Beware of FDI Screening: EU Figures Show Rising Impact on Investments

FDI Screening Now Stands Alongside Merger Control—With a Wider Reach

Like merger control, FDI screening is an ex-ante, suspensory approval process: a notifiable transaction cannot be closed before obtaining authorization from the relevant authority. With all 27 Member States now operating an FDI screening framework, the last having entered into force in Cyprus in April 2026, the EC's report shows that FDI screening has become a decisive factor for the feasibility and timing of most cross-border transactions in the European Union.

Even though Member States retain sole competence to approve, condition, or block an investment, the EU cooperation mechanism, which establishes mutual information sharing between the FDI authorities, increasingly reinforces control across the European Union, particularly whenever an investment may affect the security or public order of more than one Member State. U.S. investors remain the largest source of notified transactions (33%, down from 40%), followed by the United Kingdom (9%) and China (7%). The share of the United Arab Emirates rose (5%, from 3%), and India now accounts for 3%.

More Notifications, More Multijurisdictional Filings. National authorities handled 4,773 FDI authorization requests and ex officio cases in 2025, up 52% from 2024 (3,136). FDI screening thus now likely generates a larger caseload than merger control. Based on the latest figures from the Organisation for Economic Co-operation and Development ("OECD"), we estimate that the EC and national competition authorities ("NCAs") together received approximately 3,700 merger notifications in 2024.

FDI screening catches a wide range of transactions, including some that may not be subject to merger control in most jurisdictions. These include minority investments, internal restructurings, and, in some jurisdictions, greenfield investments. Unlike mechanisms applicable in countries like Japan and India, indirect acquisitions (e.g., through EU-based vehicles) are also covered. In some jurisdictions, such as Italy and the United Kingdom, FDI screening may not even require a local presence: holding certain contracts with clients located in the country, even with limited sales, may be sufficient to trigger a notification, depending on the sectors involved. Several EU countries, such as France and Italy, also require FDI screening for certain intra-EU deals.

This caseload is, however, unevenly distributed, and some Member States are far more active than others. Overall, only about 38% of the cases notified were formally screened, although that share increases to 65% when data for Sweden are excluded, reflecting the large number of Swedish notifications closed without action. Sweden's regime, in force since December 2023, generates a disproportionately high number of filings relative to comparable jurisdictions: the Inspectorate of Strategic Products ("ISP") received 1,987 notifications in 2025 (up from 1,261 in 2024), i.e., around two-fifths of all cases handled by national authorities across the European Union. Notwithstanding this volume, Sweden's intervention rate is low: by mid-January 2026, only 46 of 3,362 notifications had proceeded to an in-depth review, with three prohibitions and six conditional approvals. Its best-known cases are the December 2024 prohibition of a planned battery anode plant by China-based Shanghai Putailai, and the SEK 200,000 (US$20,000) fine imposed on Ramsbury Invest AB, the majority shareholder of the H&M group, for notifying an investment only after completion.

FDI notifications to the EU cooperation mechanism rose by 40% in 2025 (667 vs. 477), the highest annual increase ever recorded. Member States asked questions in about 11% of cases (10% in 2024) and issued comments in about 6% (3% in 2024), while the EC issued opinions in fewer than 2% of cases, as in 2024. Triggering the EU cooperation mechanism thus increasingly creates risks of delay and additional filing requirements.

Multijurisdictional notifications, i.e., transactions screened in two or more Member States, are also more frequent (27%, up from 19%). Yet notifications remain concentrated in a few countries: Austria, France, Italy, and Spain accounted for 65% of EU notifications, rising to 86% when Germany, Ireland, and Lithuania are added, even though the number of notifying Member States has grown from 13 in 2021 to 21 in 2025.

Through the cooperation mechanism, transactions are thus increasingly visible to other Member States, which increases the risk of a call-in or ex-post review. This risk is greater than under merger control, where the possibility of referrals of below-threshold deals has remained more limited since the Illumina/Grail judgment (see our September 2024 Commentary). Contrary to merger control, call-in powers are the rule rather than the exception in FDI screening: under the FDI Screening Regulation, from January 17, 2028, all Member States must be able to call in non-notifiable investments for at least 15 months (and up to five years) after completion, and to review notifiable investments that were not filed for at least 24 months.

This greater visibility also increases the financial exposure of investors that fail to notify. Beyond the risk of an ex-post review, which may lead to conditions or even a prohibition after completion, failure to notify a notifiable transaction, or closing it before securing a clearance, may expose investors to significant financial penalties in several Member States—for example, 10%–30% of the deal value in Belgium and up to twice the value of the investment in Italy and France. The Italian FDI authority has imposed a fine in excess of €74 million (US$83 million).

More In-Depth Reviews and Conditions. In 2025, 88% of the cases notified to the EC were closed within the 15-day Phase 1 period (92% in 2024), but the share of Phase 2 assessments rose by 50%, to 12%. Critical technologies (notably defence, aerospace, AI, quantum, and biotech) remained the most common risk factor, accounting for 37% of notifications, and access to sensitive information, including personal data, is becoming a key concern. Investors in these sectors should be prepared to document their plans for the target and how sensitive data will be protected after closing.

Although in-depth reviews remain limited relative to the total number of cases notified to the European Union (about 12%), the rise in notifications also means more EU Phase 2 reviews in absolute terms (about 80 cases, i.e., some 40 more than in 2024). In our view, this trend is likely to continue, with significant practical consequences for investors.

In-depth reviews increase the risk that conditions or remedies will be imposed on clearance. While the share of national FDI decisions imposing conditions or mitigating measures remained stable (9%), their absolute number rose in line with the higher number of notifications (more than 430 in 2025, against 283 in 2024). Some jurisdictions record very high shares of conditional decisions, such as France (49%).

Overall, conditional decisions are significantly more frequent under FDI screening than under merger control: between 2015 and 2024, fewer than 2% of merger notifications in the European Union (to the EC and national competition authorities combined) were cleared subject to remedies.

This directly affects review timelines: in-depth reviews, information requests, and remedy negotiations extend the standstill period (in our experience, French reviews involving remedies often take four to five months to complete). Parties should therefore include in purchase agreements appropriate provisions contemplating FDI clearances as conditions precedent, long-stop dates that extend automatically if an in-depth review is opened, a clear allocation of the obligation to accept mitigation measures and, where appropriate, break-up fees. Interim covenants should avoid any pre-closing influence over the target.

FDI remedies remain mostly behavioral (e.g., governance and information rights or restrictions, security of supply, cybersecurity and EU data storage, protection of IP and R&D activities, maintenance of activities and employment). The commitments may be temporary, but some jurisdictions, such as France, impose conditions lasting as long as the investor retains control, as well as new forms of governance remedies (e.g., golden share, board seat).

Vetoes and Withdrawals. Prohibitions remain very rare under merger control: only about 0.2% of EU merger notifications were blocked over the past decade, and a single prohibition was recorded in 2025. By contrast, Member States blocked about 1% of FDI filings. While the EC report maintains that prohibitions remain exceptional, Member States appear increasingly willing to block transactions, across sectors and investor nationalities.

FDI screening also led parties to withdraw 3% of filings before a decision was taken, sometimes in view of the remedies or prohibition likely to be imposed. The OECD notes that FDI screening may have contributed to withdrawals of merger control notifications in the past two years (which remained at only about 0.7% of EU notifications between 2015 and 2024), as parties may prefer to abandon a deal rather than accept intrusive conditions or face a likely veto.

The Scope of Review Will Widen Further in the Coming Years

Early indications suggest that 2026 will confirm these trends, with caseloads, in-depth reviews, conditional clearances, and prohibitions continuing to rise across the European Union and in the United Kingdom. Given the growing visibility of transactions, investors are increasingly making precautionary filings, a practice that the future EU wider scope of review is likely to reinforce.

At EU Level. The FDI Screening Regulation, applicable from January 17, 2028, will set a minimum scope of control for all Member States (e.g., dual-use and military items, critical technologies, infrastructure and raw materials), together with call-in powers for non-notified transactions (see our July 2026 Commentary). It extends to EU-based acquirers controlled from outside the European Union, but excludes passive investments, purely internal restructurings and greenfield investments, which Member States remain free to screen.

The Industrial Accelerator Act proposed in March 2026 would add an EU-wide mandatory pre-clearance mechanism, including for greenfield investments, for relatively large investments—above €100 million (US$112 million), or €50 million (US$56 million) under the Parliament committees' report—in strategic manufacturing and clean technologies where the investor's country holds more than 40% of global capacity (see our March 2026 Alert and September 2026 Commentary). Investors planning new plants, data centers or research facilities in sensitive sectors therefore cannot assume that greenfield projects fall outside FDI screening.

At National Level. Several Member States are also extending their regimes (e.g., France lowered its voting rights threshold to 10% for non-EU investors in French entities listed abroad; see our August 2026 Alert); and some jurisdictions already include new technologies within the scope of their review (e.g., cloud, 5G, AI, robotics, semiconductors, and quantum in Cyprus and Italy; construction and heavy materials; energy and charging infrastructure; transportation and logistics; and medical, pharmaceutical and safety equipment in Sweden) or plan to do so (e.g., AI, biotech, and nanotechnology in the Netherlands).

Further reforms are under way in Germany and Finland. In Germany, reform will extend the 10% share acquisition thresholds to additional sectors. In Finland, the mandatory filing obligation will be extended beyond acquisitions in the defence and security sector. By January 2028, several Member States will also have to widen their sectoral scope to the EU minimum and remove filing exemptions based on the investor's home country. For example, Bulgaria currently applies a "white list" of selected non-EU countries (e.g., the United States, United Kingdom, Japan, South Korea, Canada, Australia) whose investors are treated like EU investors and are generally exempt from mandatory filing, while Poland excludes from its sectoral screening regime investors whose ultimate parent is in the EEA or an OECD member country.

Conclusion

In practice, FDI screening should be assessed alongside merger control and the Foreign Subsidies Regulation (see our Alert here) at the outset of any transaction, including overseas transactions, minority investments and internal restructurings. Parties should map: (i) the investor's profile and ownership chain (including state ownership and non-EU limited partners); (ii) the target's presence in the European Union through subsidiaries, assets, minority investments and customers/sales; (iii) the rights the investor will hold after closing; and (iv) the target's activities per country. As national regimes still diverge on what is considered "sensitive", a global approach with close coordination at national level remains essential. The results of the filing risk analysis should be reflected in the deal timetable and transaction documents.

FDI screening is also tightening outside Europe, notably in the United States, which is seeing a higher volume of reviewed transactions, longer reviews, closer scrutiny of non-notified transactions and increased penalties (see our September 2026 Commentary), and in Japan, where major amendments to the Foreign Exchange and Foreign Trade Act have been promulgated.