The European Union strengthens FDI screening
Regulation (EU) 2026/1386 on the screening of foreign direct investments (FDI), in force since 16 July 2026, repeals Regulation (EU) 2019/452 and reshapes the EU screening framework. It provides for an 18-month transitional period in which…
Regulation (EU) 2026/1386 on the screening of foreign direct investments (FDI), in force since 16 July 2026, repeals Regulation (EU) 2019/452 and reshapes the EU screening framework. It provides for an 18-month transitional period in which Member States must adapt their legislation and administrative mechanisms. Certain provisions, including those on notification of national measures, the common information form, the secure European information-exchange infrastructure and the Commission's delegated powers, are already in force since 16 July 2026.
A mandatory screening framework and a broader concept of foreign investment The main change is the obligation for every Member State to establish and maintain a national foreign investment screening mechanism. Extending this obligation across the EU strengthens oversight and closes the gaps that allowed certain problematic foreign investors to use Member States without screening mechanisms as gateways to the internal market for investments in sensitive assets.
A common minimum scope of strategic sectors The Regulation introduces a mandatory minimum scope for prior authorisation. It covers Union undertakings involved in dual-use items, military equipment and sensitive technologies, including semiconductors, quantum technologies and certain artificial-intelligence technologies. The scope also extends to critical energy, transport and digital infrastructure identified through a national risk-based assessment; activities relating to strategic raw materials; and systemically important financial entities, such as central counterparties, central securities depositories, regulated-market and payment-system operators and specialised financial-messaging providers. Electoral infrastructure is expressly included. Investments in entities that own, develop or operate voter-registration databases, voting systems or other IT systems used to manage electoral operations must be subject to prior authorisation. This reflects the Union's concern with foreign influence, access to sensitive data and technological vulnerabilities affecting democratic processes.
Prior authorisation, ex post review and coordinated procedures Investments falling within the mandatory scope must be notified and reviewed before completion. National procedures must include at least two phases. The initial review must be completed within 45 calendar days from the date on which the filing is deemed complete. Where necessary, an in-depth investigation should be carried out, while its detailed procedural framework remains largely at the discretion of each Member State. The Regulation also reinforces ex post control. Investments falling within the scope of a Member State's screening mechanism but which are not subject to prior authorisation may be examined on the authority's own initiative from at least 15 months and up to five years after completion, if there are reasons to consider that such an investment may affect security or public order. Investments that should have been authorised but were not notified, or were notified only after completion, must remain reviewable for at least 24 months after completion. For transactions requiring filings in several Member States, applications must be submitted on the same day and must identify the parallel filings. The authorities concerned must coordinate their procedures and seek to align decision timetables, a point of direct relevance to cross-border M&A transactions.
