On 11 December 2025, the Council and European Parliament announced a provisional political agreement in their trilogue negotiations to revise the EU framework for screening foreign investments.
The EU’s FDI Screening Regulation (Regulation (EU) 2019/452) has been operational since October 2020 as a cooperation platform enabling Member States and the European Commission to exchange information and flag cross-border security and public order risks arising from foreign investments. Under the EU cooperation mechanism, the screening Member State circulates case information to other Member States and the Commission, which may provide comments or a non-binding opinion within set deadlines.
As presented by the trilogue participants, the outcome is intended to address geopolitical and technological developments and builds on the Commission’s 2024 proposal to repeal and replace Regulation (EU) 2019/452 within the framework of the EU’s economic security agenda. The final text is not yet available and formal adoption by the European Parliament and the Council is pending. According to the Council’s account, the agreement preserves the Member State-led FDI screening model while introducing a minimum common scope. Its intention is to strengthen cross-border cooperation and operational tools. According to the Council, the new regulatory framework is supposed to apply 18 months after entry into force.
The Council’s press release signals three pillars essentially tracking the core aspects of the Commission’s initial 2024 proposal:
Minimum screening scope: targeted harmonisation centered on “hyper-critical” business areas
The co-legislators agreed that all Member States must maintain FDI screening regimes covering a clearly defined set of sensitive business areas. The minimum scope will include: (i) dual-use items and military equipment; (ii) “hyper-critical” technologies which comprises artificial intelligence in line with the AI Act and focussed on general-purpose AI (GPAI) with relevance to space or defence as well as quantum technologies and semiconductors; (iii) critical raw materials; as well as critical entities in energy, transport and digital infrastructure. In addition, it includes (iv) electoral infrastructure and (v) narrows the current financial-sector list down to central counterparties, central securities depositories, market operators, payment-system operators (excluding central banks) and systemically important institutions. The trilogue’s outcome thus appears both more granular in certain risk areas (elections, GPAI) and more calibrated for finance (narrowed-down coverage) than the Commission’s initially proposed trigger design.
Coverage of EU-subsidiary routes and cooperation scope
It does not come as a surprise that both the Commission’s 2024 proposal and the outcome of the trilogue extend the EU cooperation mechanism to investments carried out within the Union by subsidiaries controlled, directly or indirectly, by third-country investors. At present, the scope of Regulation (EU) 2019/452, and especially its cooperation mechanism, is confined to direct investments, as confirmed by the ECJ in its 2023 Xella ruling.
When it comes to the scope of the cooperation mechanism, while final decisions remain a national matter, the respective Member State will need to explain how it considered other Member States’ comments or a Commission opinion, and provide reasons in case of disagreement.
Streamlined processes and interoperability
The deal also aims at streamlining procedures and enhancing interoperability by means of a newly established, shared database to prevent circumvention and facilitate experience-sharing among authorities, as well as an optional single electronic filing portal if requested by at least nine Member States. The agreement clarifies risk factors used in assessments and codifies process improvements designed to reduce administrative burden – especially in multi-country transactions.
Commentary
The EU reform proceeds against a broader policy backdrop in which foreign investment control is used more assertively to manage geopolitical and technology-security risks.
The provisional deal points to a more harmonised baseline across the EU and, in certain aspects, it seems even more precise and narrower than the Commission’s proposal. However, for M&A practice the near-term picture still remains one of increased coverage and continued complexity. A common minimum scope and the extension of the cooperation mechanism to cover EU subsidiaries of foreign investors will likely raise the number of notifiable transactions, including many that are non-critical in substance. Experience to date suggests that the bulk of cases will still be cleared – often unconditionally (86% according to the Fifth Annual Report on FDI Screening in the EU published only recently in mid-October 2025).
We can also expect further tightening of FDI regimes at national level. In Germany, the trilogue outcome will be an important signal for the proposed reform of the FDI rules and the establishment of a uniform Investment Screening Act (Investitionsprüfungsgesetz).
Operationally, the extended cooperation mechanism and new interoperability tools (database; potential single e-filing portal) can support multi-jurisdiction coordination, yet they also formalise accountability obligations and widen the information footprint across authorities. Whether the agreed changes will measurably reduce administrative burden remains to be seen.
The next steps in the EU legislative procedure are the formal adoption by the Parliament and the Council, followed by the application 18 months after entry into force. Until the final text is published, companies should treat the Council’s summary as indicative, not exhaustive. In practice, deal planning that anticipates the common minimum scope, expanded cooperation over EU-subsidiary routes, and reinforced accountability, will be essential to avoid delays and to craft workable, coordinated mitigation where FDI risks are identified.
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