On June 17, 2026, the European Parliament and the Council adopted Regulation (EU) 2026/1386 on the screening of foreign investments in the European Union, repealing and replacing the previous framework under Regulation (EU) 2019/452. The new Regulation, which will enter into force in January 2028, marks a significant step forward in the EU’s approach to protecting its economic security and strategic interests.

Why a new Regulation?  The 2019 framework was the EU’s first attempt at coordinating foreign investment screening across Member States. However, it was widely seen as insufficient: it was voluntary in nature, covered only direct investments from third countries, and left significant gaps where Member States lacked any screening mechanism at all. Since then, escalating geopolitical tensions, and lessons learned from the pandemic and energy crises have prompted a fundamental rethink. The new Regulation responds to these challenges by making screening mandatory, extending its reach, and creating a more harmonized procedural framework across the EU.

KEY CHANGES AT A GLANCE

1. Intra-EU investments now in scope.  Under the previous regime, only direct investments by third-country investors were covered. The new Regulation captures investments made by foreign investors through an EU-based subsidiary. This means that, for example, a Chinese investor operating through a Dutch holding company will now fall within the screening perimeter of the target’s home Member State.

2. Mandatory prior authorization in sensitive sectors.  All Member States must require prior authorization for foreign investments in companies active in designated sensitive sectors. These include: dual-use items and military goods/technologies; semiconductors, quantum technologies, and certain AI technologies; strategic raw materials (exploration, extraction, processing, recycling, recovery, or stockpiling); systemically important financial market infrastructures and entities (central counterparties, central securities depositories, regulated market operators, payment systems, financial messaging providers); and electoral registration databases, voting systems, and election management IT systems. Transport, energy, and digital infrastructure are also included, but only where the target company has been designated as critical following a risk-based assessment by the relevant Member State. Greenfield investments are excluded from the prior authorization requirement, although they remain within the Regulation’s general scope.

3. Harmonized review timeline.  The initial screening period is now capped at 45 calendar days from the date on which the filing is deemed complete. This provides greater predictability for deal timetables, particularly in cross-border transactions involving multiple Member States. A second phase may be opened if the initial screening period does not close with clearance of the investment.

4. Ex officio powers for non-notifiable investments.  For investments that are not subject to mandatory prior authorization, authorities may act ex officio from 15 months up to a maximum of five years after the completion of the transaction.