While the 2019 Regulation improved coordination, it stopped short of creating a harmonised screening regime. Member States retained broad discretion regarding whether to implement national screening mechanisms and how those regimes would operate. This resulted in significant differences across the European Union in relation to notification requirements, sectoral scope, review timelines and procedural safeguards.
These differences created challenges for investors undertaking cross-border transactions. Multi-jurisdictional deals often required parties to navigate multiple filing requirements and review processes simultaneously, while gaps between national regimes led to concerns regarding inconsistent levels of scrutiny across the European Union. In addition, questions arose as to whether certain investments structured through EU-incorporated entities ultimately controlled by non-EU investors were being captured as intended by the existing framework.
The New EU FDI Screening Regulation
In response to these concerns, the European Union adopted a new FDI Screening Regulation (the “2026 Regulation“), which will repeal and replace the existing framework. While responsibility for screening decisions will remain with individual Member States, the Regulation introduces a significantly greater degree of harmonisation across the European Union.
One of the most significant reforms is the requirement that all Member States operate a national FDI screening mechanism covering a common minimum scope of transactions. All transactions falling within that scope will be subject to mandatory and suspensory review, meaning completion must generally be deferred until clearance has been obtained.
The Regulation establishes a common baseline of sensitive sectors requiring mandatory review across the European Union. These include:
• Dual-use and defence-related products;
• Certain critical technologies, including semiconductors, quantum technologies and artificial intelligence;
• Critical transport, energy and digital infrastructure;
• Critical raw materials;
• Critical financial infrastructure; and
• Electoral infrastructure.
Although Member States may continue to apply broader national screening requirements, these sectors will form the minimum scope applicable across the European Union.
The Regulation also broadens the definition of a foreign investor. Going forward, investments made through EU-based entities that are ultimately controlled by non-EU investors may fall within scope. This seeks to address concerns that intermediary EU holding structures could otherwise be used to avoid screening requirements.
The 2026 Regulation introduces a more consistent procedural framework for FDI reviews. An initial review period of 45 calendar days will apply across Member States, creating greater certainty for investors involved in cross-border transactions. While more detailed investigations may still be undertaken where concerns arise, Member States are expected to align their review processes more closely than under the previous framework.
To further simplify multi-jurisdictional filings, the European Commission will develop a standard EU notification form. There will also be an option to create a common notification portal in the event that nine or more Member States request this of the European Commission. These measures are intended to reduce administrative burdens and improve consistency across Member States.
Enhanced cooperation and information sharing between national authorities forms another key pillar of the reforms. Member States will be required to share screening outcomes with the European Commission and other relevant authorities. In addition, an EU-wide database containing information on notified investments and screening decisions dating back to October 2020 will be established to facilitate greater transparency and coordination.
The Regulation also introduces stronger procedural safeguards for investors. Parties will benefit from a formal right to be heard during the review process and authorities will generally be required to provide reasoned decisions, improving transparency and predictability.
Expanded Review Powers
The 2026 Regulation strengthens the ability of Member States to review transactions that may not have been notified.
Member States will be required to maintain call-in powers in respect of certain transactions that have not been notified and may present security or public order concerns. The look-back period for some transactions may extend beyond the timeframes currently applied in certain national regimes.
The Regulation also clarifies the treatment of internal reorganisations. While intra-group reorganisations generally remain outside the scope of mandatory screening, an exception may arise where a new non-EU entity is introduced into the ownership structure above an EU target company.
Where concerns are identified, authorities will continue to have the ability to impose mitigating measures. These may include governance restrictions, cybersecurity obligations, limitations on access to sensitive technology or requirements relating to the handling of sensitive data. Any conditions imposed must be proportionate to the identified risk and prohibitions should only be used where concerns cannot be adequately addressed through less restrictive measures.
Potential Implications for Ireland
Ireland’s FDI screening regime, established under the Screening of Third Countries Transactions Act 2023 and operational since January 2025, was developed within the framework of the 2019 Regulation. As a result, amendments are likely to be required to align the Irish regime with the new EU requirements.
While the precise approach remains to be seen, potential areas of change include:
• Alignment of Ireland’s mandatory notification sectors with the new common minimum EU scope;
• Adoption of the broader definition of foreign investor to include all non-EU investors;
• Changes to review procedures and notification requirements to reflect the new EU framework;
• Extension of existing call-in powers; and
• Increased information sharing with European authorities through the new cooperation mechanisms and screening database.
Although screening decisions will continue to be made at national level, the reforms represent a significant step towards a more coordinated European approach to foreign investment screening. Businesses contemplating acquisitions, investments or restructurings involving strategically sensitive sectors should continue to assess potential FDI screening implications at an early stage of the transaction lifecycle, particularly where multiple Member States may be affected.
