European Parliament Adopts New Screening Rules for Foreign Investments in EU

In a recent plenary session, the European Parliament endorsed new screening rules for foreign investments in the European Union. The updated regulations aim to identify and address security risks associated with foreign investments, including indirect investments. Under the new rules, screening will be mandatory for all Member States, with the European Commission empowered to intervene independently when necessary.

The revised rules will require member states to conduct mandatory screenings in sectors such as media services, critical raw materials, and transport infrastructure to identify and mitigate security or public order risks related to foreign investments. The procedures for national screening mechanisms will be standardized, and the Commission will have the authority to intervene proactively or in cases of disagreement between member states regarding potential risks from specific foreign investments. Additionally, the new regulations will extend to transactions within the EU involving direct investors ultimately owned by non-EU entities.

If a screening authority determines that a foreign investment project poses a threat to security or public order, it can either authorize the project with mitigating measures or prohibit it altogether. The proposal received 378 votes in favor, 173 against, and 24 abstentions during the parliamentary vote.

Parliament’s rapporteur, Raphaël Glucksmann, emphasized the importance of streamlining screening procedures across member states to protect key sectors and ensure a unified approach while maintaining an open and competitive single market. The adoption of these rules follows growing concerns about foreign investors acquiring control of EU firms critical to security and public order at the EU level.

The new legislation builds upon the existing foreign direct investment screening framework that came into effect in October 2020. Moving forward, negotiations with member states will determine the final shape of the law before it can be fully implemented, with both Parliament and Council required to adopt the final legislative act.