EU Tightens Foreign Investment Rules

In a significant move to safeguard national security and public order, the European Union has updated its regulations on the screening of foreign investments. This decision comes after the European Parliament and the Council reached a provisional agreement on Thursday, aiming to enhance the screening mechanisms across its member states.

Under the newly agreed regulations, mandatory screenings will be required for foreign investments in critical sectors including defense, semiconductors, artificial intelligence, critical raw materials, and financial services. The intent is to identify and mitigate any potential security or public order risks these investments might pose. Additionally, the streamlined procedures are set to reduce complexity and enhance the EU’s attractiveness as an investment destination.

The legislation also strengthens cooperation among national screening authorities and the European Commission, ensuring effective coordination on cross-border security risks. Moreover, the revised rules will cover transactions within the EU involving investors from non-EU countries, thus closing loopholes that previously allowed high-risk investments to escape scrutiny.

The move reflects a growing concern among EU officials about economic security, particularly in light of diverging views on the Union’s role in safeguarding it against foreign influences. Both the European Parliament and the Commission have stressed the need for further action to address these risks. The provisional agreement will require formal adoption by both the Parliament and the Council before becoming enforceable.