The EU has reached agreement to revise the Foreign Direct Investment Regulation

On 11 December 2025, the European Council (the “Council”) and representatives of the European Parliament reached a provisional political agreement (the “Agreement”) on the revision of the Foreign Direct Investment (“FDI”) Regulation (2019/452). The Agreement aims to e.g. harmonise FDI screening across the EU by establishing a minimum scope of sectors that must be subject to screening, requiring Member States to give greater consideration to comments from the Commission and other Member States and establishing a shared database for competent authorities. Considering the diversity of national rules, certain harmonisation and coordination is most welcome. However, the extensive Swedish rules will remain.

Background

The existing FDI screening regulation entered into force in October 2020, establishing an EU-wide framework to facilitate cooperation between Member States and the European Commission (the “Commission”) in screening foreign direct investments that may affect security or public order. Following its implementation, almost all Member States have adopted national screening mechanisms.  The regulation primarily imposed formal requirements on the screening systems, which then led to varying material rules and assessments across the Union, as acknowledged by the Council in its press release announcing the Agreement, available here.

Sweden’s extensive screening mechanism exemplifies the large variation between various national systems, as it accounted for approximately 40 % of all screened transactions across the EU in 2024.

The revision of the FDI Regulation is one of the measures announced in the Commission’s 2024 proposal aimed at reinforcing the EU’s economic security. The press release of said proposal is available here.

Harmonised scope of screenings

The Agreement establishes a minimum scope for FDI screening. Member States must ensure that their screening mechanisms cover investments in:

• Dual-use items and military equipment;
• Hyper-critical technologies, including artificial intelligence (aligned with the EU AI Act definitions and focused on general-purpose AI with relevance to space or defence), quantum technologies, and semiconductors;
• Critical raw materials;
• Critical entities in energy, transport and digital infrastructure, based on a risk-based assessment by the Member State where the target entity is established;
• Electoral infrastructures (including voter databases, voting systems, and electoral management systems);
• A limited list of financial system entities, including only central counterparties, central securities depositories, operators of regulated markets, operators of payment systems (excluding central banks) and systemically important institutions.

Higher degree of coordination and a common timeline

While the Agreement confirms that screening decisions remain the exclusive responsibility of Member States, Member States conducting screenings will be required to give greater consideration to comments from other Member States and the Commission than previously required. Under the current FDI Regulation, Member States must give “due consideration” to these comments. Under the new Agreement, Member States will have to explain how the comments were considered, including any reasons for disagreement, without prejudice to sensitive national security considerations. The Agreement provides that the Commission may assist the Member State in gathering this information.

In addition, investors will need to file on the same day in all Member States, and the time frame for the initial screening phase will be set to a maximum of 45 calendar days, from when a notification is declared as complete, across the EU.

Joint databases

The Agreement establishes a shared database to prevent circumvention and facilitate the exchange of relevant information and experience between competent authorities. While the press release provides limited information on what would be included in the database, the Commission’s proposal from 2024 indicates that the database would be dedicated to enabling Member States to share information about their assessment of notifications.

A single portal for electronic filing of foreign direct investments could also be established if more than nine Member States request it.

The path ahead

The Agreement must now be endorsed by the Council and the Parliament before being formally adopted. The new rules will apply 18 months after the regulation enters into force, meaning implementation remains some time away.

Consequences for Swedish FDI screening system

The Swedish FDI Screening Act (2023:560) is considered to have one of the broadest notification scopes among Member States. In 2024, the responsible authority, the Inspectorate of Strategic Products (Sw. Inspektionen för strategiska produkter), received 1,261 notifications while the EU collectively received 3,136 notifications. Given that the scope of the Swedish FDI Screening Act already covers the minimum requirements established by the Agreement, the Swedish notification scope is unlikely to be affected by the revised Regulation. The revision’s most significant impact for investors making investments in Sweden will likely be the potential single filing portal and the shared database, facilitating the exchange of information between authorities. However, since many investors that must file in Sweden also have to file notifications in other jurisdictions, it will hopefully be easier to assess whether an investment is notifiable, although the scope may still vary between Member States. According to the Agreement, internal restructurings, which are currently part of the Swedish FDI rules, should not be notified unless there is a change of the beneficial owner.

Concluding remarks

While increased harmonisation should reduce some administrative burdens for investors, many national differences will remain. For multinational investors, the enhanced cooperation mechanisms and potential single portal should provide greater transparency and predictability when planning cross-border transactions involving sensitive sectors.

Investors should however remain aware that the regulation establishes only minimum requirements, and Member States retain the authority to maintain or introduce more extensive screening regimes tailored to their specific security concerns. Parties to M&A transactions should therefore remember to include provisions requiring non-notifying parties to cooperate in the notification procedure, as well as clauses specifying remedy options and the consequences if the investment is prohibited. Please contact Delphi if you need support with the screening assessment or notification of a foreign direct investment and contacts with authorities.