Draft Industrial Accelerator Act: The European Commission proposes an additional FDI regime

On 4 March 2026, the European Commission (“Commission”) published its Proposal on an Industrial Accelerator Act (“Draft IAA”), introducing far-reaching ideas aimed at strengthening the EU’s industrial base, accelerating decarbonisation, and enhancing strategic economic autonomy amid global geopolitical and competitive pressures.

The Draft IAA includes a Chapter IV on “foreign investment contribution” which, once implemented, introduces an additional, fourth M&A-related screening tool (next to merger control, conventional national foreign direct investment (“FDI”) control/EU FDI screening and foreign subsidy control) adding another layer of bureaucracy to dealmaking by foreign, in particular Chinese, investors.

I. Key objectives

According to the draft text, the primary objective of the IAA is to enhance the functioning of the internal market by establishing a framework to support the development, competitiveness, and resilience of the European Union’s manufacturing sector, with a focus on selected strategic sectors, while contributing to the EU’s climate objective, economic security and the creation, retention of, and transition into high-quality jobs. The Draft IAA sets a target to ensure that the manufacturing industry accounts for at least 20 % of the EU‘s gross domestic product by 2035, i.e. an increase from 14.3 % in 2024.

II. Impact on foreign investments in certain sectors

The Draft IAA introduces specific conditions and screening mechanisms for direct investments in EU targets (companies or assets) in emerging strategic manufacturing sectors by foreign investors. Any relevant FDIs would have to be notified to, and cleared by, national authorities or the European Commission prior to implementation.

1. Scope

The notification requirement applies to the acquisition of control of EU targets in strategic manufacturing sectors where, first, more than 40 % of global manufacturing capacity in the relevant emerging strategic sector is held by the third country of which the foreign investor is a national or an undertaking (China according to the Commission holds a production capacity of more than 40 % in several of these sectors). Second, the investment value must exceed EUR 100 million.

Foreign investors are considered to have control if they acquire at least 30 % of the share capital/voting rights in companies incorporated, or ownership rights in assets located, in the EU (exemptions may apply for certain passive financial investments). The strategic manufacturing sectors are:

• Battery technologies and their value chain for battery energy storage systems.
• Pure electric vehicles, off-vehicle charging hybrid electric vehicles, and fuel-cell electric vehicles, including components related to electrification and digitalization.
• Solar PV technologies.
• The extraction, processing, and recycling of critical raw materials.

The Commission can adopt delegated acts to extend the sectors to additional emerging strategic sectors, including various net-zero technologies, nuclear fuel cycle technologies, and electric propulsion, but explicitly excluding digital technologies, AI, quantum, and semiconductors.

2. Conditions for approval of FDI

For approval, a direct investment made by foreign investors must meet at least four of the following six conditions:

• Foreign investors do not acquire, hold, or exercise ownership interests representing more than 49 % of the share capital, voting rights, or equivalent ownership interests in the EU target, or equivalent ownership, leasehold or other rights conferring control;
• Foreign investors in joint ventures concerning EU targets are banned from owning more than 49 % of the share capital, voting rights, or other rights conferring control in the target and must ensure effective participation of the EU partner(s) in management, technology transfer, and capacity building;
• Foreign investors enter into agreements providing for the licensing of their intellectual property rights and of their know-how to the benefit of the EU target;
• Foreign investors, in proportion to their share of control, must direct at least 1 % of the gross annual revenue of the EU target in research and development;
• Foreign investors employ at least 50 % of EU workers across the entire workforce in the context of the FDI (this condition has always to be fulfilled);
• Foreign investors prepare and publish on their website a strategy for enhancing the EU value chain, prioritise sourcing of inputs from the EU, and endeavour to source at least 30 % of EU inputs used for the products placed on the EU market.

3. Competent authority, timeline and compliance

Each Member State must designate an Investment Authority to review FDIs. The Investment Authority has normally 30 days to declare the notification admissible; thereafter the Commission has 30 days to issue a non-binding opinion. Afterwards, the Investment Authority must approve or prohibit the investment generally within 60 days. The Commission may decide to screen FDI in particular circumstances itself (e.g. large-cap FDI). The Investment Authority will also monitor compliance with the clearance conditions, failure of which can lead to significant fines.

III. Practical implications and next steps

If adopted, the Draft IAA would introduce yet another layer of screening for foreign investors, operating in parallel with the updated EU FDI Screening Regulation, which is expected to enter into force at the end of 2027/beginning of 2028. This would result in an even more complex regulatory environment for foreign investments across the EU amid calls from industry and politicians to attract more foreign investments in the EU. Various business associations and stakeholders have already voiced criticism: While some argue that the current sectors are not broad enough and fail to include future key sectors such as semiconductor technologies, quantum technologies, and AI, others, in turn, are concerned about the additional bureaucratic hurdles. Whether or not, and to what extent, the Draft IAA will come into force remains to be seen. The Draft IAA will next be reviewed by the European Parliament and the Council of the European Union.