More than five years ago, the EU’s Foreign Direct Investment (“FDI”) Screening Regulation (Regulation (EU) 2019/452) (the “Regulation”) came into force, creating for the first time a cooperation mechanism for Member States and the European Commission (the “Commission”) to exchange information on specific investments in the Union, whilst respecting the sovereignty of Member States to make final determinations regarding investments in their own territories.
The mechanism was intended to increase transparency, enable early warning of potentially problematic investments, and foster a more coordinated approach to FDI screening across the EU given that an investment in one Member State could affect security and public order in another or potentially across the EU. Despite its important objectives, several significant challenges and gaps emerged following the implementation of the Regulation, prompting calls for reform. These included:
Since the Regulation entered into force in April 2019, the global geopolitical and technological landscape has changed dramatically. This has included threats to critical infrastructure, supply chain dependencies and the rapid development of dual-use technologies. These new challenges have also exposed gaps in the current regime.
On 24 January 2024, the Commission adopted five initiatives to strengthen the EU’s economic security amid the growing geopolitical tensions and rapid technological shifts. One of the initiatives proposed included an upgraded framework for screening foreign investments to better protect the EU’s security and public order. Over the past year, the proposal has been the subject of interinstitutional negotiations between the Commission, the Council of the European Union and the European Parliament, which concluded on 11 December 2025, with a provisional political agreement on a revised FDI Screening Regulation (the “Revised Regulation”).
Revised Regulation – Key Aspects
While the text of the Revised Regulation has yet to be published, press releases from the Commission (see here and here) note the following key changes:
The provisional political agreement marks an important step in the EU’s efforts to strengthen its economic security, particularly in the current geopolitical environment, while seeking to remain open to foreign investment. Formal adoption of the Revised Regulation will follow once the co-legislators complete their internal procedures, and once the final text has been translated into all EU official languages. Once the Revised Regulation enters into force (which is likely to be in Q1 2026), Member States will have an 18-month transition period to update their national rules in line with the Revised Regulation.
The authors would like to thank Trainee Solicitor Peter Vojnits for his contribution to this article.
