Foreign direct investment: Council and Parliament reached political agreement to improve FDI screening 10:40 Council and Parliament reached a deal to reinforce EU foreign[...]

The Council's presidency and the European Parliament's representatives reached today a provisional political agreement on the revision of the foreign direct investment (FDI) screening regulation. The updated framework aims to strengthen the EU's ability to identify, assess and address risks posed by certain foreign investments, while preserving the openness to global trade and investment.

The revised regulation builds on the functioning of the current FDI screening framework, which is key to safeguarding public order and security across the EU. The agreement strengthens the current system, mandating screening mechanisms with a common minimum scope to be carried out by all Member States, and foreign investments through EU subsidiaries covered as well.

The agreement also increases consistency across national mechanisms, reducing administrative burden for investors, and ensuring that the potential cross-border security implications of foreign investments will be screened.

Main elements of the agreement

A common minimum scope of screenings

To ensure a higher degree of harmonisation across the EU, the co-legislators agreed that all member states would establish screening mechanisms covering a targeted and clearly defined set of sensitive areas where they must screen foreign investments. The minimum scope includes:

• dual-use items and military equipment
• hyper-critical technologies, such as artificial intelligence (aligned with the EU AI Act definitions and focused on general-purpose AI with relevance to space or defence), quantum technologies and semiconductors
• critical raw materials
• critical entities in energy, transport and digital infrastructure, based on a risk-based assessment by the member state where the EU target is established
• electoral infrastructures (e.g. voter databases, voting systems, electoral management systems)
• A limited list of financial system entities, narrowed to include only central counterparties, central securities depositories, operators of regulated markets, operators of payment systems (excluding central banks) and systemically important institutions.

A strengthened but proportionate cooperation and accountability mechanism

The agreement confirms that screening decisions remain the exclusive responsibility of the member state in which the investment is being made. Member states retain full discretion in deciding whether to authorise, condition or prohibit an investment. The final text preserved this principle while improving transparency and coordination among national authorities and the Commission.

In cases where comments from other member states or an opinion from the Commission have been issued, the screening member state will explain how these were considered, including reasons for any disagreement, without prejudice to sensitive national security considerations. According to the agreement, the Commission may assist the host member state in gathering information.

Streamlining processes and interoperability

The agreement also clarified and streamlined several operational aspects of the framework, including:

• a new shared database to prevent circumvention and make exchange of relevant experience easier between authorities
• an optional single portal for the electronic filing of foreign investments, to be set up if at least nine member states request it
• clarification of risk factors for assessing foreign investments.

Next steps

The provisional agreement will now be endorsed by the Council and the Parliament before being formally adopted. The new rules will start applying 18 months after the entry into force of the regulation.

Background

The current FDI screening regulation has been in force since October 2020 and created, for the first time, an EU-wide framework enabling member states and the Commission to cooperate on the screening of foreign direct investments likely to affect security or public order.

Since its introduction, the number of member states with a national screening mechanism has grown significantly. However, divergences in scope, thresholds, timelines and procedures persist, creating uncertainty for investors and potential risks for the internal market. Moreover, evolving geopolitical and technological challenges, including threats to critical infrastructure, supply chain dependencies and the rapid development of dual-use technologies, highlighted the need to update the EU's approach.

The revision of the regulation was one of the initiatives announced in the Commission's 2024 package on strengthening the EU's economic security.

• Council's negotiating mandate
• Commission's proposal
• European economic security (background information)