Background and overview of key changes
The current FDI Screening Regulation (Regulation (EU) 2019/452) has been in force since October 2020. It established a cooperation mechanism between the Member States and the European Commission to assess foreign investments for potential risks to security or public order. It essentially provides for a notice-and-comment procedure, which requires EU Member States to notify the EU Commission when they decide to conduct FDI screenings. The EU Commission and the other EU Member States are then invited to provide their comments on the investment. Due to significant differences in the individual EU Member State FDI screening regimes, the Commission proposed a comprehensive reform in January 2024 as part of its Economic Security Strategy.
The Commission's proposal of January 2024 introduces several important changes, which we have laid out in a previous blogpost. Most notably, all Member States will be required to implement a domestic FDI investment screening regime – which is so far not mandatory. The proposal also introduces a minimum range of industry sectors, such as semiconductors, artificial intelligence, quantum technologies and biotechnology, for which FDI filing and clearance requirements shall be provided for under domestic FDI regimes in the EU. It further suggests to clarify that the EU FDI Screening Regulation shall also apply to indirect investments, which are already regularly screened under domestic EU Member State FDI screening regimes.
Position of the Committee on International Trade of the European Parliament
On 8 April 2025, the European Parliament's Committee on International Trade adopted its position on the reform of the FDI Screening Regulation. The Committee largely follows the European Commission's proposal, but goes further in some respects. For example, additional sectors are to be subject to mandatory investment screening in future, including media services, critical raw materials and transport infrastructure. The Committee also advocates greater harmonization of national review procedures in order to facilitate cross-border investments. Importantly, the parliamentary Committee's proposal also advocates for a greater role of the EU Commission in FDI screenings in the EU. A central element of the proposal is the introduction of a standardized EU portal for investment notifications, which should simplify the procedures for companies.
Position of the Council of the European Union
The Council of the EU also supports the Commission's proposal, in particular the mandatory introduction of investment controls in all member states. It clarifies that the EU FDI Screening Regulation shall provide for a minimum harmonization of the sectors and timelines for domestic EU Member State FDI screening procedures and that the EU Member States retain the discretion to subject more industry sectors to their domestic FDI screening regimes. The Council proposes a stronger focus on military and dual-use goods for the minimum range of sectors to be covered by domestic screening regimes. The Committee's proposal also tones down the suggestion for a greater role of the EU Commission. While EU cooperation on FDI screenings is to be made more efficient, the final decision on investments is to remain with the individual member states. It clarifies that the EU FDI Screening Regulation shall not apply to internal reorganizations, which are subject to multiple EU Member State screening regimes.
Outlook and next steps
Now that the Council of the European Union has adopted its position, trilogue negotiations with the European Parliament and the European Commission will begin. In these negotiations, representatives of the three institutions meet to develop a common position on the legislative proposal. The aim is to reach a provisional political agreement that can accelerate the legislative process.
This agreement must then be formally approved by all three institutions – the Parliament, the Council, and the Commission. Only once this formal confirmation has taken place is the law considered adopted under the ordinary legislative procedure and can enter into force.
A political agreement is expected during the course of 2025. Once the new regulation enters into force, a transitional period is likely to follow – with the new rules potentially becoming binding from 2026.
Recommendation
Companies should follow the developments closely and analyze at an early stage what impact the new requirements could have on their investment strategies and compliance processes. We support our clients in M&A deals covering targets in multiple jurisdictions taking the requirements for coordination in the EU under the evolving FDI framework into particular account.
