On Thursday, members of the European Parliament and the Council reached a provisional agreement to update EU rules on screening foreign investments. The aim is to prevent security risks associated with investments from outside the EU in sectors considered sensitive.
The new rules will require all member states to conduct mandatory screenings of foreign investments in areas such as defence, semiconductors, artificial intelligence, critical raw materials, and financial services. These measures are designed to help identify and address possible threats to security or public order. Additionally, transactions within the EU will be covered if the investor is ultimately owned by individuals or entities from non-EU countries.
Procedures for national screening mechanisms will be simplified in an effort to reduce complexity and make the EU more attractive for investment. The agreement also seeks to improve cooperation among national authorities and with the European Commission so that coordination on cross-border security risks is strengthened.
A statement adopted as part of the political agreement highlights that both the European Parliament and the Commission recognize a need for further action at Union level to manage economic security risks tied to foreign investments. The Commission has committed to introduce an initiative setting out conditions for foreign investments in certain strategic sectors.
Parliament’s rapporteur Raphaël Glucksmann (S&D, FR) said: “These were intense negotiations because we had strongly diverged views between Parliament and Council on the concept of economic security and the Union’s role in safeguarding it. The spirit of compromise ultimately prevailed, and the outcome will deliver important improvements in the way foreign investment is handled by Member States and the Commission. Clearer and faster procedures will enhance the EU’s attractiveness, while a streamlined cooperation mechanism will ensure that all Member States can raise their security concerns effectively. Our debates with Council underscored the need for further action at European level to ensure not only that foreign investments do not pose immediate security risks, but also that they bring added value to the Union. We welcome the Commission’s commitment to work on this matter. The Parliament is ready.”
Bernd Lange (S&D, DE), Chair of the international trade committee, added: “The EU welcomes investors from across the globe who contribute to job creation, knowledge transfer and increased productivity throughout our continent. At the same time, such investments must not endanger the Union’s security or public order. The revised Foreign Investment Screening Regulation offers investors greater clarity regarding risk criteria and establishes transparent, harmonised rules for national screening authorities. By requiring all Member States to implement a screening mechanism and by strengthening cooperation among them, the regulation closes potential loopholes for high-risk investments in the internal market. Moreover, the European Parliament successfully advocated for a broader minimum scope of the national screening mechanisms, ensuring that investments in particularly critical sectors must be screened by all Member States.”
The existing regulation on foreign direct investment (FDI) screening has been effective since October 2020; it provides a framework aimed at protecting EU security while keeping borders open for capital inflows. After evaluating its effectiveness, deficiencies were identified which led to a proposal by the Commission in January 2024 for revision as part of its broader economic security agenda.
Before coming into force, this provisional agreement must still be formally approved by both Parliament and Council.
