Harmonised, But Not Uniform: The EU’s New FDI Screening Regulation

In this piece, authors Dimitris Vallindas & Charles Corbusier (Sheppard) discuss the European Union’s newly adopted Foreign Direct Investment (FDI) Screening Regulation, which significantly overhauls the bloc’s 2019 framework. The new rules require all 27 Member States to maintain national FDI screening mechanisms, establish a common baseline for mandatory reviews in strategic sectors, and strengthen cooperation between national authorities and the European Commission. While the reforms improve consistency, investors will still face differing national procedures and timelines.

The authors explain that the regulation closes several key gaps exposed under the previous regime. Most notably, it extends scrutiny to investments made through EU-based subsidiaries that are ultimately controlled by non-EU investors, preventing companies from avoiding review through intermediary holding structures. The framework also expands authorities’ powers to call in transactions after completion and introduces harmonized Phase I review deadlines alongside a more structured two-phase assessment process.

The article also highlights a stronger EU-level cooperation mechanism, requiring mandatory notifications for certain high-risk investments and granting the European Commission a more active role in proposing mitigation measures. Authorities will be able to impose conditions ranging from governance changes and cybersecurity requirements to restrictions on access to sensitive technologies, while remaining bound by the principle of proportionality…

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