EU FDI Screening Regulation: Coverage, Penalties, and 2027 Changes

The EU FDI screening regulation, formally Regulation (EU) 2019/452, sets up a cooperation mechanism for reviewing non-EU investments that could affect security or public order. It does not run a single EU-level approval process. Each member state screens deals under its own national law, then notifies the European Commission and every other member state so they can weigh in before the final decision. Under the current rules, screening is voluntary at national level. A revision agreed in December 2025 will make national screening mandatory across all 27 member states, with entry into force expected in 2027.¹

What Counts as a Foreign Direct Investment

The regulation defines foreign direct investment as an investment by a non-EU person or company that creates lasting, direct links with a business in a member state and lets the investor take a meaningful role in its management or control. That role can come through voting shares, board seats, or other forms of corporate influence.² Passive portfolio investments made purely for financial return, with no management role, generally fall outside the framework.

An EU-registered company still counts as a foreign investor when it is ultimately owned or controlled by a non-EU person or entity.² Regulators look through the corporate chain to identify who actually controls the capital and the decision-making, which prevents investors from routing money through an EU shell to avoid scrutiny. The 2027 revision formalizes this by requiring member states to screen intra-EU investments when the buyer is ultimately controlled from outside the Union.³

One boundary worth flagging: greenfield investments, where a foreign company sets up an entirely new operation instead of buying an existing one, are not covered by the minimum mandatory scope under the revised regulation. Individual member states are free to extend their national rules to catch greenfield projects, and some do.

Which Sectors Trigger a Review

Article 4 directs screening attention to assets that underpin a society’s basic functioning. Five broad categories define the scope:

Critical infrastructure, including energy, transport, water, health, communications, media, data storage and processing, aerospace, defence, electoral systems, and financial infrastructure, along with the land and property essential to operating that infrastructure.
Critical technologies, including dual-use items, artificial intelligence, robotics, semiconductors, cybersecurity, energy storage, quantum and nuclear technologies, nanotechnologies, and biotechnologies.
Supply of critical inputs such as energy, raw materials, and food.
Access to sensitive information, including personal data and control over classified or strategically important datasets.
Media freedom, where an investment could affect the independence and pluralism of news outlets.

These categories are drawn directly from the regulation.² They are deliberately broad. A deal involving a small data-hosting firm can trigger review just as easily as an acquisition of a defence contractor, because the deciding factor is what the target company touches, not how large it is.

How the Cooperation Mechanism Works

When a member state screens an investment, it notifies the Commission and every other member state through a secure channel.² That notification opens a window for input.

Under the current rules, other member states have 35 calendar days to submit comments, and the Commission has 45 calendar days to issue an opinion where it believes the investment could affect security or public order in more than one country.² The revised regulation harmonizes the initial national review to a flat 45 calendar days from the date a filing is deemed complete.¹ Most transactions clear during that first phase.

The mechanism also works in reverse. Where no member state is actively screening a deal but the Commission or another member state spots a concern, comments and opinions can still be issued on any foreign investment in any member state, regardless of whether that country has a screening regime.²

The Host Country Has the Final Say

The member state where the investment takes place decides whether to approve, condition, or block the deal. Commission opinions and comments from other countries carry weight but are not legally binding. The screening member state must give them “due consideration,” and where the Commission itself issues an opinion, must take “utmost account” of it.² A member state that disagrees and proceeds anyway must explain its reasoning to the Commission. The 2027 revision strengthens this explain-or-comply duty but leaves the final decision with the host country.

What a Notification Has to Contain

Article 9 sets the minimum information that must accompany a notification into the cooperation mechanism:

The identity and shareholding chain of the foreign investor, including the ultimate beneficial owner.
The approximate value of the investment.
A description of the products, services, and activities of both the investor and the target.
Every member state where the target or the investor conducts business.
Where the capital comes from, including any government funding.
The planned or actual completion date.

These requirements come from the regulation itself.⁴ National authorities layer their own forms and portals on top of these minimums, and the level of detail expected varies. Investors routinely spend weeks assembling filings, particularly where a target operates across several member states with different administrative standards. Incomplete filings delay the clock.

Filing Thresholds Differ by Country

The regulation itself does not set a percentage of ownership that triggers a filing. That falls to each member state. Some countries require notification when a foreign investor acquires as little as 10% of voting rights in companies operating in the most sensitive sectors, while others set the bar at 25% or higher. Several member states impose additional notification duties when an existing foreign investor increases its stake past further thresholds such as 30%, 50%, or 75%. Any acquirer planning a deal should check the specific rules in every member state where the target operates.

How Regulators Assess the Risk

Screening decisions do not turn on a single pass-fail test. Two factors carry particular weight.

The first is whether the foreign investor is directly or indirectly controlled by a non-EU government. That control can take the form of significant ownership stakes, substantial state subsidies, or instructions from government agencies or armed forces.² A privately held investor with no government ties faces a lighter review than a state-owned enterprise or a company receiving strategic state funding. Authorities also look at the investor’s track record, including any past conduct that undermined public order or security in another country.

The second is whether the investment affects a project or programme of Union interest. The regulation names the Galileo and EGNOS satellite navigation systems, the Copernicus earth observation programme, the Trans-European Networks for transport, energy, and telecommunications, and the European Defence Industrial Development Programme.² Deals touching these multinational programmes face heightened scrutiny because a security breach in one country’s component can cascade across the whole system.

National Regimes Across the EU

Nothing in the current regulation forces a member state to establish a screening mechanism. Article 3 states that member states “may maintain, amend or adopt” screening mechanisms.² Despite that, 25 of the 27 member states now operate national FDI screening regimes. Croatia and Cyprus are the remaining holdouts, and both have begun legislative processes to adopt their own.

For dealmakers the practical consequence is significant. A single cross-border acquisition may require separate filings in every member state where the target has operations, each with different thresholds, timelines, forms, and fees. The 2027 revision aims to reduce that friction by harmonizing deadlines and requiring filings in multi-country transactions to be submitted on the same day.¹

Penalties for Skipping a Filing

Because the current regulation leaves enforcement to national law, the consequences of failing to notify or of closing a deal without approval vary widely. Some member states treat the completion of an unnotified transaction as legally void until it is cleared. Others impose administrative fines that can reach hundreds of thousands of euros per violation. In the most aggressive jurisdictions, intentional breaches of the standstill obligation, meaning closing a deal before approval, can be a criminal offence carrying prison time.

The revised regulation will let every member state screen unnotified transactions retroactively, so a deal that closed without the required filing can be pulled back for review after completion.³ A shared EU database will help authorities detect circumvention attempts, such as structuring a single acquisition as several small ones to stay below thresholds. For investors, skipping or delaying a filing is not a viable strategy, and the cost of getting it wrong is rising.

Challenging a Screening Decision

A negative decision is not the end of the road. Investors can challenge blocking decisions or restrictive conditions in the courts of the member state that made them. Typical grounds include failure to justify the restriction properly or disproportionate application of the rules.

The Court of Justice of the European Union has set out what national authorities must show. In Case C-106/22, referred by a Hungarian court in 2024, the CJEU held that any restriction on foreign investment based on security or public order grounds must address a “genuine and sufficiently serious threat to a fundamental interest of society.” Vague concerns about a sector being sensitive are not enough. The ruling also confirmed that EU-established companies, even those with foreign ultimate ownership, keep their right to freedom of establishment, and any interference with that right needs specific justification.

Beyond domestic courts, investors may pursue claims through investor-state dispute settlement where the host country has a bilateral investment treaty with the investor’s home country. Retroactive decisions affecting an already-completed investment are particularly exposed to challenge on fair and equitable treatment grounds. Host states typically defend these actions by invoking national security exceptions, and outcomes turn on the specific treaty language and the facts of each case.

What Changes in 2027

In December 2025, the European Parliament and Council reached a provisional political agreement on a comprehensive revision of the framework. Formal adoption is expected in the first half of 2026, with entry into force likely in 2027.¹ The main changes:

Every EU country will be required to establish and operate a national screening mechanism.⁵
All member states must screen investments in a minimum mandatory list of sectors: dual-use items, military equipment, AI (aligned with the EU AI Act), quantum technologies, semiconductors, critical raw materials, critical infrastructure such as energy, transport and digital networks, electoral infrastructure, and certain financial entities.
Investments by EU-based companies ultimately owned or controlled by non-EU persons will be caught.
A standardized 45-day first-phase national review replaces the current patchwork of timelines.
Member states that disregard Commission opinions or comments from other countries must give written reasons.
National authorities will have the power to call in and review transactions completed without notification.
A centralized EU database will support cross-border information sharing and help detect circumvention.

Member states remain free to screen beyond the mandatory floor, and the final decision on any individual transaction still belongs to the host country. The core architecture of national sovereignty over outcomes survives; the floor has been raised. Any investor planning a deal in the EU that will close in 2027 or later should treat the revised framework as the operative ruleset.

1
European Commission. Revision of the EU’s Foreign Investment Screening Mechanism
2
EUR-Lex. Regulation (EU) 2019/452 of the European Parliament and of the Council
3
European Commission. Investment Screening
4
EUR-Lex. Regulation (EU) 2019/452 – Article 9
5
European Commission. EU Foreign Direct Investment Screening 2024 Revision