I. Introduction

On June 11, 2025, the Council of the European Union (the “Council”) put forward changes[1] to the draft new EU FDI Regulation proposed by the European Commission (the “EC”) in January 2024, following changes put forward by the European Parliament (the “Parliament”) in May 2025.  These proposals will now kick-off trilogue negotiations among the EU institutions with the aim of reaching a political agreement on the final text of the revised regulation in due course.[2]

In summary, while the Council supports several core elements of the EC proposal of the new regulation, the Council also pushes back against shifting of influence from Member States to the EC.  Notably, the Council proposes greater discretion and autonomy to Member States to determine their own minimum scope of mandatory sectors and greater control over their own assessments.

II. The EC Proposal for a New FDI Screening Regulation

On January 24, 2024, the EC published a draft proposed new EU FDI regulation (the “draft EC Proposal”), as part of several initiatives to strengthen EU economic security. The draft EC Proposal contains the following key changes to the existing EU FDI Regulation (the Regulation (EU) 2019/452): (1) making investment screening compulsory for all EU Member States; (2) the EU screening cooperation mechanism would also apply to all EU-based investors ultimately controlled by non-EU parents; (3) the EU screening cooperation mechanism would apply to greenfield investments if they are reportable at the EU Member State level; (4) setting a ‘floor’ for activities to be screened by all EU Member States; (5) a reinforcement of the EU  cooperation mechanism, harmonizing the cases that must be notified to the EU screening cooperation mechanism and related timing; (6) ex-officio review of investments not notified to the EU screening cooperation mechanism, up to 15 months post-closing; (7) EU cooperation mechanism that could last 2-3 months, in an effort to align the timeline of Member States’ reviews ; (8) a non-exhaustive list of risk factors related to the investment and investors; and (9) soft due process rights.

III. The Parliament’s Proposed Changes

The Parliament reviewed the draft EC Proposal and adopted an amended version of the draft legislation on May 8, 2025.[3]  The Parliament’s amended version included several additions that would, in a nutshell:

1. Further strengthen the EC’s decision-making powers.  The draft EC Proposal enables the EC to submit comments to the Member States’ authorities with regard to specific reviews, and mandates that Member States give “utmost consideration” to these comments.  The Parliament builds on this, proposing to give the EC the final say in case of disagreement with the Member State on the outcome of a case.
2. Expand the minimum sectoral scope of mandatory sectors in relation to raw materials, transport, and farming land.
3. Include a requirement to screen greenfield investments that: (i) pertain to a mandatory sector as listed in the proposed new EU FDI Regulation; (ii) involve a sensitive investor (e.g., an investor controlled directly or indirectly controlled by a government or state body); and (iii) exceed EUR 250 million in value.

IV. The Council’s Proposed Changes

The Council’s negotiating mandate includes the following key highlights:

1. The new EU FDI Regulation should not apply to investments made in the application of a resolution tool or write-down and conversion powers[4] and to internal restructurings.
2. A greater discretion for Member States to determine the sectors subject to mandatory review and more generally their own screening regimes.  This remains subject to the following changes to the list of mandatory sectors that ought to be screened under the new EU FDI Regulation:
   • Expansion of the scope for mandatory prior review, comprising investments (other than greenfield investments) concerning EU-established entities active in the development, production, or “commercialization” of items subject to the EU export control regulation,[5] or other goods and technologies comprised in the EU Common Military List.[6]
   • Limitation of the number of projects or programs of Union interest that fall within the minimum scope of mandatory sectors (removing Horizon 2020 and Horizon Europe programs, the Digital Europe Program, the European Joint Undertaking for ITER, EU4Health Program, and Important Projects of Common European Interest).
   • Limitation of dual-use items and technologies that fall within the minimum scope of mandatory sectors to those covered by the EU Common Military List.
3. A toning down of the proposed expanded role of the EC, instead strengthening of the exclusive and final decision-making powers of Member States.  The Council proposes to remove ex officio reviews, which would have enabled Member States or the EC to review investments that were not previously notified under the cooperation mechanism if they considered that the investment could negatively affect security or public order. The Council proposes that in certain circumstances the EC and Member State would only be able to request information to the Member State where the non-notified transaction is planned or was consummated (and possibly issue an opinion or make comments).
4. A revised non-exhaustive list of considerations that Member States and the EC shall take into account to determine the likely negative impact on security and public order when evaluating a foreign investment.  According to the Council’s proposal, this list of considerations includes: (a) the availability of critical technologies, including outside the EU, of particular importance for security or public order (with a greater emphasis on semiconductors and AI); (b) certain projects or programs of Union interest; (c) the security, integrity, resilience and functioning of a critical entity within the meaning of the Critical Entities Resilience (“CER”) Directive;[7] (d) the continuity of supply of critical inputs (unchanged from the EC’s proposal); (e) the protection of sensitive information, including personal data, in particular with regard to the ability of the foreign investor to access, control, and otherwise process such personal data (unchanged from the EC’s proposal); (f) the freedom and pluralism of the media, including online platforms that can be used for large scale disinformation or criminal activities (unchanged from the EC’s proposal); (g) the protection of public health; (h) critical transport infrastructure; and (i) protection of food security.
5. A proposal for a database set up by the EC and available to all Member States, containing information on the foreign investments notified to the EC cooperation mechanism and the outcome of the assessments under screening mechanisms.
6. A proposal for a 24-month transition period after the publication of the final text of the new regulation (compared to EC Proposal of 12 months and Parliament’s proposal of 15 months).

On balance, the Council supports the draft EC Proposal, including on key points such as: (1) the requirement to establish a mandatory screening mechanism in all Member States, and (2) the definition of ‘foreign investment’ as including intra-EU indirect investments, i.e. investments by a foreign investor or a foreign investor’s subsidiary in the Union which is directly or indirectly controlled by a non-EU parent. 

However, the Council departs from the draft EC Proposal and the Parliament’s position in several key aspects, including notably by limiting the role of the EC and affording greater discretion and autonomy to Member States to determine their own minimum scope of mandatory sectors and greater control over their own assessments, while placing greater emphasis on military and dual-use items as the minimum mandatory sectors covered.

IV. The (Long) Road Ahead

The EC, the Parliament, and the Council have now entered into trilogue negotiations, to bottom out a final text of the new EU FDI Regulation. As it is still early days in the EU legislative process, the final text of the Regulation and its entry into force is likely still a long way to come.

---

[1] Council’s mandate for negotiations with the European Parliament on the EC’s Proposal for a Regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council, available here.  See also our Alert Memo on the Proposed New EU FDI Screening Regulation – 10 Things to Know.

[2] EC, Interinstitutional talks begin on EU’s revised FDI screening mechanism (June 17, 2025), available here.

[3] Amendments adopted by the European Parliament on 8 May 2025 on the proposal for a regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council, available here.

[4] Resolution tools are mechanisms used by financial authorities to prevent the disorderly collapse of financial institutions.  Write-down powers enable financial authorities to reduce the value of shares or debts of failing financial institutions.  Conversion powers enable financial authorities to convert debt instruments into equity.

[5] Particularly, as listed in Annex I to Regulation (EU) 2021/821.

[6] As adopted by the Council on February 19, 2024.

[7] Directive 2022/2557 on the resilience of critical entities and repealing Council Directive 2008/114/EC, Article 2(1), available here, defines a “critical entity” as “a public or private entity which has been identified by a Member State in accordance with Article 6 [procedure for the identification of critical entities] as belonging to one of the categories set out in the third column of the table in the Annex [defining the following covered sectors: energy, transport, banking, financial market infrastructure, health, drinking water, waste water, digital infrastructure, public administration, space, and production, processing and distribution of food]”.