19.03.2026
The current state of affairs of FDI screening in Europe
This client alert provides an update on the current state of affairs of foreign direct investment (“FDI”) screening in the EU covering the latest developments of FDI screening at the EU level and its impact on FDI screening regimes in the EU Member States.
In particular, we discuss the amendments of the Regulation (EU) 2019/452 (“EU FDI Screening Regulation”) that the EU institutions agreed in trilogue negotiations, which concluded on 11 December 2025, the outcome of which was subsequently adopted by the Council of the EU’s Permanent Representatives Committee (Coreper) on 10 February 2026. The amendments to the EU FDI Screening Regulation (the “Proposal”) still require formal adoption by the Council of the EU and by the European Parliament (“Parliament”) in order to be published in the Official Journal of the EU and to enter into force. We expect a formal adoption of the Proposal in the weeks or months to come. Irrespective of the ongoing legislative procedure, the European Commission (“Commission”) has published a proposal for the so-called Industrial Accelerator Act (“IAA”), which proposes further amendments to the EU FDI screening framework and which we will also address below.
FDI screening has become a central feature of the European regulatory landscape, reflecting heightened geopolitical sensitivities and a growing focus on national security and strategic autonomy. In recent years, the number of European countries with dedicated FDI screening regimes has surged, driven by the EU’s FDI Screening Regulation and a broader recognition of the need to monitor foreign investments in critical sectors. As of early 2026, the vast majority of Member States have established comprehensive FDI screening mechanisms, with several countries – including Belgium, Bulgaria, Estonia, Ireland, Luxembourg, Romania, Slovakia, and Sweden – introducing new regimes in recent years. Bulgaria’s FDI regime, for example, became fully operational in July 2025, marking the latest step in the region’s regulatory evolution. The remaining Member State without an operational FDI regime, Cyprus, has adopted an FDI screening act that will enter into force on 2 April 2026. The United Kingdom, although outside the EU, has also adopted a robust FDI screening framework.
The EU FDI Screening Regulation is set to provide for an even more robust EU legal framework for FDI screening in the EU. The EU FDI Screening Regulation became fully applicable in October 2020 and established a framework for the screening of FDI into the EU on grounds of security or public order by the Member States, set some binding minimum procedural requirements for those EU Member States that had enacted FDI screening regimes and essentially provided for a notice-and-comment mechanism on the basis of which the Commission and other Member States can comment on FDI screenings conducted by a Member State under its national law.
The Commission published a legislative proposal to substantively amend the EU FDI Screening Regulation and expand the EU law framework for FDI screenings for the first time in January 2024. That legislative proposal had already proposed the introduction of an obligation for Member States to implement domestic FDI screening regimes as well as mandatory FDI screening and clearance requirements under Member State law for investments in particularly sensitive areas. The Commission’s proposal already also took into account the need for reform resulting from the ECJ’s judgment in the Xella case (ECJ, Case C‑106/22, Xella Magyarország Építőanyagipari Kft v Innovációs és Technológiai Miniszter) of 13 July 2023, which held that the EU FDI Screening Regulation does not apply to indirect investments. The Commission’s initial legislative proposal was subsequently substantively amended by the EU Parliament’s proposal of 8 May 2025, which notably suggested the introduction of independent FDI screening decision-making power for the Commission. Both proposals served as the basis for the subsequent trilogue negotiations, which resulted in the consolidated Proposal of 11 December 2025.
The revised Proposal will bring into force significant changes to the FDI screening landscape across the EU. For parties to transactions, it will be more essential than before to take the dual level of the FDI regulations at the EU as well as the Member State level into account from an early stage of any transaction on. While the EU level is becoming more important despite doubts whether the IAA proposal will be accepted in its current form, the developments at the level of the Member State FDI regimes are also to be carefully taken into account. Germany, for example, will consolidate its existing FDI regulations into one single FDI act and presumably close existing regulatory gaps in a draft currently expected in this summer.
We will first set out the key revisions currently envisaged under the Proposal for the amendment of the EU FDI Screening Regulation (I.), briefly describe the next steps in the legislative process (II.), discuss the proposed amendments to FDI screening in Europe under the draft IAA (III.) and subsequently provide an outlook on the implications of the ongoing changes for investors, sellers and target companies in the EU (IV.).
Dr. Alexander Ehrle, LL.M. (NYU)
Partner
Frankfurt a.M.,
Brüssel
alexander.ehrle@luther-lawfirm.com
+49 69 27229 20065
Prof. Dr. Christian Burholt, LL.M.
Partner
Berlin
christian.burholt@luther-lawfirm.com
+49 30 52133 10269
Dr. Sebastian Felix Janka, LL.M. (Stellenbosch)
Partner
München
sebastian.janka@luther-lawfirm.com
+49 89 23714 10915
Dr. Helmut Janssen, LL.M. (King's College London)
Partner
Brüssel,
Düsseldorf
helmut.janssen@luther-lawfirm.com
+32 2 627 7763 / +49 211 5660 18763 / +49 1520 16 18763