DealLawyers.com Blog

Earlier this month, the Council of the EU adopted a new framework for screening foreign direct investments. The press release notes that these rules replace the existing FDI screening framework that’s been in place since 2020. It explains:

The revised regulation requires all member states to establish screening mechanisms covering a common minimum scope of sensitive sectors, technologies and infrastructure (such as dual-use items and military equipment, critical raw materials, artificial intelligence, energy, transport and digital infrastructure), including foreign investments made through EU-based subsidiaries, while maintaining sole national responsibility for screening decisions.

The regulation also improves cooperation between member states and the European Commission, increases transparency and consistency across national screening systems, and streamlines procedures for investors and public authorities. In addition, it introduces new tools to facilitate information exchange and prevent circumvention of the rules.

The regulation will be published in the official journal and enter into force 20 days after publication. The new rules will start applying 18 months after the entry into force of the regulation.

This Gibson Dunn alert shares some color on what this means for U.S. investors in Europe:

The reform lands amid a changing stance vis-à-vis U.S. investors and mounting European sensitivity around foreign influence over the digital infrastructure underpinning core governmental functions. A case in point: On May 25, 2026, the Dutch government prohibited U.S.-based Kyndryl’s acquisition of Solvinity, the cloud provider hosting the Netherlands’ digital identity platform for accessing government services – the Netherlands’ first FDI prohibition of a U.S. acquirer. The message is unambiguous: U.S. investments in Europe enjoy no safe harbor, and that message is now being reinforced in the new EU FDI Screening Regulation.

One theme that runs throughout the reform: The new Regulation provides a floor, not a ceiling – it harmonizes a minimum standard but allows Member States to go further. Therefore, significant divergence between national FDI regimes in Europe is expected to persist.

The alert describes the “good,” the “bad,” and the “not-so-pretty” aspects of the new framework, which it characterizes as a “mixed bag” for investors who value predictability. It also says:

As most of the new regime hinges on national implementation over the next 18 months, the practical contours, including the application of risk factors and the call-in power, will emerge only after this. Investors active in the covered sectors in the EU should map their filing footprint and closely monitor national implementation over the coming months.

– Meredith Ervine