EU Parliament approves tougher foreign investment screening rules

The European Parliament has approved new foreign direct investment (FDI) screening rules that were provisionally agreed in December with the Council of the European Union, the institution representing EU member states.

The legislation still requires formal approval from the Council before it can enter into force 18 months later.

Once implemented, EU countries will be required to screen investments in a range of sensitive sectors, including defence, dual-use goods, and critical technologies.

The revised framework is aimed at strengthening oversight of foreign investments across the European Union while providing greater consistency in screening procedures among the bloc’s 27 member states.

Sensitive sectors brought under stricter scrutiny

Under the new rules, investments in sectors considered strategically important will face mandatory screening requirements.

The legislation specifically identifies areas such as artificial intelligence, quantum technologies, semiconductors, and raw materials as key sectors requiring closer oversight.

Other sectors covered under the rules include aerospace, energy, transport, digital infrastructure, and entities linked to the financial system.

Electoral infrastructure, including registration databases and voting systems, will also fall under the scope of the legislation.

The new framework reflects growing concerns within the European Union over foreign involvement in sectors considered critical to economic security and technological sovereignty.

The scope expanded beyond traditional foreign investment

The revised rules expand the scope of the EU’s investment screening framework beyond conventional foreign direct investment.

The legislation will also apply to intra-EU investments carried out by companies that are ultimately owned by investors from third countries.

This marks a significant expansion of the bloc’s oversight powers, as authorities will now be able to review investment structures involving foreign ownership even when transactions occur within the EU.

Lawmakers said the new rules are designed to streamline screening parameters across the bloc and create more certainty for investors operating in the European market.

The harmonised framework is also expected to reduce inconsistencies between member states in how foreign investment reviews are conducted.

EU lawmakers highlight sovereignty concerns

Raphael Glucksmann, the EU lawmaker who led the legislative file, said the new rules represent a shift in the European Union’s approach towards foreign investment and economic security.

“With this text, we are closing a chapter of European naivety. Certain foreign states are seeking to weaken us,” Glucksmann said in a statement.

“We are turning the page on the wilful blindness of member states that allowed foreign actors to seize control of sensitive sectors of our economy,” he added.

Glucksmann also said the EU’s work on foreign investment oversight was not complete and linked the legislation to broader efforts aimed at strengthening Europe’s industrial and economic independence.

“But our work on foreign investment is not finished the fight for Europe's independence and sovereignty continues, now with the proposed Industrial Accelerator Act,” he said.

The legislation is part of the European Union’s broader push to reinforce economic resilience and reduce vulnerabilities in strategically important industries.