The New EU FDI Screening Regulation – What Companies Should Consider Now

At the beginning of 2026, the European Commission, the Council of the European Union, and the European Parliament reached an agreement on the reform of the European Investment Control Regulation (Regulation (EU) 2019/452). However, the new regulation (EU) 2026/1386, known as the "EU Screening Regulation 2026," will primarily take effect from 2028. Nevertheless, it is advisable for companies to assess the implications of this regulation now and to take early action.

When Do the New Rules Take Effect?

The timing of the new rules is particularly significant for companies. The EU Screening Regulation 2026 was published on June 26, 2026, and will come into force on July 16, 2026. After an 18-month transition period, it will apply directly from January 17, 2028. By this date, all EU member states must have investment screening mechanisms that meet at least the requirements set forth in the regulation.

Germany will incorporate these regulations into a standalone Investment Screening Act (IPG), which will consolidate and systematize the existing regulations currently spread across the Foreign Trade Act (AWG) and the Foreign Trade Regulation (AWV). This should facilitate the examination of approval or notification requirements for companies in the future. The IPG is expected to be initiated "in a timely manner" according to previous announcements.

What Changes Are Fundamental in the EU?

The most significant structural change is the requirement for all member states to establish an investment screening regime. While the previous regulation allowed member states to decide whether to control foreign investments, the reform now mandates minimum harmonization. The era in which certain countries deliberately opted out of FDI screening, thus providing more attractive "hubs" for foreign investors, is over.

The regulation also establishes a common minimum catalog of sectors that must undergo prior screening for foreign investments and cannot be executed without approval. This includes companies developing, manufacturing, or marketing dual-use goods as defined by the EU Dual-Use Regulation, companies involved with goods or technologies listed on the EU Military Goods List, and companies in particularly sensitive technology sectors such as semiconductors, quantum technology, or certain forms of artificial intelligence. Additionally, operators of critical energy, transport, and digital infrastructure, companies exploring, extracting, processing, or stockpiling strategic raw materials, central financial market infrastructures, and operators of specific systems for conducting and evaluating elections are included.

The regulation introduces a two-stage review process modeled after merger control practices. In the first phase, the competent authority must decide within 45 days of a complete application whether to approve the investment or require a more in-depth review. This standardizes the often heterogeneous duration of the initial review phase across member states. Although the regulation does not set a binding deadline for the second phase, it remains at the discretion of the member states. However, the clearly defined first phase provides companies with greater planning certainty for short-term deal timing.

Another key point is the possibility of ex officio reviews. Even investments that are not subject to reporting can be reviewed within a period of up to five years, depending on the nature of the acquisition, if there are indications of potential impacts on security or public order. This existing regulation in Germany means that even seemingly "small" or "low-risk" transactions will not completely escape the authorities' scrutiny.

The substantive review criteria will also be tightened. While the review standard remains formally unchanged-focusing on potential negative impacts on security and public order-the regulation adds a detailed list of protected goods and investor-related factors that must be considered.

Finally, the cooperation mechanism within the EU will be reformed. The number of cases required to be reported and commented on will be reduced and focused on particularly critical investments. Simultaneously, the accountability of member states will increase: they will now have to explain to the Commission and other states to what extent they have considered opinions and comments and why they may have made different decisions. This increases the likelihood that investment decisions in one member state will also be made under the scrutiny of other states and the Commission.

Additionally, the establishment of a European database is planned to track whether and what measures have been taken against foreign investors.

What Does the Reform Mean for German Companies?

Germany is among the member states that have had an extensive investment screening regime for many years. From the perspective of German companies, the new EU regulation is not a completely new instrument but rather a tightening and structuring of what is already established practice.

The German investment review already covers both direct and indirect acquisitions, including investments through EU companies controlled by non-EU entities. Therefore, the explicit inclusion of indirect investments at the EU level is more of a confirmation than a disruption for Germany. The two-stage review process-preliminary review and formal review-is already standard practice in Germany.

Nonetheless, German companies will experience significant changes. Firstly, there will be a comprehensive assessment of all dual-use goods and goods listed in the EU Common Military List, ensuring that security-relevant products and technologies are systematically included in the review. Secondly, the scope of artificial intelligence will explicitly extend to defense and aerospace-appropriate AI systems; simultaneously, the definition of AI will be aligned with the provisions of the EU AI Act to ensure uniform and contemporary regulation. Furthermore, critical infrastructures will be mandatorily considered, particularly in the areas of transport, digital infrastructure, financial services, and election infrastructure, to adequately reflect the sensitivity of these sectors. Finally, the list of critical raw materials will be expanded to better account for supply security and the strategic importance of these materials within the investment review.

A central change also concerns the previous privileging of certain third countries. In the German investment review, investors from EFTA states like Switzerland or Norway were partially treated as EU investors and thus privileged in sensitive areas. The EU Screening Regulation 2026 prohibits discriminatory differences between third countries. For German companies with EFTA investors, this means that transactions previously considered "quasi EU-internal" will now fall fully under the scope of third-country investment control.

The procedural deadlines will also change. The first review phase currently lasts two months under German law; at the EU level, a uniform period of 45 days is now established.

Importantly, the information requirements for applications will be expanded. The documents and information previously specified in a general decree will not suffice to cover all the information required under the cooperation mechanism. Companies will now be expected to disclose their corporate structure in detail, describe activities in other member states, identify participations in EU projects of particular interest, and specify larger EU grants received in the past. Transparency in ownership and control structures will be particularly important: the more complex and opaque a structure is, the more likely authorities will view it as a risk indicator.

What Should Companies Do Now?

For companies, the reform means that they can no longer treat investment control as a "post-factum specialty" but must integrate it into their governance and transaction processes. They need to identify early on whether and to what extent they are active in any of the sectors that will be particularly sensitive in the future. This requires a detailed analysis of products, technologies, raw materials, and infrastructure functions. Particularly for dual-use goods, it is insufficient to consider only classic export goods; research, development, and pure marketing activities may also fall within the scope of application.

Simultaneously, companies should critically review their investor and ownership structures. Open questions regarding economic entitlement, potential state influences, or connections to sanctioned or high-risk jurisdictions should be clarified early on. The better these structures are documented and transparent, the lower the risk that they will be perceived as a risk factor in the review.

Additionally, it is advisable to clearly define internal responsibilities. Investment control is not solely a legal issue; it touches on strategy, finance, compliance, IT, and sometimes public policy. Companies are well advised to designate fixed points of contact, establish processes for the preparation and coordination of applications, and harmonize interfaces with other regulatory areas-particularly antitrust law, export controls, and sanctions law. Where complex international transactions are planned, a central "FDI Taskforce" can help synchronize different review regimes and deadlines, thereby avoiding delays.

Finally, German companies should closely monitor the development of the Investment Screening Act. It will be crucial to see how the German legislator implements the EU minimum catalog in detail, whether additional sectors will be voluntarily included, and how threshold values and review standards will be defined. Industries that are mentioned in the regulation as protected goods but not as mandatory review segments-such as manufacturers of critical pharmaceuticals or certain media companies-will have a particular interest in the specific national implementation.