On Thursday (11 December), the European Parliament and the Council of the European Union reached a political agreement to update the rules for screening foreign direct investments (FDI). The new rules will require all member states to screen investments in sensitive sectors, including defence, semiconductors and artificial intelligence.
Under the new framework, all 27 EU member states will be required to establish screening mechanisms—a significant shift from the current voluntary approach. These mechanisms will apply to a clearly defined “common minimum scope” covering the most sensitive areas of the European economy. These would include:
- Dual-use items and military equipment
- Hyper-critical technologies, such as artificial intelligence, semiconductors and quantum technologies.
- Critical raw materials
- Critical entities in energy, transport and digital infrastructure.
- Electoral infrastructures.
- Some financial system entities.
Furthermore, the new rules aim to harmonise procedures, reducing administrative burden and making the EU a more attractive destination for legitimate foreign capital. The agreement establishes an enhanced cooperation mechanism amongst national screening authorities and the European Commission. When investments have potential cross-border implications, member states and the Commission can share information and concerns through a new shared database designed to prevent circumvention of screening rules.
Importantly, the final say on whether to approve, condition or block an investment remains with the member state where the investment is being made. However, when other member states or the Commission raise concerns, the screening authority must explain how these were considered.
The provisional agreement must now be formally adopted by both the European Parliament and the Council before entering into force. Once approved, member states will have 18 months to implement the new screening mechanisms.
Denmark’s Minister for Industry, Business and Financial Affairs, Morten Bødskov, chairing the Council’s presidency, welcomed the outcome: “Today’s agreement strengthens the EU’s capacity to protect its security and public order, whilst ensuring Europe remains an attractive destination for investors. We achieved a balanced and proportionate framework, focused on the most sensitive technologies and infrastructures.”
