European Parliament votes on new FDI Screening Regulation

On 19 May 2026, the European Parliament (“Parliament”) approved the proposal for a Regulation on the screening of foreign investments in the European Union and repealing Regulation (EU) 2019/452 (“FDI Screening Regulation”, see our previous Insight).

The adopted text (“Adopted Regulation”) largely retains the provisions set out in the draft proposal published on 10 February 2026 (“Proposal”), subject primarily to clarifying and editorial amendments. The Adopted Regulation must still be formally approved by the Council before entering into force. It will become applicable 18 months thereafter.

This Insight provides an overview of the key features already included in the Proposal. For further background, see also our February 2026 Insight.

I. Expansion of the definition of “foreign investment”

The definition of “foreign investment” will be expanded. In particular, the Adopted Regulation expressly captures investments made by EU entities controlled by non-EU investors (so-called indirect investments).

In practice, such transactions were already frequently considered to fall within the scope of national screening regimes in several Member States. However, uncertainty remained following the judgment of the Court of Justice of the European Union in Xella judgment.

II. Exemptions under the Adopted Regulation

The Adopted Regulation continues to exclude certain internal restructuring measures from its scope (Article 1(5)(b)), as well as certain foreign investments made in connection with EU resolution tools.

III. Sectors subject to mandatory FDI screening

A key element of the revision of the FDI Screening Regulation is the introduction of sectors in which all EU Member States must provide for mandatory prior authorisation requirements for foreign investments.

The list of mandatory sectors set out in Article 4(15) of the Adopted Regulation largely follows the Proposal. It includes, inter alia, EU targets that:

• develop, produce or commercialise items listed in the EU Common List of Dual-Use Items or the EU Common Military List;
• are engaged in the production, research or development of semiconductor or quantum technologies;
• conduct research in, or develop, artificial intelligence systems meeting specified criteria;
• operate critical transport, energy or digital infrastructure; or
• are involved in the exploration, extraction, processing, recycling, recovery or stockpiling of critical raw materials.

IV. Screening of foreign investments beyond the mandatory scope

EU Member States will retain a certain degree of discretion with respect to the screening of foreign investments.

The Adopted Regulation maintains the Proposal’s approach under which Member States may “adopt national provisions that are complementary to or more specific than” the Regulation, provided that such provisions do not undermine the Regulation’s objectives (Article 3(1)).

Accordingly, Member States may decide to subject additional categories of foreign investments to screening beyond those expressly covered by the Regulation. Where Member States elect to do so, the Regulation will also apply to the screening of such investments (Article 4(16)).

V. Factors relevant for the substantive assessment

The Adopted Regulation retains the substantive review standard set out in the Proposal, namely whether a foreign investment is likely to negatively affect security or public order.

Article 19 of the Adopted Regulation sets out a non-exhaustive list of factors that Member States should take into account, including potential effects on Projects or Programmes of Union interest, the availability of critical technologies, risks relating to the protection of intellectual property, and risks arising from the characteristics or nationality of the investor concerned.

VI. Call-in powers, partially harmonised timelines and the EU cooperation mechanism

The Adopted Regulation also retains the Proposal’s provisions regarding Member States’ call-in powers for foreign investments within their territory (Articles 4(4) and 4(5)).

Likewise, the Regulation maintains the harmonised two-phase screening procedure applicable across all EU Member States (Article 4(2)).

For transactions requiring filings in multiple Member States, applicants will be required to submit filings on the same day in all relevant jurisdictions (Article 7a).

The Adopted Regulation further maintains the Proposal’s clearer guidance regarding transactions that must be notified under the EU cooperation mechanism (Article 5).

VII. Outlook for FDI screening in the EU

The Adopted Regulation still requires formal approval by the Council and will become fully applicable 18 months after its entry into force. It is therefore expected to become fully operational by the end of 2027 or the beginning of 2028.

However, Member States may amend or adopt national legislation prior to the expiry of the transitional period. In Germany, it is expected that the proposed new Investment Control Act (Investitionsprüfgesetz) will take into account the final text of the revised FDI Screening Regulation.