The European Parliament adopted strong measures to protect its economy from geopolitical risks for investing, with a harsher regulation of foreign investments in critical sectors. It was cross-party, cross-floored, with 508 votes for, 64 against, and 90 abstaining, and was clearly viewed as one of economic self-defense.
In the new version, all EU nations will have to decide on foreign investments made in so-called "strategic sectors" like defence, artificial intelligence, semiconductors, critical raw materials, and financial services. The regulation does not stop deals that are struck within the EU, but where the final beneficiary of the deal is not from the EU, nor is it an EU entity. This will effectively plug a big hole that enabled indirect foreign influence on European assets.
The new rules will improve the existing national screening procedures, minimize administrative burden, and help to better coordinate the screening processes across the member states and between the European Commission and the member states when it comes to risks stemming from cross-border investment.
The Commission has also been given specific instructions to outline conditions for foreign investment in specific strategic sectors, which the Commission has done by submitting the Industrial Accelerator Act proposal in March 2026. EU member states have for far too long tolerated the influence of external forces on key areas of the European economy, said Parliament rapporteur Raphaël Glucksmann, who called the EU legislation a turning point. The overall process of gaining European sovereignty via investment policy continues. The EU foreign direct investment screening regulation was adopted in October 2020.
In recommending the revisions in January 2024, the Commission was inspired by the COVID-19 pandemic and the current geopolitical tensions arising out of the 2019 war in Ukraine. The regulation still needs to be formally approved by the EU Council. If authorized, member states will have 18 months to comprehensively implement it in law.
