On 17 June 2026, Regulation (EU) 2026/1386 on the screening of foreign investments in the Union was adopted. With effect from 17 January 2028, it will replace the existing EU Screening Regulation (EU) 2019/452. The aim is to make the screening of foreign investments more effective, efficient and consistent across the EU. The previous framework was voluntary. Member States could decide for themselves whether to introduce an investment screening mechanism at national level. This voluntary approach has now been abandoned.
The background to this is, on the one hand, the significant differences between the Member States’ existing national screening mechanisms, for example regarding their scope, timelines and procedures. On the other hand, increasing geopolitical tensions pose a threat to the EU’s economic security. This concerns, in particular, risks relating to supply chains, critical infrastructure, access to technology and economic dependence on other states.
The new Regulation entered into force on 16 July 2026. However, the new rules will only apply from 17 January 2028. This gives Member States around one and a half years to adapt their national screening mechanisms – although they may do so earlier. Investments that are already being screened or have been completed by the time the new Regulation becomes applicable will continue to be subject to the previous EU Screening Regulation.
An overview of the key changes
Obligation to establish a screening mechanism
In future, every Member State will be obliged to establish its own screening mechanism for foreign investments. Until now, this was voluntary, which resulted in different levels of protection between the Member States. The new Regulation now specifies which foreign investments are subject to prior authorisation. This depends on the activity of the target. The new Regulation defines a common minimum scope of covered activities relating to sensitive sectors, technologies and infrastructure. These include, in particular:
- development, production or commercialisation of dual-use items (Annex I to Regulation (EU) 2021/821) or defence-related products (Annex to Directive 2009/43/EC);
- production, research in or development of semiconductors, quantum or certain AI technologies (Annex I to Regulation (EU) 2026/1386);
- operation of critical infrastructure in the transport, energy or digital infrastructure sectors;
- exploration, extraction, processing, recycling, recovery or stockpiling of strategic raw materials (Annex I to Regulation (EU) 2024/1252).
From a German perspective, this represents an extension. In particular, the categories of cases covered by Section 55a(1) of the Foreign Trade and Payments Ordinance (AWV) (cross-sectoral assessment) do not currently cover all dual-use items across the board, but only selected items.
It is important to note that the Member States retain a degree of discretion (minimum harmonisation). They may decide to apply their screening mechanism to foreign investments in other sectors as well. Furthermore, they may complement or further specify the provisions of the new Regulation through national legislation, provided that such national legislation does not undermine the objectives of the new Regulation. For example, Member States may specify thresholds of voting rights acquired triggering the screening of a foreign investment.
Subject matter of the screening and assessment criteria
The subject matter of the investment screening is whether the foreign investment is likely to negatively affect the security or public order of the respective Member State. The previous EU Screening Regulation merely sets out non-binding factors which Member States may take into consideration in their assessment. By contrast, the new Regulation establishes binding requirements regarding the effects of the investment as well as specific information concerning the foreign investor that Member States must take into account.
These criteria include, for example, potential effects on the security, integrity, resilience and functioning of a critical entity or critical infrastructure, as well as the security of military and other sensitive public facilities in the immediate geographical proximity of the Union target. Information relating to the foreign investor that must be taken into account includes, for example, whether the foreign investor is likely to pursue a third country’s policy objectives or facilitate the development of a third country’s military capabilities, as well as whether the investor has an opaque ownership structure.
As the list in the new Regulation is not exhaustive (‘in particular’, ‘including’), Member States remain free to take further criteria into account in their assessment.
Indirect investments from third countries covered
The definition of the term ‘foreign investment’ in the new Regulation expressly clarifies that this also includes investments made by a foreign investor through a subsidiary in the Union (indirect investment). This is consistent with existing German practice, meaning that, from a German perspective, no adjustment is required in this regard.
Special provision for greenfield investments
So-called ‘greenfield investments’ are foreign investments carried out through the establishment of new facilities or of a new undertaking for the performance of an economic activity in the Union. Whilst these generally fall within the scope of the new Regulation, they are not covered by the mandatory minimum scope of the prior authorisation requirement. Member States are therefore free to decide whether to include greenfield investments within the scope of their screening mechanisms. In Germany, this is generally not the case at present.
Exceptions
Foreign investments made pursuant to the application of a resolution tool as well as internal restructuring are generally excluded from the scope of the new Regulation. However, there is a counter-exception regarding internal restructuring: such transactions are covered by the new Regulation if a new legal entity established in a third country that is not already represented in the upstream ownership chain of the Union target is introduced in that chain.
Procedure and timelines
The new Regulation provides for a two-stage procedure. In Phase I, the national screening authority must decide within 45 calendar days of a complete filing whether an in-depth investigation is necessary. If so, the in-depth investigation is carried out in Phase II. No uniform deadline has been set for this phase. Thus, there may still be differences between Member States in this regard.
Germany already has a two-stage procedure. However, the deadline for Phase I in Germany is currently two months. Adjustments can therefore be expected in this regard.
Ex post screening powers
The new Regulation also establishes mandatory powers of ex post screening. National screening authorities are empowered to screen foreign investments which fall within the scope of the national screening mechanism but are not subject to a prior authorisation requirement, for at least 15 months and up to a maximum of five years after completion of the investment.
Where a prior authorisation was required and the foreign investment was not filed or was only filed after its completion, the national screening authorities are empowered to screen the investment for at least 24 months after its completion.
Strengthened cooperation between Member States
The cooperation mechanism between the Member States, which already existed under the previous EU Screening Regulation, is being further strengthened. The provisions on multi-country transactions are particularly noteworthy. The person making the filing is required to ‘endeavour’ to do so on the same day in all Member States concerned. Each filing must refer to the other filings. The Member States concerned are required to closely coordinate their screening procedures. This applies in particular to the timing of the screening procedures and the consistency of the screening decisions.
Impact on German investment control
Since the German investment screening provisions are among the stricter regimes within the EU and already meet some of the mandatory minimum standards set out in the new Regulation, the need for adaptation is likely to be less extensive than in other Member States. Nevertheless, the German legislator will have to amend certain provisions of the Foreign Trade and Payments Ordinance (AWV) and the Foreign Trade and Payments Act (AWG). The national implementation of the new Regulation should therefore be monitored closely.
Changes will particularly affect the scope of foreign investments subject to a prior authorisation requirement. In practice, this means an expansion of investment screening that should be taken into account at an early stage when planning future investments – particularly in the area of dual-use items and defence-related products. In multi-country transactions, the strengthened cooperation between the Member States and the obligation to endeavour to file in all Member States concerned on the same day must also be observed.
