European Parliament endorses new screening rules for foreign investment in EU

Identifying and addressing security risks relating to foreign investment, including indirect investment

Screening to be mandatory for all Member States

European Commission to be able to act on its own initiative

On Thursday, MEPs adopted revised rules to prevent security risks from foreign investments.

Under the new rules, sectors such as media services, critical raw materials and transport infrastructure will be subject to mandatory screening by member states, in order to identify and address foreign investment-related security or public order risks. The procedures applicable to national screening mechanisms will be harmonised and the Commission will have the power to intervene on its own initiative or where there are disagreements between member states about potential security or public order risks emanating from a specific foreign investment. The new law will also cover transactions within the EU where the direct investor is ultimately owned by individuals or entities from a non-EU country.

If the screening authority finds that the planned foreign investment project is likely to have a negative effect on security or public order, it will either have to authorise the project subject to mitigating measures, or prohibit it.

The proposal was adopted by 378 votes in favour, 173 against and with 24 abstentions.

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Parliament’s rapporteur Raphaël Glucksmann (S&D, FR) said: “Right now, the EU’s foreign investment screening system is fragmented, costly for investors, and insufficiently effective at mitigating risks. Leaving large industrial plants, energy grids, and media giants open to foreign takeovers — whether from China, the US, or elsewhere — ultimately puts our security and economic sovereignty on shaky ground.

Screening procedures will now be streamlined across member states, keeping the single market open and attractive, while also protecting our industries, safeguarding key sectors, and allowing our strategic industries to become more competitive. The Commission will have the authority to take final decisions in instances of disagreement, ensuring a more unified approach across the EU."

Background

The current foreign direct investment screening framework entered into force on 11 October 2020. It addressed growing concerns about certain foreign investors seeking to acquire control of EU firms that supply critical technologies, infrastructure or inputs, or hold sensitive information, and whose activities are critical for security or public order at EU level. The rules are designed to help identify and address security or public order risks relating to foreign direct investment involving at least two member states or the EU as a whole. The Commission submitted its new proposal on the screening of foreign investment projects in the EU in January 2024.

Next steps

Now that the report has been adopted in plenary, negotiations with member states on the final shape of the law can begin. Parliament and Council must adopt the final legislative act before it can enter into force.