Revised EU FDI Screening Regulation published: what will change?
The agreed draft of the revised EU FDI Screening Regulation ("Proposed Regulation") has been published, prior to its adoption by the EU Parliament later this year.
Unless substantially amended by the Parliament (which is unlikely), the key changes that will be introduced by the Proposed Regulation, as compared to the Regulation presently in force ("Current Regulation"), are summarised in the table below. We expect that the Proposed Regulation will come into force around the end of 2027.
This agreed draft of the Proposed Regulation omits a number of provisions that were put forward in earlier versions. In particular: (i) the European Commission will not be able to over-rule decisions of Member States (MS); (ii) there is a much shorter list of sensitive sectors for which mandatory filings will be required; and (iii) there will not be a requirement for MS to screen greenfield investments.
Current Regulation |
Proposed Regulation |
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MS required to have a mandatory filing regime, with standstill obligations? |
No. |
Yes. These must cover, at least, acquisitions of control of EU targets with activities in: (i) dual-use/military items; (ii) hyper-critical technologies, such as AI (focused on general-purpose AI with relevance to space or defence), quantum technologies and semiconductors (iii) critical raw materials (iv) critical entities in energy, transport and digital infrastructure; (v) electoral infrastructures; and (vi) certain financial system entities. A number of MS do not screen for all of these activities, and will therefore be required to amend their regimes before the end of 2027. Greenfield investments and most intra-group transactions are excluded from this minimum scope, although MS will be free to require filings for broader range of transactions and sectors, and many will. National FDI regimes will also be required to have certain minimum standards, such as effective due process and a 45 calendar day deadline for initial, Phase 1 reviews. |
MS required to have powers to call-in deals that are not notifiable for review? |
No. |
Yes, MS will have to be able to call-in non-notifiable deals on public order/security grounds for at least 15 months after closing, including cases where concerns are raised by another MS. MS will also be required to have powers to impose remedies or to prohibit deals that have not closed. |
Investments by an EU subsidiary of a non-EU parent caught? |
No, not covered by the Regulation unless structured to circumvent a screening regime. |
Yes, the scope of the Regulation will be extended to cover investments by EU subsidiaries of non-EU parents. |
Transactions subject to the "cooperation mechanism"
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All transactions that are "formally" screened by an MS must be notified to all other MS and the EC for their comments and cannot (usually) be cleared until after the commenting period. |
The cooperation mechanism will be limited to: (i) notifiable deals involving investors linked to foreign States or entities subject to EU sanctions, or investors that have previously been subject to remedies that were not complied with, or a prohibition decision; (ii) transactions subject a detailed Phase 2 review by the host member state, where the target is active in a project or programme of EU interest, or has subsidiaries in multiple member states; and (iii) transactions that the host member state considers might affect national security in other member states. |
Timing of the cooperation mechanism |
Fixed periods within which MS must comment, once provided with information by the MS in which a deal is notified. |
Deadlines for the various stages of the commenting procedure have been reduced by around 20 calendar days and there is a new 15 calendar day deadline from the merging parties' filing within which MS must initiate the procedure (or 45 days for Phase 2 cases). However, the process may also be prolonged by new requirements that: (i) parties must endeavour to make all FDI filings in the EU on the same day, so the MS that takes longest to accept the filing might hold up all the others (although the Regulation now requires MS to do this without undue delay); and (ii) that new information provided by the host MS may extend the commenting period by 20 calendar days. |
Mandatory criteria for assessment? |
No, but various factors are set out that MS can take into account, such as impacts on critical infrastructure, technologies or inputs. |
Yes. MS will be required to consider the relevant factors, which have been expanded to include considerations such as the protection of electoral processes, the availability of critical medicines, food security (including substantial farming operations) and the security of sensitive facilities in geographical proximity of the target. The list of risk factors relating to the foreign investor have also been expanded to include: (i) foreign investors that are established in jurisdictions with deficient AML/CFT regimes or obligations to share information for intelligence purposes without due process; (ii) investors previously subject to FDI remedies that were not complied with, or a prohibition decision; (iii) investors linked to sanctioned entities or individuals (and the reasons for such sanctions); and (iv) investors with opaque ownership structures. |
Weight to be given to views of other MS/EC |
"Due consideration" to other MS comments and most EC opinions. |
No change, but host MS will be required to offer a meeting to other MS or the EC if they have commented, and to explain the extent to which it has considered their comments and any reasons for disagreement. |
Other changes |
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Significantly increased volume of information to be provided by MS (and required from merging parties) when initiating the cooperation procedure (e.g. information about other entities in target's corporate structure) New obligations for MS to assist the host MS in gathering information relevant to the assessment of the transaction. |
