
How member states implement these requirements, and whether they introduce additional procedural safeguards, will be key for deal certainty.
Timing
The new rules will apply 18 months after entry into force (subject to transitional measures), giving member states time to align existing regimes, and to operationalize cooperation upgrades and digital infrastructure.
During this transition, investors should anticipate that authorities will begin moving toward the new baseline and should plan filing strategies accordingly.
Over to member states...
As a result of the various changes, most member states will need to amend their national screening regimes to expand and/or specify the scope of application and amend procedural requirements.
With respect to the common scope of application, member states may go beyond the minimum requirement but cannot fall below. In particular, many member states will need to expand their screening mechanism to cover critical raw materials and electoral infrastructure. In addition, while some member states (e.g., Belgium, France and Italy) have a broadly defined scope of application in energy, transport and digital infrastructure, other member states (such as Germany and the Netherlands) will have to reconsider whether the existing scope of application suffices following a risk-based assessment.
Importantly, the mandatory scope of application will apply to all investors that are ultimately controlled by individuals or entities from non-EU countries. Certain member states currently provide preferential treatment to EFTA investors (such as Germany) or OECD investors (Poland). The revised framework will therefore introduce new filing obligations for non-EU investors in these jurisdictions. We anticipate that substantial national divergences will remain with respect to the level of non-EU ownership and control that would trigger a filing obligation.
Furthermore, many member states will need to align their timelines with the harmonized deadlines under the regulation. Certain member states that do not yet have a call-in power, will also need to implement the possibility of retroactive review.
We will keep you updated on revisions to national investment screening regimes as member states implement the new rules across the EU.
Interaction with the EC’s wider economic security agenda
Beyond these technical points, businesses should also consider how the revised EU foreign investment screening framework will interact with other elements of the EU’s December 2025 Economic Security Strategy, as this broader policy context informs substantive risk assessments in sensitive transactions.
While the strategy itself does not rewrite the rulebook, it systematizes existing provisions through a structured risk lens: critical technologies, data access, strategic inputs and infrastructure.
It also sets out the EC’s intention to issue foreign investment screening guidelines to align screening practice, including on cumulative risk of multiple investments, to pilot monitoring of start-ups in sensitive technologies that are vulnerable to the risk of hostile foreign acquisitions, and to encourage tracking of portfolio positions (that fall outside the scope of the coordination mechanism) in high risk sectors.
Significantly, in March 2026, the EC proposed the IAA to increase demand for low-carbon, European-made technologies and products. It establishes conditions for foreign investments above EUR100 million in the electric vehicles, batteries, solar, and critical raw material sectors by companies originating in countries that hold more than 40% of global production capacity. Conditions include EU shareholding majority, technology transfer, integration into EU value chains, and job creation.
More is on the way. Upcoming initiatives include the evaluation of dual-use export controls, trade defense instruments, the Blocking Statute and Public Procurement directives, the continued development of technology-industrial initiatives in semiconductors, AI, cloud and quantum technologies, publication of the Foreign Subsidies Regulation review report and ongoing consideration of outbound investment restrictions.
Together with the rise of “European preference” clauses across legislation relevant for emerging technology areas, the combined signal is one of closer EU-wide coordination and additional screening, with clear implications for transaction feasibility and timing across strategic value chains.
