The EU Council formally adopts the new FDI Regulation

The EU Council today formally adopted the new Regulation on the screening of foreign investments in the EU (the FDI Regulation). The Council’s approval marks the final step in the legislative process, following the European Parliament’s approval on 19 May.

The text of the FDI Regulation, which is now available in English, will be published in the Official Journal of the European Unionand will enter into force 20 days after its publication. Its provisions will not, however, generally apply until 18 months after it enters into force.

In the Joint Statement made alongside the Regulation, the European Parliament and the Commission state that the Union needs to remain an attractive place to do business, ensuring that foreign investments, especially in strategic sectors, contribute to economic growth and competitiveness. They also acknowledge that certain investments risk creating strategic dependencies and undermining the resilience of the internal market, which risk weakening the Union’s economic security and may undermine the Union’s technological edge, economic resilience and capacity to create jobs.

In this context, Michael Damianos, Cyprus’ Minister for Energy, Trade and Industry, whose country currently holds the rotating presidency of the Council of the EU, stated that: “with today’s adoption, the EU is reinforcing its capacity to protect security and public order while remaining open to foreign investment. The updated framework provides greater consistency across the Union, as it will apply to all EU member states, covering an extended common minimum scope for national screening authorities which will focus on the most sensitive technologies and infrastructures, ensuring effective cooperation with member states. At a time of growing geopolitical competition, protecting the EU’s strategic assets and economic security interests is more important than ever.”

The new rules replace Regulation (EU) 2019/452, which has applied since October 2020, and introduce three key changes: (i) stronger FDI screening mechanisms across the EU; (ii) greater harmonisation of criteria, timeframes and screening procedures across all Member States; and (iii) enhanced cooperation between Member States and the European Commission in assessing risks to security and public order, reinforcing the “comply or explain” principle. In Spain, the new Regulation is expected to have only a limited impact, although we expect some modifications to the scope of investments subject to screening and to the applicable procedure.