Council of the European Union and European Parliament reached provisional political agreement to review the FDI Screening Regulation

On 11 December 2025, the Council of the European Union (“Council”) under the current Danish presidency and the representatives of the European Parliament (“Parliament”) have reached a provisional political agreement (“Agreement”) on the revision of Regulation (EU) 2019/452 (“FDI Screening Regulation”).

Background

The current FDI Screening Regulation has been in force since October 2020 and regulates cooperation between Member States and the European Commission (“Commission”) regarding the screening of foreign direct investments likely to affect security or public order.

Since the FDI Screening Regulation was introduced, the number of Member States implementing national screening mechanisms has increased substantially. Yet, significant differences remain in their scope, thresholds, timelines and procedures, leading to uncertainty for investors and creating potential barriers within the internal market. At the same time, growing geostrategic challenges like threats to European critical infrastructure and supply chain dependencies have highlighted the urgent need to modernize the EU’s approach to investment screening. The revision of the FDI Screening Regulation was therefore included in the Commission’s 2024 package aimed at strengthening the EU’s overall economic security. The aim is to improve the resilience of the European economy while maintaining openness to global trade and foreign investments.

Key components of the Agreement

Even though the final draft of the revision of the FDI Screening Regulation has not been published yet, the focal points of the Agreement have already become apparent.

First and foremost, the Agreement reaffirms that each Member State retains exclusive authority over screening decisions and whether to impose conditions or block foreign investments. However, when other Member States issue comments or the Commission provides an opinion through the Cooperation Mechanism, the screening Member State must explain how these inputs were taken into account, including the reasons for any divergence. The Agreement also allows the Commission to support the host Member State in the collection of relevant information.

As part of a drive for greater consistency, the revised FDI Screening Regulation will also introduce a mandatory minimum screening scope for all Member States. The areas concerned appear to be a blend of the Parliament’s and Council’s suggestions, including:

• dual-use items and military equipment,
• hyper-critical technologies, such as artificial intelligence, quantum technologies and semiconductors,
• critical raw materials,
• critical entities in energy, transport and digital infrastructure (to be defined by the respective member state),
• electoral infrastructure and
• a limited list of certain systemically important financial institutions.

The Member States can maintain or respectively establish screening mechanisms for additional sectors.

Another explicit aim of the revision of the FDI Screening Regulation is to streamline processes and interoperability. This concerns a new shared database to prevent circumvention of investment screening laws and facilitate the exchange of relevant experience between the authorities. It also includes an optional single electronic notification portal, which will be established if at least nine Member States request it. Furthermore, the revised FDI Screening Regulation is intended to include a clarification regarding the risk factors for assessing foreign investments.

Outlook

The Agreement will now be endorsed by the Council and Parliament, before being formally adopted.

The Agreement marks a significant step towards fostering a more consistent investment environment across the EU. By introducing a mandatory minimum screening scope and improving cooperation and transparency between Member States and the Commission, the reform addresses existing fragmentation. The reaffirmation of Member States’ autonomy, while strengthening the EU-level coordination, strikes a crucial balance between national interests and collective security. If implemented effectively, the revised FDI Screening Regulation should bolster the EU's resilience against emerging geostrategic risks without deterring beneficial foreign investments.

Investors should anticipate further guidance and adaptation as the EU works to ensure future-proof investment screening compliance.