On 8 June 2026, the EU finally adopted the new regulation intended to strengthen the screening system for foreign investments. The new regulation repeals and replaces the previous regulation on the screening of foreign direct investments (the previous FDI Regulation). It will enter into force 20 days after its publication in the Official Journal of the European Union and will apply 18 months thereafter, most likely in early 2028.
The background to the new regulation includes, among other things, a 2022 OECD study and a 2023 report by the European Court of Auditors. In addition, the European Commission had identified a number of gaps in the previous framework. For example, the previous FDI Regulation did not cover investments made through EU-established subsidiaries, so-called indirect investments. The new regulation aims to close these gaps and ensure more comprehensive screening.
In addition to the identified gaps, the new regulation also reflects the increased importance of economic security and public order since the previous FDI Regulation was adopted in 2019. The need to strengthen the EU’s ability to identify, assess and manage risks linked to foreign investments has become increasingly apparent, while the ambition to preserve openness to global trade and international investment remains central.
At the end of 2025, the Commission updated its economic security strategy. This update builds on the strategy adopted in 2023, which announced the Commission’s forthcoming proposal for a new FDI Regulation. The 2023 economic security strategy set out the overarching objectives of promoting the EU’s competitiveness, protecting the EU’s economic security and partnering with like-minded countries. The updated strategy is described as a paradigm shift, with the EU moving towards a more proactive, broader and strategic use of both existing and new tools across a number of areas. This means, on the one hand, that existing tools are being evaluated, such as the EU Dual-Use Regulation, the Cybersecurity Regulation and the now adopted new regulation on foreign investments. On the other hand, it also includes proposals for entirely new tools, such as the Industrial Accelerator Act, the Quantum Act and the Cloud and AI Development Act.
Below, we outline the new FDI rules.
Previously, Member States have decided for themselves whether and how foreign direct investments should be screened. The Commission considers that this fragmentation poses a threat to the EU’s security and public order, particularly in the case of investments in Member States that lack screening mechanisms, where national systems do not cover certain sensitive investments, or where foreign investors act through companies established within the EU.
The new regulation therefore requires all Member States to establish screening mechanisms for particularly sensitive investments. This is considered to include the following areas:
Each Member State will continue to retain the freedom to decide whether an investment should be authorised, made subject to conditions, or prohibited. At the same time, transparency and coordination between national authorities and the Commission have been strengthened.
Where other Member States or the Commission have issued an opinion on an investment, the screening Member State will be required to explain how these opinions have been taken into account, including the reasons for any differing views, without prejudice to sensitive national security considerations. The strengthened cooperation also includes the possibility for the Commission to assist the screening Member State in collecting relevant information in connection with a decision.
The new regulation also clarifies and streamlines several operational aspects, including:
The following additional changes should be noted:
The new regulation on foreign investments gives the EU a stronger and, above all, more harmonised framework for identifying, assessing and managing risks that may arise when investors from third countries acquire influence over strategically important activities within the Union. By expanding the scope to include indirect investments, introducing mandatory screening mechanisms in all Member States, and improving coordination at EU level, the regulation creates conditions for more consistent and effective screening.
The EU’s strategic approach to economic security is likely to lead to stricter scrutiny of foreign investments going forward. The new economic security strategy confirms that the EU should remain open and attractive to foreign investment, while at the same time making clear that certain investments entail risks that justify targeted measures.
As an example of forthcoming initiatives, the Commission has announced new guidelines to ensure more consistent national screening practice, including as regards how cumulative risks arising from multiple investments should be taken into account.
It is interesting to note that the Commission also intends to explore support mechanisms for target companies that suffer financial harm as a result of an investment being blocked. This indicates an ambition to balance security interests against the needs and legitimate expectations of target companies.
It should also be noted that the Commission’s proposal for an Industrial Accelerator Act contains a mechanism parallel to the FDI Regulation. The Commission proposes common conditions for the approval of foreign investments exceeding EUR 100 million in new strategically important manufacturing sectors considered to be of particular importance to the Union’s competitiveness, namely battery technology, electric vehicles, solar technology, and the extraction, processing and recycling of critical raw materials, where the investment is made by a foreign investor with more than 40 per cent of global manufacturing capacity.
The Swedish Act on the Screening of Foreign Direct Investments, the FDI Act, is in general already well aligned with the new FDI Regulation. In fact, it already goes further than the regulation requires.
That the FDI Act is among the most far-reaching national regimes within the EU is particularly evident in relation to so-called essential services, an area where the regulations issued by the Swedish Agency for Civil Preparedness are very extensive. A clear trend is that the scope of what may be considered essential services in Sweden is continuously being expanded, which in practice means that the scope of the FDI Act is gradually broadening.
In light of the far-reaching Swedish framework, it is interesting to note that the Implementation Council, the government committee which, among other things, provides supporting material and recommendations to the Government on how EU legal acts can be implemented in Swedish law in a manner that is no more far-reaching from a business perspective than the acts require, has submitted a number of recommendations to the Government in response to the new FDI Regulation. These aim to simplify the current Swedish framework, reduce the administrative and cost burden on investors, and increase predictability. In essence, the recommendations mean that the Swedish framework should be harmonised with the new regulation in order to avoid negative effects on Swedish competitiveness. The key proposals include the following:
However, it is doubtful whether any simplification of the framework can be expected from the Swedish legislator. As mentioned above, the trend is rather towards expanding what may be considered essential services in Sweden. Internal restructurings may possibly be exempted from the scope of the FDI Act if the Government chooses to follow the new FDI Regulation on this point. Furthermore, it cannot be ruled out that the processing time for the initial review, phase 1, of an FDI notification in Sweden will be extended from the current 25 business days to the 45 calendar days permitted under the new regulation.
In general, the new FDI Regulation is unlikely to have any major effects from a Swedish perspective, since the current Swedish framework already goes beyond what the regulation requires.
The risks currently faced by businesses mainly arise from the very far-reaching Swedish framework and the complicated review process. In addition, the most extensive part of the framework, namely the regulations on essential services, is issued by one authority, the Swedish Agency for Civil Preparedness, but applied by another, the ISP. It may also be noted that in other Member States, the supervisory authority for national FDI legislation is usually the equivalent of a ministry of enterprise, trade or finance, whereas Sweden has chosen a structure in which both the rule-making authority and the supervisory authority are authorities responsible for national security and preparedness.
If the Government were to adapt the national framework to the new FDI Regulation, as proposed by the Implementation Council, foreign investors’ willingness to invest in Swedish companies would likely increase to a not insignificant extent, thereby strengthening Swedish companies’ ability to obtain financing.
From an EU perspective, one consequence of the stricter frameworks forming part of the new economic security strategy, including the new FDI Regulation but also, for example, the proposed Industrial Accelerator Act, is that investors and target companies in transactions in sensitive sectors will increasingly need to take potential screening procedures and possible delays into account in their planning. The strategy makes clear that both Member States and businesses are increasingly expected to bear the costs associated with stricter requirements for security, resilience and reduced dependence in global value chains.
