Strengthening of the European Foreign Investment Screening Mechanism
Frédéric Saffroy – Alice Bastien
The strengthening of the European mechanism for screening foreign investments reached an important milestone on 11 December 2025: the European Commission and Parliament agreed to generalize, extend and reinforce it.
The forthcoming Regulation will make the screening of foreign investments mandatory in all Member States, with a harmonized approach to risks to security and public order. While this obligation in practice concerns only Croatia and Cyprus, it primarily establishes a minimal and standardized perimeter of sectors subject to screening: dual-use goods, defense equipment, hyper‑critical technologies (artificial intelligence, quantum technologies, semiconductors), critical raw materials, strategic infrastructures in the energy, transport and digital sectors, electoral infrastructures, as well as certain entities within the financial system. Member States will remain free to extend screening to additional sectors.
The reform also confirms the applicability of screening to indirect and intra‑EU investments where the European investor is controlled by a non‑European actor. This has long been the case in France.
Furthermore, cooperation between national authorities and the Commission will be strengthened through a harmonized procedural framework (two phases, including a first 45‑day phase), enhanced information‑sharing, and the prospect of a single notification portal (which will require investors to coordinate their submissions). Decisions to authorize or prohibit transactions will, however, remain at national level.
Finally, ex‑post reviews may be carried out for up to fifteen months after completion of a transaction.
The new Regulation is expected in the first half of 2026, with probable entry into force in 2027.
The current FDI screening in a nutshell
Foreign investment screening was introduced in France in 1966. The current legislation was strengthened in 2019, and then after the Covid crisis, to protect sensitive sectors of industry and services, and to provide the State with more flexible tools, including authorizations subject to conditions. It already goes beyond the sectors covered by the forthcoming EU Regulation and encompasses indirect transactions, including those carried out abroad between foreign entities where the effect is to transfer control of a sensitive French entity.
Introduced by EU Regulation 2019/452, the European framework for foreign investment screening (“FDI screening”) entered into force in October 2020 and applies to transactions involving a non‑EU foreign investor.