Securing the internal market: the new EU regulation on FDI screening

Securing the internal market: the new EU regulation on FDI screening

The Council formally adopted the regulation on June 8, 2026, following the European Parliament’s adoption of its position on May 19, 2026. Regulation (EU) 2026/1386, dated June 17, 2026, was published in the Official Journal of the European Union on June 26, 2026. It entered into force on July 16, 2026, and will apply, for the most part, from January 17, 2028, on which date it will repeal Regulation (EU) 2019/452. Certain preparatory provisions, however, have applied since July 16, 2026.

The reform transforms a fragmented landscape into a much more coherent system: screening becomes mandatory in all Member States, based on a common sectoral core and minimum procedural safeguards, while leaving the final decision (authorization, conditions, prohibition) at national level. Against a backdrop of a continuously rising number of cases examined and the tightening of several national regimes, foreign investment screening is becoming a fully‑fledged pillar of deal execution in Europe. The new regulation thus replaces the framework established by Regulation (EU) 2019/452, which was limited to a cooperation mechanism and did not make screening mandatory in all Member States.

I. A core set of sensitive sectors

The regulation lays down a minimum list of sensitive activities that all national regimes will have to cover whenever a non‑EU investor is involved, directly or through an interposed European structure:

• Defense and dual‑use items
  • Development, production or marketing of dual‑use items.
  • Products and equipment listed on the EU Common Military List.
• Critical technologies
  • Production or R&D in semiconductors.
  • Quantum technologies.
  • Technologies or know‑how specifically related to general‑purpose AI models, or systems based on such models, when adapted for the development of space or defense applications, as well as general‑purpose AI models presenting a systemic risk within the meaning of Article 51 of the AI Act and systems based on such models.
• Critical transport, energy and digital infrastructure
  • Activities in these sectors where the entities concerned are classified as critical by the Member State, on the basis of a risk analysis related to national security and the continuity of essential functions (e.g. energy storage facilities, gas network operators, airports, port operators, cloud service providers or providers of public electronic communications networks).
• Strategic raw materials
  • Exploration, extraction, processing, recycling, recovery or storage of certain strategic raw materials that are central to the resilience of European value chains.
• Systemic financial services and market infrastructures
  • Central counterparties (CCPs).
  • Central securities depositories (CSDs).
  • Regulated market operators.
  • Operators of payment systems (excluding central banks).
  • Other systemic institutions.
  • Global providers of specialized financial messaging services.
• Electoral infrastructure
  • Ownership, development or operation of systems or databases related to elections, including systems for the transmission, counting and validation of results.

Member States will be able to broaden this scope, but not remove these sectors: this represents the common European “floor” beyond which States remain free to add other nationally sensitive sectors.

II. Investments covered: beyond direct acquisitions

The text also clarifies which forms of investment must be covered.

Indirect investments via EU subsidiaries are fully covered: acquisitions carried out by companies established in the Union but controlled, directly or indirectly, by a non‑EU investor must be covered by national mechanisms. They will be notified under the European cooperation mechanism when they meet the notification criteria laid down by the regulation. This explicit extension to acquisitions carried out via EU subsidiaries controlled by third‑country investors formalizes a practice already encouraged under Regulation 2019/452.

Greenfield projects may be subject to screening by Member States, but they are not subject to a mandatory prior authorization requirement under the regulation, unless otherwise provided by national law, reflecting a compromise between openness and security.

The regulation targets investments that confer effective participation in the management or control of the target. Purely passive portfolio investments are, in principle, outside the mandatory scope, even though certain national regimes remain vigilant regarding “strategic” minority shareholdings.

Internal restructurings are in principle excluded, except where they introduce into the chain of control a new entity from a third country that did not previously appear there: in such a case, the reorganization may be treated as a new foreign investment.

Finally, a broad definition of the beneficial owner governs the information authorities may require and the risk assessment by allowing them to trace back to the person or entity that ultimately controls the investment.

III. A common assessment framework, national decision‑making

Member States retain competence to assess whether an investment undermines security or public order, but the regulation imposes a common set of criteria.

On the substantive side, authorities must assess the security, integrity, resilience and functioning of critical entities, the availability and protection of sensitive technologies and intellectual property, as well as the continuity of supply of essential inputs (energy, raw materials, strategic inputs), in connection with food security and public health. The framework also encompasses the protection of sensitive information (including data), freedom and pluralism of the media, the security of military installations and the potential impact on projects or programs of interest to the Union.

With respect to the investor, the profile of the investor is a key consideration: control links with a third country (including via state‑owned enterprises or sovereign wealth funds), exposure to EU sanctions, opacity or complexity of the ownership structure, track record of non‑compliance with corrective measures or problematic behavior. Member States may add their own criteria but may not ignore this common core. Whereas Regulation 2019/452 merely set out a non‑exhaustive list of factors, Regulation 2026/1386 elevates these criteria to a mandatory minimum standard.

IV. Procedure, call‑in powers and enhanced cooperation

All national regimes will have to provide for a two‑phase procedure. An initial phase 1review, lasting a maximum of 45 calendar days from filing, enables the authority to determine whether an in‑depth investigation is necessary. More sensitive cases are referred to phase 2 for an in‑depth examination, including, where appropriate, internal consultations, exchanges with other Member States and the Commission, and the negotiation of remedies (governance, localization, data ring‑fencing, etc.). No maximum time limit is set at EU level for this second phase, but national rules must be transparent, and the parties must have access to an effective judicial remedy.

The regulation also requires the introduction of “call‑in” powers. For investments falling within the scope of the national mechanism but not subject to prior authorization, the authorities must be able to intervene on their own initiative for at least 15 months after completion, with Member States able to extend this period up to five years. For investments subject to prior authorization but not filed, or filed after completion, the power to intervene must remain in place for at least 24 months. This regulatory “tail” will have to be factored into risk management and contract drafting (conditions precedent, long‑stop dates, risk‑allocation clauses).

The European cooperation mechanism is strengthened by the establishment of a secure and encrypted communication system and a database recording of notifications and their outcomes. A European electronic filing portal must be created if at least nine Member States request. The mechanism is extended to intra‑EU acquisitions carried out by European subsidiaries controlled by non‑EU investors. The final decision, however, remains within the competence of the host State, as the Commission has no veto, even though Member States must duly take account of European comments and opinions and provide reasons for certain disagreements.

Consequences for Member States

Each Member State must have, by January 17, 2028, a mechanism that complies with the regulation and must notify the Commission of the national measures adopted. Member States that do not yet have a comprehensive mechanism will have to create an authorization procedure, competent authority, sanctions, and remedies. Member States that already have a regime will have to verify the compliance of their mandatory scope, time limits, ex-post powers, procedural safeguards, and cooperation rules.

Harmonization will remain minimal. Member States will be able to maintain additional sectors, lower thresholds, control greenfield investments, or other transactions not covered by the mandatory core. Multi‑country transactions will therefore remain subject to a jurisdiction‑by‑jurisdiction analysis, even if filers should endeavor to make their filings on the same day, and authorities will have to coordinate their timetables.

France: required and likely adjustments

The French regime is already largely aligned with the new European core: it covers the control of a French entity, the acquisition of a branch of activity and certain minority shareholdings by investors from third countries, as well as an extensive set of critical sectors and technologies.

Some adjustments nevertheless appear necessary. The French phase‑one deadline, currently set at 30 working days, will have to be brought into line with the European requirement of an initial review within 45 calendar days of filing. French texts will also have to be updated to take account of the replacement of the 2019 regulation, the new cooperation obligations, the minimum ex-post powers and the mandatory sectoral core, for electoral infrastructure, certain strategic raw materials and systemic financial entities.

As of July 29, 2026, no identified French public source refers to any draft law, decree or order expressly intended to adapt the French regime to Regulation (EU) 2026/1386. The order of February 27, 2026, concerns only the online filing service and a back‑up address in the event of unavailability; it predates the publication of the new regulation. The above developments regarding future French amendments must therefore be read as an analysis of the adjustments required or likely, and not as the description of a draft already published.

V. A new environment for foreign investors

For non‑EU investors, the message is clear: FDI screening is becoming a permanent and integral element of access to the European market. Any transaction affecting the listed sectors – including via EU vehicles – will have to be assessed from an FDI perspective, in parallel with merger control and, where applicable, the Foreign Subsidies Regulation.

In the longer term, this screening will also need to be coordinated with the Union’s future sector‑specific industrial policy instruments, first and foremost the proposed “Industrial Accelerator Act”, which could more precisely regulate public support and production capacities in certain strategic value chains.

The framework brings more structure and predictability (common sectors, harmonized deadlines, cooperation tools), but also greater vigilance and a longer horizon for potential intervention. Transaction planning will need to account for these requirements from the outset: choice of structure, mapping of the jurisdictions concerned, strategy for coordinated filings and a realistic timetable to secure closing within the Union’s new economic security architecture.

Main sources

• Regulation (EU) 2026/1386 of the European Parliament and of the Council of 17 June 2026 on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 https://eur-lex.europa.eu/eli/reg/2026/1386/oj/eng
• Council of the EU press release of June 8, 2026, on the adoption of the updated framework: https://www.consilium.europa.eu/en/press/press-releases/2026/06/08/foreign-investment-screening-council-signs-off-on-updated-framework/
• European Commission, “EU strengthens its foreign investment screening framework”, June 26, 2026. https://policy.trade.ec.europa.eu/news/eu-strengthens-its-foreign-investment-screening-framework-2026-06-26_en
• French Monetary and Financial Code, Articles L. 151‑3 and R. 151‑1 et seq.; Order of December 31, 2019, as amended; Order of February 27, 2026, on foreign investments in France.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.