Where these criteria are met, the competent authority designated by the relevant Member State could review the investment and impose conditions prior to approval. Such conditions may include: limiting foreign shareholding to 49% of shares or voting rights; requiring the investment to be structured through a joint venture with an EU partner; mandating technology transfer commitments (including manufacturing processes and scale-up expertise); requiring local R&D investment equivalent to at least 1% of gross annual revenues attributable to the investor’s share of control; requiring that at least 50% of the workforce be European nationals; and requiring that at least 30% of inputs used in final products be manufactured within the EU. Notably, the IAA proposal includes a Commission oversight layer: the Commission may issue an
opinion on whether a notified investment fulfills the conditions for approval and may carry out its own assessment where the investment has the potential to significantly impact added value creation in the EU or where the value of the investment exceeds €1 billion. Failure to notify prior to implementation could result in a penalty of at least 5% of the investor group’s average daily aggregate revenues. The IAA mechanism would operate without prejudice to other applicable EU regimes, including FDI screening under the New Regulation, merger control and the Foreign Subsidies Regulation. The IAA proposal remains subject to the ordinary EU legislative procedure and may undergo significant amendments during negotiations between the European Parliament and the Council before any final adoption.
Outlook for 2026 All EU Member States have now enacted FDI screening regimes, while the FDI regime in Cyprus became operational on April 2, 2026 – the adopted Croatian regime still has operational gaps. The New Regulation is expected to mandate a certain degree of harmonization of national regimes across all 27 Member States within 18 months of entry into force. The proliferation and expansion of FDI screening regimes among EU Member States will inevitably result in a continued increase in FDI notifications in EU Member States. In addition, Member States continue to show significant degrees of variation in their formal screening processes. Applicable timelines, sectoral coverage, notification requirements and other elements still diverge significantly. As such, the coordination of FDI screening processes remains challenging. The New Regulation is generally a welcome development for investors. The reform is expected to introduce a degree of cross-EU harmonization, bringing greater certainty for investors on the scope of application and the substantive and procedural aspects of the review. The introduction of a 45-day cap on Phase 1 review proceedings and the streamlined cooperation mechanism categories are particularly meaningful improvements. That said, the New Regulation may in practice introduce new complexity: the same-day filing obligation, even framed as a “best endeavors” requirement, will demand enhanced coordination by legal advisers; and the discretion afforded to national authorities on information completeness and the absence of clear clock- stopping rules means that timing predictability may remain elusive in complex cases. Notably, Member State concerns about centralizing decision-making authority in Brussels materialized during negotiations: the agreed compromise text walks back the Commission’s originally proposed power to impose conditions or prohibit investments where it disagrees with a Member State’s assessment, preserving ultimate decision-making authority with individual Member States.
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FDI and National Security Review
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