TerraLex Guide to Foreign Direct Investment - NEW

Regulation (EU) 2019/452 of the European Parliament and of the Council (the “FDI Screening Regulation”) sets out the framework for the screening of foreign direct investments (“FDI”) into the European Union (“EU”). However, it does not establish a central EU screening system. Instead, it allows individual Member States to maintain, amend, or adopt mechanisms to screen foreign direct investments in their territory; and provides a framework for cooperation between them and the European Commission.

The FDI Screening Regulation is supplemented by the Guidance to the EU Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets, ahead of the application of the FDI Screening Regulation.

Each EU Member State enforces its national screening rules through national FDI authorities such as ministries, investment screening authorities, competition/sectoral regulators, etc.

Enquiries regarding FDI screening may be submitted to the European Commission’s Directorate General for Trade (DG Trade) via phone or the contact form found on its website.

The Regulation specifies that EU Member States should assess foreign investments based on whether they pose a risk to “security or public order”.

The risk assessment, therefore, depends on the Member State where the FDI is contemplated and its national FDI legislation.

However, there are FDIs likely to affect projects or programmes of European Union interest, such as those involving substantial or significant EU funding, or which are covered by EU legislation on critical infrastructure, technologies, or inputs. As of December 2025, these include:

 - [European GNSS programmes](https://www.gsc-europa.eu/) (Galileo & EGNOS);
 - [Copernicus;] (https://www.copernicus.eu/en)
 - [Horizon 2020](https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/horizon-europe_en);
 - [Trans-European Networks for Transport (TEN-T)](https://transport.ec.europa.eu/transport-themes/infrastructure-and-investment/trans-european-transport-network-ten-t_en);
 - [Trans-European Networks for Energy (TEN-E);](https://energy.ec.europa.eu/topics/infrastructure/trans-european-networks-energy_en)
 - Trans-European Networks for Telecommunications;
 - [European Defence Industrial Development Programme;](https://defence-industry-space.ec.europa.eu/eu-defence-industry/european-defence-industrial-development-programme-edidp_en)
 - [Permanent structured cooperation (PESCO).](https://www.pesco.europa.eu/)

Where the FDI is being done as part of one of the abovementioned projects of EU interest, the FDI Screening Regulation gives the European Commission power to screen the FDI and issue an opinion to the relevant EU Member State(s).

The FDI Screening Regulation provides EU Member States with a list of non-exhaustive factors that may be taken into consideration by them, i.e. enacted into their national FDI legislation. The same list applies to the European Commission when it assesses projects of EU interest. The list covers assessments of potential effects on:

• critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
• critical technologies and dual use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies;
• supply of critical inputs, including energy or raw materials, as well as food security;
• access to sensitive information, including personal data, or the ability to control such information;
• the freedom and pluralism of the media.

Additional factors include:

• whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding;
• whether the foreign investor has already been involved in activities affecting security or public order in a Member State;
• whether there is a serious risk that the foreign investor engages in illegal or criminal activities.

Some individual EU Member States have chosen to enact additional criteria.

The FDI Screening Regulation does not specify any filing timelines. These are left to the individual EU Member States to define in their national legislation.

Filing fees are regulated by individual EU Member States in their national FDI legislation.

EU Member States must inform the European Commission and other Member States of certain information while conducting an FDI screening. These include:

• the ownership structure of the foreign investor and of the undertaking in which the FDI is planned or has been completed, including information on the ultimate investor and participation in the capital;
• the approximate value of the FDI;
• the products, services, and business operations of the foreign investor and of the undertaking in which the FDI is planned or has been completed;
• the Member States in which the foreign investor and the undertaking in which the FDI is planned or completed conduct relevant business operations;
• the funding of the investment and its source, on the basis of the best information available to the Member State;
• the date when the FDI is planned to be completed or has been completed;
• a list of Member States whose security or public order is deemed likely to be affected by the FDI.

National EU Member State FDI legislation specifies which parties are responsible for national filings.

In terms of information sharing obligations between the European Commission and EU Member States under the FDI Screening Regulation, Member States must notify the European Commission and the other Member States of any foreign direct investment in their territory that is undergoing screening.

At the moment, there are no consequences foreseen in the FDI Screening Regulation for EU Member States which fail to share FDI filings they have received with the European Commission.

Individual Member State FDI legislation sets out fines and penalties for failing to notify and late filings.

This issue is determined by each individual EU Member State in its national FDI legislation.

This issue is determined by each individual EU Member State in its national FDI legislation.

At the EU level, where the European Commission considers that an FDI - whether or not it is being screened in an EU Member State - is likely to affect the security or public order of more than one Member State, or has relevant information about that FDI, it may issue an opinion addressed to the host Member State. The European Commission may also issue an opinion following comments from other Member States. It shall issue such an opinion where justified, after at least one third of Member States consider that an FDI is likely to affect their security or public order.

This is determined by each individual EU Member State in its national FDI screening legislation.

At the EU level, the European Commission may issue opinions addressed to the Member State conducting the FDI screening during the course of the proceedings.

This issue is determined by each individual EU Member State in its national FDI legislation.

The European Commission has no powers under the FDI Screening Regulation to adopt conditional or unconditional decisions on planned FDI projects approving or prohibiting them.

This is determined by each individual EU Member State in its national FDI legislation.

The FDI Screening Regulation envisages a consultative process where the EU Member States notify the European Commission and other Member States of an FDI in their jurisdiction undergoing an FDI screening.

Once a foreign direct investment is notified as undergoing screening, the Commission and other EU Member States have 15 calendar days to notify the screening Member State of their intention to provide comments or an opinion, and to request additional information. Comments and opinions must be submitted within a reasonable period, but no later than 35 calendar days from the original notification or 20 calendar days from receipt of additional information. If the Commission issues an opinion after receiving comments from other Member States, it should do so within these deadlines, and at the latest, five calendar days after they expire.

A similar cooperation mechanism applies to foreign direct investments not undergoing screening, including those completed up to 15 months before.

Each individual EU Member State specifies its own steps and timelines for its national screening regime in its national FDI legislation.

The FDI Screening Regulation provides that the information received by the European Commission and the EU Member States under the information sharing provisions shall be used only for the purpose for which it was requested. It also obliges the Member States and the European Commission to ensure the protection of confidential and classified information.

The FDI Screening Regulation is the only EU-level FDI regime. Under that Regulation, most EU Member States have now adopted national FDI screening regimes.

Foreign investors participating in procurement procedures or M&A in the EU need to be aware of the Foreign Subsidies Regulation, which gives the European Commission the power to address internal-market distortions caused by foreign subsidies granted by non-EU governments.

It may also be the case that a foreign investor making an acquisition which results in joint or sole control of an entity will trigger antitrust filing obligations under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (so-called “merger control”). Transactions which do not trigger EU merger control may need to be notified under the national merger control legislation of one or more EU Member States.

The EU FDI Screening Regulation is currently being revised. Following a proposal for amendments put forward by the European Commission in 2024, the co-legislators are currently negotiating the final text. If the European Commission’s proposed changes are adopted, that institution’s powers would be strengthened, and national screening regimes would be further harmonized across the EU. As of December 2025, the revised regulation is likely to be adopted around Q2 2026, with 12 to 24 months for EU Member States to change their national laws.

On 3 December 2025, the European Commission also announced plans to extend the EU foreign investment screening regime to cover portfolio investments, including stakes in EU-based companies held by hedge funds and other asset managers.