FDI in Europe: the EU readies itself for a harmonised screening regime

The Report is the last full annual snapshot before the new Foreign Investment Screening Regulation (EU) 2025/1386 (“FISR”) takes effect. The FISR was signed on 17 June 2026, is now in force, and will apply from 17 January 2028 following a transition period for Member States to bring their national FDI regimes in line.

The figures from the Report confirm many of the key global FDI trends identified in Eversheds Sutherland’s DealSCREEN, providing data-driven insights on global M&A regulatory trends. In particular, the Report highlights the expanding reach of screening regimes and growing cooperation between authorities, while confirming that most deals continue to be cleared without conditions. For deal planning, these trends underline the importance of identifying filing requirements early, coordinating submissions across jurisdictions and allowing sufficient time for review, even where unconditional clearance is ultimately expected.

Notification volumes surge, but more filings does not mean more intervention

Member States handled 4,773 requests for authorisation and cases opened on their own initiative in 2025, up 52% from 3,136 in 2024. Filings grew much faster than investment activity: foreign M&A into the EU increased by just 4%, while greenfield investment fell by 4.3%. This suggests that broader screening rules and more cautious filing decisions, rather than increased deal activity, are driving the rise. All 27 Member States now have a regime, with some only recently becoming operational and others expanding their scope during 2025.

Only 38% of cases proceeded to formal screening, compared to 41% in 2024. Formal screening refers to an investment undergoing a Member State’s review procedure (excluding any pre-screening stages and eligibility checks, where applicable). The EC notes that this figure is heavily skewed by Sweden, which reported a very high number of cases not requiring formal screening – excluding Sweden, 65% of cases were formally screened. A relatively low proportion of notifications progressing to formal screening is common, particularly under newer regimes, as parties make precautionary filings to avoid potential penalties for failure to notify, only for the transaction subsequently to be found outside the regime’s scope.

Despite the increase in filings, the proportion of deals prohibited or subjected to remedies was essentially unchanged. Of formally screened notifications with a reported decision:

Read alongside the insights on DealSCREEN, the 2025 figures in the Report confirm that FDI regimes continue to expand their reach and outpace merger control, but most deals are still cleared without remedies. However, the Report’s EU-wide figures are not broken down by Member State and may therefore mask national regimes where intervention may have increased in 2025.

The EU cooperation mechanism comes of age

In 2025, Member States submitted 667 cooperation mechanism notifications to the EC under Article 6 of the FDI Screening Regulation, up from 477 in 2024. The Report describes this 40% increase as “by far the highest annual rise” since the mechanism was implemented: since 2021 (the first full year that the mechanism was in place), notifications have grown by 61%, and the number of notifying Member States increased from 13 to 21.

These EU-level notifications are distinct from national filings and undergo a separate review process under the EU cooperation mechanism, comprising an initial Phase 1 assessment and, where further scrutiny is required, an in-depth Phase 2 review. These phases are separate from any Phase 1 and Phase 2 reviews under national FDI regimes.

Member States currently notify cases under the cooperation mechanism at different stages of their national reviews. The Report identifies this variation as an issue addressed by the FISR through a common two-phase national review process and a 45-calendar-day initial review deadline. This more structured framework should bring greater consistency to notifications to the EC. We expect the notification rate under the cooperation mechanism to increase once the FISR applies.

Notification activity under the cooperation mechanism remains highly concentrated, although slightly less so at the very top: the top four Member States (Austria, France, Italy and Spain) accounted for 65% of notifications (74% in 2024), whereas the top seven (Austria, France, Germany, Italy, Ireland, Lithuania and Spain) accounted for 86% (84% in 2024). Ireland’s appearance in this group in the first year of its regime being operational is notable (for more key insights from the first annual Irish FDI report, please see our article here).

Beyond headline volumes, several statistics point to Member States engaging more actively with each other’s FDI cases, a direct precursor to the more structured cooperation required under the FISR:

• Peer comments nearly doubled: Member States issued comments on c.6% of notified cases (3% in 2024), and the proportion of Member States issuing comments rose from about one third to 57%.

• More questions: Member States asked questions in c.11% of cases (10% in 2024). The EC notes that, in several cases, the replies alleviated the potential concerns identified.

• More multi-jurisdictional deals: 27% of notifications concerned transactions screened in two or more Member States (19% in 2024), led by deals in the manufacturing and wholesale/retail sectors.

• More in-depth EC review: The EC moved 12% of cases notified under the EU cooperation mechanism to Phase 2 (8% in 2024), a 50% increase in share, which the Report says signals more transactions with relevance for security and public order. It still issued opinions in fewer than 2% of cases.

• Technical cooperation: Member States and the EC also cooperated through the FDI Expert Group, and the EC continued to provide guidance to support alignment of national mechanisms.

The 2025 figures show that Member States are already working more closely on cross-border deals. The FISR will formalise this cooperation, including by requiring parallel filings in different Member States to be submitted on the same day and by introducing the option for coordination meetings to be called before adopting a final decision. An EU-level database will support coordination by recording investments notified under the mechanism and national review outcomes since October 2020. An EU filing portal may also be introduced if at least nine Member States request one.

Sectors: manufacturing still dominates, but sensitive factors are changing

• The five sectors accounting for the most notifications to the EC remained unchanged from 2024: manufacturing (27%), ICT (19%), financial activities (17%), wholesale and retail (13%) and professional activities (8%). Manufacturing also accounted for a growing share of Phase 2 EC reviews, rising to 53% from 50% in 2024 and 39% in 2023, followed by ICT at around a fifth. This continued prominence in in-depth reviews contrasts with the broader transaction picture, where ICT overtook manufacturing as the leading sector.

• The more interesting shift lies in why manufacturing deals go to Phase 2 of EC reviews:

Within critical technologies, aerospace jumped to 28% of cases (16% in 2024), alongside defence at 31% (37% in 2024), while semiconductors fell to 12% (21% in 2024).

The rise in aerospace and the continued prominence of defence reflect the EU's rearmament agenda and the geopolitical backdrop that the Report itself cites, reinforcing our DealSCREEN finding that a heightened focus on national security is prompting greater political oversight of transactions in the EU. The more than doubling of sensitive data as a trigger means parties should look beyond sector labels to assess filing risk.

The FISR will require national regimes to cover a common minimum set of sectors, reducing, though not necessarily eliminating, differences between them. These include dual-use and military items; critical technologies such as semiconductors, quantum and AI; critical transport, energy and digital infrastructure; critical raw materials; certain systemically important financial market entities; and electoral infrastructure.

Less concentration in investor origin

The US and UK remain the leading origins of notified investment (42% combined) but both shares fell from the year prior: the US from 40% to 33%, and the UK from 11% to 9%. China (including Hong Kong) also declined, from 9% to 7%, while the UAE rose from 3% to 5%, and Canada and Japan each reached 4%. Jurisdictions outside the top six accounted for 38% of notifications (30% in 2024), with Ukraine and India each at 3% and Russia at 1%.

This mirrors the macro data of foreign investment into the EU, which show the strongest M&A growth into the EU from India (+42%), the UAE (+37%) and Canada (+23%). As in previous years, the Report does not link prohibitions or remedies to investor origin. Intervention is not confined to perceived "hostile" states: EU Member States have blocked deals involving US and even EU acquirers where highly strategic capabilities are at stake.

Foreign investment conditions under the Industrial Accelerator Act

Alongside the FISR, the EU is considering a separate set of foreign investment conditions under the proposed Industrial Accelerator Act (IAA), which we discussed in our recent article here.

Member States are moving closer to agreement on the foreign investment chapter of the IAA, with broad support for revisions to its sectoral scope and for adding sectors through a legislative review rather than delegated legislation. As current negotiations stand, the foreign investment conditions could include a €100 million investment threshold, aggregating investments in the same EU company or assets over five years to prevent circumvention. Investors would have to meet at least four of six conditions, including a mandatory requirement for at least half of their workforce to consist of “Union workers”, a term whose definition remains under discussion.

Important points remain contested, including the investment threshold, workforce requirements and the EC’s proposed powers to waive conditions at a Member State’s request and take over investment assessments. Ireland, which is steering negotiations, is seeking agreement among Member States on the IAA as a whole by the end of November 2026. This would not amount to final adoption: agreement with the European Parliament would still be required before the law could take effect. For investors, the proposal could add a further layer of investment conditions alongside FDI screening, although its final scope and requirements remain subject to negotiation.

Taken together, the FISR and the proposed IAA underline the importance of FDI on the EU’s policy agenda, both in safeguarding security and public order and in supporting its wider industrial objectives.

Implications for deal planning

• More deals will be caught: As mentioned in our previous article, the FISR's common minimum scope and its extension to foreign-controlled EU acquirers will bring more transactions into scope before 2028, with some Member States expected to amend their regimes earlier. The power to review non-notified deals retroactively may also lead to more precautionary filings where scope is unclear.

• High clearance rates do not remove timing risk: Parties should identify FDI filing requirements early and build clearance conditions and realistic long-stop dates into transaction documents. DealSCREEN data shows that regulatory scrutiny can extend long-stop dates by up to 12-18 months in some cases. The increase in EU-level Phase 2 reviews makes this particularly relevant for deals requiring filings in several Member States.

• Substance matters more than sector labels: With access to sensitive information more than doubling as a trigger for in-depth review, a target's access to data, customers and supply relationships can bring a business within scope.

• Coordination is key: Greater cooperation between Member States, together with the FISR’s future same-day filing requirement, makes a coordinated filing strategy increasingly important. Parties should expect authorities to share and scrutinise information. All filings should therefore present a consistent account of the investor, the target's activities and any proposed measures to address concerns.

• Track national implementation carefully: The detail of how Member States adapt their regimes (including timelines, thresholds and the treatment of foreign-controlled EU acquirers) will determine how quickly the more harmonised system envisaged by the FISR becomes a reality for deal planning.

• Look beyond FDI screening: Investors in strategic manufacturing sectors should also monitor the Industrial Accelerator Act negotiations, as the proposed conditions could affect investment structures and operational commitments, not just clearance timetables.

For further insight into the changing regulatory landscape, our DealSCREEN platform examines how growing regulation is influencing dealmaking, what this means for transactions in practice and the key issues to consider when navigating regulatory challenges.

DealSCREEN

Further reading on Foreign Direct Investment in the EU:

EU adopts renewed foreign investment framework

FDI in Europe: are Member States prioritising investment over national security?

FDI in Europe: New report reveals increasing number of notifications and sectors screened but the unconditional approval rate remains high