FDI screening by EU Member States is set to become more rigorous and widespread under EU harmonization efforts. On February 10, 2026, the EU published the draft of a new Foreign Direct Investment Screening Regulation (“New FDI Regulation”), which will replace the existing framework under Regulation (EU) 2019/452. Dealmakers will need to be increasingly mindful that several FDI clearances might be required in individual countries around the EU before their transaction can close.
The key changes to the current framework are expected to include:
FDI screening will no longer be optional at the national level. While Member States may currently choose whether to maintain, amend, or adopt screening mechanisms, the New FDI Regulation will require every Member State to have a screening system in place. Of the EU 27, only Cyprus has yet to complete this step.
All Member States will be required to screen foreign investments in specified sensitive sectors, including dual-use and military items, artificial intelligence, quantum technologies, semiconductors, critical raw materials, energy, transport and digital infrastructure, electoral infrastructure, and certain financial entities. This means that the New FDI Screening Regulation establishes a common minimum scope for screening mechanisms. However, Member States may still extend screening to additional sectors, provided their national rules remain consistent with the EU framework. Additionally, the New FDI Regulation requires Member States to give screening authorities call-in powers. This gives them the authority to review completed investments that were not notified for a period of 15 months up to five years.
All Member States will be required to follow a two-phase review process, beginning with an initial assessment and, if necessary, proceeding to a more detailed review. Phase one will be set at 45 calendar days. The New FDI Regulation also encourages coordination when the same transaction is being reviewed in multiple Member States, suggesting that companies should, where feasible, file in parallel and that authorities should aim to adopt decisions simultaneously. The proposal also allows for the possible creation of an EU portal for online filing of notifications.
The New FDI Regulation will also be extended to cover EU investors that are ultimately owned or controlled by non-EU persons. The current framework is focused on direct investments by third-country investors. The new rules are designed to address situations in which non-EU investors use EU-incorporated entities to acquire sensitive assets without scrutiny. As a result, it will be increasingly important to assess ownership and control structures during deal planning.
The New FDI Regulation will also strengthen cooperation and transparency between EU Member States and the European Commission. Where another Member State provides comments or the Commission issues an opinion, the reviewing Member State will need to explain how that input was taken into account and, where it takes a different approach, give reasons for doing so.
The provisional agreement must now be formally approved by both the Council of the European Union and the European Parliament. Once approved, the text will undergo final legal review. Formal adoption by the co-legislators is expected in the first half of 2026, with the New FDI Regulation entering into force in 2027 and applying 18 months later.
For investors in the EU and their advisers, this means greater legal certainty and clearer deadlines, ultimately reducing compliance costs. On the other hand, FDI issues in the EU will need to be assessed earlier, across a broader range of jurisdictions, with closer scrutiny of ownership and indirect control structures.
As has been the case for many years with competition clearances for transactions (merger control), FDI filing obligations now need to be assessed at an early stage, while deals are still being negotiated, so that timelines and substantive risk are taken into account even before parties sign on the dotted line.
