EU prepares new foreign investment screening rules

The European Union is preparing to tighten its oversight of foreign investments through a new Foreign Direct Investment (FDI) Screening Regulation. On February 10, 2026, the provisional text of the regulation was published following a political agreement reached on December 11, 2025, between the European Parliament and the Council of the European Union.

The new regulation represents the next stage in the EU’s evolving framework for monitoring foreign investments and will require Member States to update their national screening regimes. This could significantly affect both the timing and strategy of future investment transactions across the European Union.

Mandatory screening mechanisms across the EU

One of the most important changes introduced by the regulation is the requirement that all EU Member States establish a national foreign investment screening system.

Once the regulation enters into force, Member States will have 18 months to implement or update their national regimes.

In practice, however, the impact may be limited because most EU countries already have such systems. Currently, 26 of the 27 Member States operate FDI screening regimes. Croatia introduced its system in November 2025, while Cyprus remains the only country still preparing its mechanism.

Strategic sectors subject to mandatory review

The regulation defines a minimum list of sectors where foreign investments must undergo mandatory pre-transaction screening.

These sectors include companies involved in:

• dual-use technologies subject to export controls

• defense technologies and military-related products

• advanced technologies such as semiconductors, quantum computing and artificial intelligence

• critical infrastructure in transport, energy and digital networks

• strategic raw materials extraction and processing

• systemically important financial institutions

• election management systems and voting infrastructure

However, the regulation does not require screening of greenfield investments involving the establishment of entirely new businesses.

Investments via EU subsidiaries also covered

The regulation also clarifies that foreign investments carried out through EU-based subsidiaries can still fall within the screening framework if those entities are ultimately controlled by non-EU investors.

This provision aims to prevent circumvention of screening rules through European corporate structures and reflects legal interpretations established by the Court of Justice of the European Union.

Stronger cooperation between Member States

The regulation strengthens the EU cooperation mechanism for reviewing foreign investments.

In certain cases, the Member State receiving the investment must notify the European Commission and other Member States within 15 days after the filing.

This applies when:

• the investor is controlled by a non-EU government

• the investor is subject to EU sanctions

• the investment raises previous security concerns

• the project affects EU strategic programmes or multiple Member States

The goal is to ensure that investments with cross-border implications are reviewed collectively within the EU.

Expanded risk assessment criteria

The regulation also expands the risk factors that authorities must consider when reviewing foreign investments.

In addition to existing criteria related to infrastructure security and sensitive technologies, authorities will assess new areas including:

• influence over democratic processes

• risks to public health and supply of critical medicines

• strategic technology access

• potential military or geopolitical implications

• human rights considerations

• opaque or complex ownership structures

Procedural changes for investment reviews

The regulation introduces several procedural reforms designed to improve transparency.

Investors will be granted the right to present their views before authorities impose conditions or block an investment.

National authorities will also be able to review investments that were not properly notified, in some cases up to five years after the transaction has been completed.

The regulation also proposes to standardize the duration of the initial review phase to 45 calendar days.

The evolving role of the European Commission

Although Member States retain the final authority to approve or block foreign investments, the European Commission’s role in the screening framework will increase.

The Commission will be able to issue formal opinions on investment cases and propose mitigation measures when it identifies risks to security or public order.

However, the overall framework remains based on cooperation rather than centralized decision-making at the EU level.

As experts at International Investment note, the new regulation reflects the EU’s broader shift toward economic security and strategic autonomy. While the rules aim to protect critical sectors and technologies, they are also likely to increase regulatory complexity and extend review timelines for foreign investors seeking to enter European markets.