The New EU FDI Screening Regulation: Key Changes and Implementation Timeline

The new EU FDI Regulation on the screening of foreign investments in the Union (Regulation 2026/1386, the “Regulation”) officially entered into force on 16 July 2026. The new rules will become fully applicable on 17 January 2028. By that date, every EU Member State will be required to maintain a national foreign direct investment (“FDI”) screening mechanism that complies with the Regulation’s minimum requirements. 

The newly adopted Regulation aims to foster a more harmonised approach to investment screening by introducing a mandatory common minimum sectoral scope and strengthening Member States’ powers to assess and control FDI. It also seeks to enhance an EU-wide cooperation mechanism and information sharing among Member States.

Adoption and implementation timeline

As mentioned in our previous blog post, the EU first introduced a regime to encourage coordination of FDI screening for security and public order risks in 2019 (Regulation 2019/452). Building on this framework, the European Commission (“Commission”) presented a proposal in 2024 to fundamentally revise and strengthen the EU FDI screening regime. 

This resulted in the new Regulation which was adopted on 17 June 2026. The adoption of the Regulation marks the beginning of a transitional period during which Member States will need to review their existing FDI screening frameworks and, where necessary, amend them to comply with the new EU requirements. 

The implementation timeline is as follows: 

• 17 June 2026: the Regulation is formally adopted.
• 26 June 2026: the Regulation is published in the Official Journal of the EU.
• 16 July 2026: the Regulation entered into force. 
• 17 January 2028: the Regulation becomes fully applicable, and Member States must comply with its minimum requirements.

Key changes introduced by the new Regulation 

Broader definition of “foreign investment” – now captures indirect acquisition structures

The scope of “foreign investment” has been expanded to capture indirect acquisition structures, including investments made by EU investors if they are “controlled” by individuals or entities from non-EU countries. This addresses the limitations revealed in the Xella judgment of the CJEU (Case C-106/22) under the previous Regulation 2019/452. In practice, this closes an important gap in the existing framework by bringing within scope investments made through EU acquisition vehicles where control ultimately rests with non-EU persons or entities. The relevant criterion is whether the investor is able to exercise “effective participation” over the management or control of an EU target. 

The Regulation also introduces a definition of greenfield investments as “a foreign investment carried out through the establishment of new facilities of an undertaking for the performance of an economic activity in the Union”. While these investments fall within the Regulation’s scope, Member States remain free to decide whether to include them in the scope of their screening mechanisms, as no mandatory prior authorisation requirement is imposed. 

The Regulation largely excludes internal restructurings from its scope, provided that (i) the beneficial owner of the company remains unchanged; and (ii) no new company from a third country that is not yet represented in the upstream ownership chain of the Union-based target company is included in this chain.

Mandatory FDI screening mechanism and partially harmonised timelines across all Member States

Member States will need to establish a compatible national FDI screening mechanism by 17 January 2028. In practice, all Member States have already adopted such a mechanism, with Cyprus being the last to formally establish one in April 2026. The practical impact will therefore be the need for national regimes to be reviewed and, where necessary, amended to comply with the new EU framework.

The mandatory FDI screening mechanism will be based on a two-phase review process: 

• Phase I reviews will be subject to uniform deadlines, including an initial assessment period of 45 calendar days (non-extendable) to determine whether a Phase II in-depth examination is required;
• Phase II in-depth investigation timelines will be determined by each Member State. 

For multi-jurisdictional transactions, the applicant must “endeavour” to submit the notifications in all Member States concerned on the same day. This is intended to facilitate a more coordinated review of transactions requiring filings in several Member States, although it will also require careful sequencing and preparation by the parties to a transaction.

“Call-in” right for national authorities

National authorities are granted a call-in right enabling ex officio review of any foreign investment within their territory that could potentially pose risks to security or public order. 

• For investments that are not subject to prior authorisation, each Member State must establish a limitation period of between 15 months and five years. 
• For investments that required prior authorisation but were not notified or notified after completion, screening authorities may review for up to 24 months following completion. 

This may have important consequences for investors given that, even if no mandatory filing is required, a transaction could subsequently be called in for review, especially in sensitive sectors or in situations where the investor profile may attract scrutiny.

Mandatory minimum sectoral scope

Member States must provide for a screening or notification requirement, in particular where the target company operates in sensitive or strategic sectors. These include defence items, dual-use items, advanced technologies (e.g. semiconductors, quantum technologies, artificial intelligence), energy, transport and digital infrastructure, critical raw materials, financial system entities and electoral infrastructure. Member States are allowed to maintain or adopt more comprehensive national authorisation or notification requirements.

The Regulation therefore sets a common minimum level of protection, rather than fully harmonising the scope of national FDI regimes. In practice, investors will still need to assess national filing requirements on a case-by-case basis.

Mandatory substantive review

The Regulation introduces a set of risk factors Member States must take into account to assess whether a foreign investment is likely to negatively affect security or public order, both in relation to the foreign investor and to all relevant stakeholders within the ownership chain. 

• General security interests, including risks affecting a project or programme of Union interest, critical technologies, critical infrastructure, continuity of supply of critical inputs, sensitive information, media freedom and pluralism, public health, food security, electoral processes and military facilities. 
• Foreign-investor criteria, including links to a third country’s policy objectives, military development or internal repression, involvement in activities affecting security or public order in a Member State, exposure to sanctions, past unauthorised investments or investments subject to mitigating measures, involvement in illegal activities, anti-money laundering and terrorism-financing concerns, intelligence-sharing obligations owed to a third country, and opaque ownership structures.

Mitigating measures

Member States may impose mitigating measures to address the likely negative effect on security or public order arising from a foreign investment, such as: 

• Changing the governance structure of the target or modifying the voting rights of the foreign investor; 
• Restricting access to sensitive technologies and information; 
• Imposing supply commitments or requirements to source critical components from trusted suppliers;
• Taking measures to ensure the continuation of business activities;
• Implementing cyber security protocols;
• Storing and processing specific data within the Union. 

Where appropriate, the Commission can propose mitigating measures. However, Member States retain responsibility for the final decision on whether to approve, condition or prohibit the investment. 

Strengthened cooperation mechanism

The Regulation further develops the EU cooperation mechanism by requiring Member States to notify certain foreign investments, while other Member States and the Commission can comment on those notifications. Member States nevertheless retain authority to approve or prohibit the investment. Mandatory notification is required: 

• For all investments falling within the minimum sectoral scope where the foreign investor is state-controlled or state-owned, subject to sanctions, previously subject to an investment prohibition, or has violated mitigation measures.
• Where a Member State has opened a Phase II review, plans to impose mitigation measures, prohibit a transaction, or order its unwinding during Phase I, provided that the target is active in a project of Union interest, is part of a group with subsidiaries in other Member States, or could negatively affect the security or public order of at least one other Member State. 

The strengthened cooperation mechanism does not create an EU-level one-stop-shop for FDI screening. However, it is likely to increase the visibility of sensitive transactions across the EU and may lead to greater coordination between national authorities and the Commission. 

Increased efficiency of investment screening regimes

The Regulation strengthens the efficiency and transparency of national investment screening regimes through guidance. For example, Member States are required to publish guidelines on the scope of their screening mechanisms. The Regulation also improves information sharing by establishing a Commission database on previously notified cases and screening outcomes. Member States are also able to request information from each other and from the Commission about natural or legal persons residing in another Member State where necessary. 

These measures may make the operation of FDI regimes more transparent over time. However, they may also increase the amount of information that investors are expected to provide, particularly in transactions involving sensitive sectors, complex ownership structures or activities across multiple Member States. 

Practical implications for investors

The Regulation does not create a centralised EU FDI mechanism. Member States will remain responsible for approving (with or without conditions) or prohibiting foreign investments in their territory. However, the new framework is likely to lead to greater convergence in the design and operation of national screening regimes. 

For investors, this means that FDI screening should be considered early in their transaction planning, particularly for transactions involving: 

• Sensitive or strategic sectors; 
• State-owned or state-controlled investors; 
• Sanctions exposure; 
• Greenfield investments in Member States that decide to screen them; 
• Targets with operations, subsidiaries or assets in multiple Member States;
• Ownership structures involving EU vehicles controlled by non-EU persons or entities.

Where multiple filings are required, parties should also factor in the expectation that notifications in the Member States concerned should, as far as possible, be submitted simultaneously. This is likely to require more coordinated preparation of FDI filings and more detailed assessment of timing implications at the outset of a transaction. 

The Regulation should therefore make the EU FDI screening framework more consistent and transparent in some respects. However, it is also likely to increase regulatory complexity for transactions involving sensitive activities or higher-risk investor profiles.